Deciphering Ampleforth (AMPL): Classifying Its Nature and Examining Its Financial Utility

Documenting AMPL
3 min readMay 12, 2023

Ampleforth (AMPL) represents a groundbreaking approach to digital assets, with features that differentiate it from established cryptocurrencies like Bitcoin and Ethereum. As an innovative token with an adaptive supply mechanism, AMPL aims to provide a stable unit of account while addressing some of the challenges faced by traditional financial systems.

In this article, we will take an in-depth look at AMPL’s defining characteristics. To better understand its position within the realm of digital assets, we will delve into the distinctions between commodities and currencies and analyze the characteristics of sound money.

Understanding Commodities and Currencies

Before proceeding with AMPL’s classification, it’s vital to comprehend the differences between commodities and currencies.

Commodities are tangible goods or raw materials that have intrinsic value, traded on an exchange. Examples include gold, silver, oil, and agricultural products. These commodities, due to their utility or inherent properties, can be used as inputs to produce other goods or services, with their prices being determined by supply and demand factors in the market.

On the other hand, a currency serves as a medium of exchange, a unit of account, and a store of value, typically issued by governments. Unlike commodities, their value is not tied to a physical asset, but rather stems from their ability to facilitate transactions and trade between parties.

Classifying Ampleforth (AMPL): An Elastic Commodity or a Currency?

AMPL’s unique design, properties, and functions make it an asset unlike any other. To comprehend its role within the digital asset ecosystem, it is crucial to classify AMPL accurately as a commodity or a currency.

While AMPL displays some currency-like traits, its limited acceptance and adoption as a currency in the market, along with its primary use as collateral for the decentralized currency SPOT, suggest a closer alignment with the commodity classification.

The Case for AMPL as an Elastic Commodity

AMPL’s adaptive supply model modifies its token supply daily based on market demand, with the goal of maintaining a stable value over time. This flexibility makes AMPL more akin to commodities, which experience supply and demand fluctuations resulting in price volatility. Currencies, in contrast, usually have a more predictable and controlled supply.

Although AMPL serves as a unit of account and possesses certain currency-like properties, its unique supply mechanism, aiming for stability, derives its value. This intrinsic value is more comparable to a commodity, which has value based on its utility or inherent properties, rather than a currency, whose value is rooted in its ability to serve as a medium of exchange.

While AMPL has the potential to function as a medium of exchange, its current market acceptance and adoption are limited in comparison to traditional currencies. Until AMPL gains widespread acceptance and use in transactions, it is more accurately described as a commodity, especially considering its primary use case as a collateral asset for the decentralized currency, SPOT.

A unique aspect of Ampleforth (AMPL) as an elastic commodity is the concept of network ownership. AMPL’s non-dilutive nature ensures that the proportional ownership of the network remains constant, irrespective of changes in the token’s supply. When an investor purchases AMPL tokens, they effectively acquire a percentage of the entire network.

AMPL’s unique monetary policy, achieved through its adaptive supply mechanism, ensures that token holders’ ownership in the network is not diluted as the token supply expands or contracts. This feature sets it apart from traditional finance where dilution refers to a decrease in ownership percentage when new shares are issued or in cryptocurrencies when new tokens are minted.

Conclusion

Ampleforth (AMPL) presents a unique and innovative approach to cryptocurrencies, offering features that differentiate it from traditional currencies and align it more closely with commodities. Its elastic supply, intrinsic value, and limited use as a medium of exchange support the classification of AMPL as an elastic commodity, rather than an outright currency.

By understanding these distinctions, market participants, regulators, and other stakeholders can better appreciate the potential applications and implications of AMPL and other cryptocurrencies with similar features. Future research and exploration into the adoption and use of elastic commodities like AMPL will undoubtedly continue to shape the evolving landscape of digital assets and their role in the global economy.

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