Ampleforth’s SPOT: The Digital Gold Standard for Crypto
When Satoshi Nakamoto set out to formally create Bitcoin, there was a distinct lack of technology that otherwise kept him and the original developers from realizing their true vision — how to create a P2P currency that was decentralized, durable, and scalable for commerce.
The key headline for much of the past five years has been surrounding purchasing power. Modern fiat currencies do a fine job providing near-term, surface-level stability, but because they are uncollateralized, they always fall prone to the degradation of purchasing power over time due to inflation.
So, while stablecoins currently hold massive market capitalizations and control significant volumes within DeFi, this has made crypto an extended digital arm of TradFi.
On the other side of this are the major commodity monies, specifically Bitcoin and Ethereum. While they are the two largest assets in crypto by market capitalization, they don’t even match the daily volume of USDT combined.
This is because there is a natural incentive to NOT utilize BTC or ETH in day-to-day transactions. Instead, they are seen as store-of-value (SoV) assets where wealth can be parked and remain dormant for extended periods of time, benefitting from long-term price appreciation.
As Evan Kuo from Ampleforth puts it, the asset that crypto really needs to realize Satoshi’s vision and differentiate itself fully from TradFi is one that takes the best qualities from fiat and commodity monies and pits them together into what he calls “really low-volatility gold.”
The US dollar used to be a low-volatility gold standard, but it was removed from it. It used to be valuable and hold value. Off the gold standard, it has been printed to infinity, and inflation has eroded the value of a single dollar by significant percentages over time.
We would argue that SPOT is a digital, cryptographic return to the gold standard.
How SPOT Unlocks True Scalability for Digital Commerce
Without a dynamic supply, L1 tokens like Bitcoin, Ethereum, Solana, Avalanche, and so on will struggle to match the volumes of stablecoins without absolutely massive increases in market capitalization. To drive this point home, Bitcoin is a $1.3 trillion asset but does less than half the daily volume of Tether.
This is because there is no incentive to spend your Bitcoin.
However, counting on centralized, censorable, inflation-prone stablecoins has not differentiated DeFi either. This is where SPOT comes in.
Because of SPOT’s underlying infrastructure and collateralization model, it can provide all of the inflation-resistant benefits of its base asset, AMPL, without any significant supply volatility. It is also completely decentralized and transparent.
It is important to note, though, that SPOT does not attempt to be a fully stable asset in the near term. This is why it does not feature an artificial peg or other stabilizing mechanism. Instead, it has a free-floating price, much like commodity assets.
This creates features that are fundamentally unique to SPOT:
- Much more inflation-resistant than fiat currencies
- Much more stable than commodities
- At least as durable and decentralized as commodities
This is a big deal for DeFi for multiple reasons. First, the obvious — it allows crypto to finally decouple from TradFi meaningfully to achieve a greater degree of decentralization. The less reliance on fiat currencies, the less inflation, censorship, and centralized control are allowed into the crypto space.
Second, it can provide the SoV properties featured in commodities like gold combined with long-term stability and automatic supply scalability. This is what makes SPOT superior within commerce applications, as there is an incentive to hold your wealth in SPOT (far less debasement than fiat), but it is still usable in P2P transacting.
Lastly, due to its low-level volatility, SPOT is a superior asset to stablecoins within trading pairs, liquidity pools, and other yield-generating activities. Because it makes no attempt to introduce artificial price stability, the price can move with demand (in the short term), similar to commodity tokens. This introduces far more opportunities for significant arbitrage profitability.
This leads to value capture on all fronts:
- Arbitrage traders net larger profits on SPOT price movements (+/- AMPL price target)
- LPs earn far higher naturally incentivized APYs than stablecoins thanks to elevated trading volumes and swap fees
- AMPL holders benefit from significant supply increases thanks to rising demand for SPOT
How Big Could SPOT Really Get?
This is the $160 billion question (current market capitalization of all stablecoins combined), but the technical answer is that there is no limit to how large SPOT can grow. AMPL’s supply is dynamic, automatically rebasing daily to match demand and maintain a long-term price target.
Because SPOT is a derivative of AMPL, if there is greater demand for SPOT, then AMPL can be purchased to create more SPOT. If there is less demand for SPOT, then SPOT can be purchased off the open market and redeemed for AMPL. This process has been made even easier with the release of the Rollover Vault v2, which allows instant flash mints and redemptions.
