Documenting AMPL, SPOT: Q2 2023 Performance Summary
The Ampleforth ecosystem has seen a bustling second quarter (Q2) in 2023, with the AMPL and SPOT tokens exhibiting distinct dynamics. Amidst broader economic cooling, the ecosystem witnessed market contractions, resilience against downturns, and promising new developments in governance and community engagement.
While AMPL faced a contraction, hitting historic lows, it showed signs of resilience with a surprising market cap expansion. However, the quarter ended on a somber note with overall negative growth.
On the other hand, SPOT, the newest addition to the ecosystem, demonstrated impressive growth and resilience, even as its collateral token, AMPL, navigated through choppy waters. The sturdy performance of SPOT hinted at a promising future and introduced a potential solution to some long-standing challenges in the crypto world.
Additionally, the Ampleforth community saw active engagement with releasing educational materials, community-centric blog posts, and significant governance updates. Key proposals surrounding the SPOT token were also put forward, aimed at optimizing its functionality.
Join us as we delve deeper into an exciting Q2 for Ampleforth, marked by turbulence, resilience, and innovative strides.
Ecosystem Documentation
Project documentation for SPOT has continued to be slowly released and updated throughout Q2 2023 and serves as the best place to get completely caught up with project development.
Check out the docs below:
Token Performance
AMPL Token
Over the past 90D, Ampleforth (AMPL) has experienced a steady contraction in market capitalization, reaching historic lows not seen since AMPL’s inception during the Summer of 2020. However, recent weeks have seen AMPL expand its market cap by an astounding 27%, showcasing how quickly low-cap projects can change their tune weekly. Nevertheless, AMPL ends the quarter at -25.6% growth, falling from $39.8 million down to $29.6 million. Over the past year, AMPL has been down -21.7% overall.
As shown in the chart above, the very recent market cap growth has caused the price of AMPL to deviate from the market cap valuation, indicating that a positive rebase cycle can be expected for the short to medium term until equilibrium is reached again.
At the end of Q2 2023, AMPL experienced a positive rebase over consecutive days (five days and counting at the time of writing) for the first time since March. This breaks a 100-day streak of neutral or negative rebase daily. The price target for AMPL has increased over the past few months, from $1.1471 on April 1, 2023, to $1.159 today. This slowdown in price target increases reflects the cooling of inflation in the broader economy, with Truflation reporting the CPI inflation rate for the United States being 2.48% versus a government-reported 4% YoY.
SPOT Token
Back in our first quarter (Q1) review, we touched upon the nascent SPOT token, which was born in December 2022. Fast-forward to the end of Q1 2023, and SPOT had flexed its muscles to reach a market cap of around $732,900, with about 637,000 SPOT tokens in play.
Now, as we move through the second quarter (Q2) of 2023, SPOT has revved up its engines even more, with over 1.2 million tokens minted and about 768,000 SPOT currently in circulation. This momentum has boosted the estimated market cap to approximately $867,600, marking an impressive 18.4% increase in growth. By the end of Q2 2023, each SPOT token was valued at $1.13.
What makes these figures even more noteworthy is that they’ve stayed robust despite the market cap value of the collateral token, AMPL, dropping over 25%. While this dip did exert some downward pressure on SPOT, it wasn’t enough to trigger a significant slump. The lowest SPOT dipped to around $1.09, demonstrating the power of a well-designed system that can weather unexpected ‘black swan’ events without resorting to artificial stability measures.
Let’s take a step back and look at SPOT’s journey this year. It kicked off 2023 for $1.15, and as we pen this article, SPOT is cruising at $1.13, a minor decline of 1.7%. Compare this to AMPL’s year-to-date (YTD) decline of over 12%, and you’ll appreciate SPOT’s resilience.
The story of SPOT teaches us an important lesson: recessions are hard to prevent, but a well-crafted currency like SPOT can offer a shield not just against inflation but also against the rough and tumble of economic downturns. It’s an issue that the crypto world had been grappling with until SPOT came along, offering a robust alternative to the inflation-vulnerable, centralized stablecoins we’ve been accustomed to.
The SPOT-AMPL comparison chart demonstrates this stability versus AMPL’s volatility over time quite well:
Ecosystem and Community Updates
Q2 2022 has been a busy quarter for the continued development of the Ampleforth ecosystem, coming from both the core development team and the community. First, there has been a consistent release of new official materials on SPOT from the Ampleforth devs, most recently in The Spotter Playbook.
The purpose of The Spotter Playbook is to shift the perspective of the crypto community regarding stablecoin designs. It aims to move away from misguided assumptions and promote a viewpoint based on sound assumptions. By following the Playbook, individuals can effectively identify the type of person they are communicating with and guide them toward narratives that challenge misconceptions while directing them toward narratives that highlight the positive aspects of the SPOT token and its protocol.
We would argue this is required reading for everyone in the Ampleforth community.
Another blog post we would also like to highlight is Evan Kuo’s “The SPOT decentralized flat coin — A five-year journey in 5 minutes”.
In this post, Evan discusses the development and purpose of the SPOT project by the Ampleforth Foundation. The post highlights the challenges in creating a decentralized asset that serves a real purpose and works in the long run.
Governance Updates
Three proposals were officially voted on and passed by the FORTH DAO in Q2. Those three proposals are as follows:
1. Arrakis PALM for Deepening DAO Owned Liquidity — Passed with 767.93k FORTH
This proposal suggested deploying Arrakis PALM, a trustless market-making infrastructure protocol, to conduct market-making activities on UniV3 for FORTH.
Arrakis had a successful track record and offered liquidity bootstrapping mechanisms through PALM. The proposal outlined how PALM could balance asset ratios and provide liquidity without downward pressure on FORTH’s price. The FORTH DAO was granted full transparency and control over the deployment, with the ability to withdraw funds or revoke access. The proposal included an initial deployment phase using ETH from the DAO treasury, followed by a reassessment in Phase 2 to adjust parameters or consider additional liquidity options.
2. Geyser Refresh for April 25th, 2023 — Passed with 614.56k FORTH
This passed proposal involved the renewal and configuration of geysers for the FORTH token.
The proposal suggested keeping the same geyser configuration as before, as the liquidity landscape remained similar. It was mentioned that platforms like PALM from Arrakis could be explored to acquire matching pair tokens for AMPL and SPOT. The proposal was successfully funded and implemented, thanks to the participation and support of the community.
3. Chainlink CPI Architecture Upgrade — Passed with 867.38k FORTH
This proposal aimed to upgrade the CPI oracle used by Ampleforth to the latest version of Chainlink’s decentralized oracle network infrastructure.
The proposal involved implementing a new architecture and automation jobs to ensure the monthly delivery of the CPI metric data to the Ampleforth contract. Chainlink Automation would handle the data delivery process, with two automation jobs being executed monthly. The upgrade aimed to enhance the reliability and availability of the CPI metric data following the migration of the AMPL Price Feed to the upgraded Chainlink infrastructure.
SPOT Token Proposals
There are two crucial recent proposals that all AMPL/SPOT enthusiasts should be aware of. Each of the new proposals is discussed in detail below:
Tranche Ratio Update
The first is the “Proposal to update the tranche ratios for SPOT’s collateral.”
The passed proposal aimed to update the tranche ratios for SPOT’s collateral in the Ampleforth protocol. Currently, the tranche ratio is 20/80, allowing users to mint 20 SPOT for every 100 AMPL.
The proposal suggested updating the ratio to 25/75, enabling users to mint 25 SPOT for every 100 AMPL, thus increasing capital efficiency by 25%. The proposal sparked a discussion about the potential risks and benefits of the ratio change, with some expressing caution and others supporting the increase. After thorough discussion, the proposal passed on the snapshot vote, and the issuer configuration was updated on-chain.
The “Proposal to update the tranche ratios for SPOT’s collateral” alters the relationship between SPOT and AMPL, making it easier to create SPOT tokens. By adjusting the tranche ratio from 20/80 to 25/75, users can now mint more SPOT for the same amount of AMPL. On the one hand, this change increases the capital efficiency of SPOT and potentially makes it more attractive to users, as they can get more tokens for the same amount of collateral.
However, the alteration also poses certain risks. As the supply of SPOT tokens may increase due to the easier minting process, it could lead to inflationary pressures, devaluing the token if demand doesn’t keep up. Moreover, increasing token creation might lead to a surplus of tokens in the market and negatively impact the price. It will be crucial to monitor market demand closely and manage token supply appropriately to mitigate this risk.
Fees and Rollover Rewards Update
The second major proposal released in Q2 2023 is the “Proposal to update SPOT’s Fees and Rollover Rewards.”
The proposal aims to update the fees and rollover rewards for the SPOT system in the Ampleforth protocol. The proposal suggests implementing a 2.5% mint and burn fee for SPOT and a rollover fee of -0.077% (equivalent to a maximum of 1% annual debasement). The fees are intended to support timely rollovers and incentivize users to participate in the SPOT system.
The discussion highlighted the importance of balancing fees that cover rollover rewards and maintaining the stability and correlation between SPOT and AMPL prices. After the discussion, a snapshot vote was initiated, and the proposal passed with a majority in favor of the updated fees and rollover rewards.
The “Proposal to update SPOT’s Fees and Rollover Rewards” directly affects user incentives within the system. By introducing a mint and burn fee and a rollover fee, the system encourages prompt rollovers and discourages unnecessary or excessive minting and burning actions.
Introducing a 2.5% mint and burn fee is effectively a form of transaction tax, which could potentially discourage high-frequency trading and stabilize the market by reducing token velocity. Conversely, it might deter some users due to the increased cost of transactions.
The rollover fee of -0.077% (equivalent to a maximum of 1% debasement per year) essentially disincentivizes holding onto the token for extended periods. This could encourage the circulation of the tokens within the ecosystem and possibly foster a more vibrant SPOT economy. However, it might also discourage the long-term holding of the tokens and could promote more short-term, speculative behavior.
What Lessons Have We Learned About SPOT?
As we round off Q2 2023, the lessons from SPOT’s performance are manifold and insightful. Notwithstanding its young age, SPOT has demonstrated considerable resilience amidst the turbulence experienced by its collateral token, AMPL. Despite a significant dip in AMPL’s market cap, SPOT held its ground, showcasing its robust design and capability to weather market downturns.
SPOT’s performance highlights the token’s potential as a hedge against not just inflation but also broader economic fluctuations. Its resistance against the volatile dynamics of the crypto world underscores its effectiveness as a decentralized alternative to conventional stablecoins, offering a solution to long-standing challenges in the space.
The updates to the SPOT system, namely the tranche ratio and fees and rollover rewards, reflect the continuous efforts to optimize its functionality and efficiency. While these changes are expected to boost SPOT’s utility and appeal, they also underline the need for ongoing monitoring to mitigate potential inflationary pressures and ensure that demand keeps pace with the increased token supply.
In essence, the second quarter of 2023 has been a testament to SPOT’s inherent strength and adaptability, reinforcing its promising prospects in the cryptocurrency landscape. As the Ampleforth ecosystem continues to evolve, the learnings from this quarter will undoubtedly play a pivotal role in shaping future strategies and developments.
