Ampleforth founder: There is a solution to the decentralized stablecoin dilemma 🚨 This article is 3 years old...
Ampleforth founder: There is a solution to the decentralized stablecoin dilemma
Ampleforth’s founder and CEO shared his thoughts on regulatory concerns surrounding the instability of stablecoins as the “rebasing crypto” got introduced to DeFi lending protocol.
2 min read
Updated: Aug. 25, 2021 at 1:50 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
As the US dollar devaluation becomes a hot topic, CryptoSlate talked to the founder of the “rebasing cryptocurrency” designed to fight the inflation curse.
Ampleforth (AMPL) is a protocol running on the Ethereum (ETH) blockchain that incentivizes a network of users to maintain a cryptocurrency with a value that is cycling around $1.
Maintaining the price stability
“We created AMPL to be an indestructible unit of account because we realized early on that the algorithmic stablecoin approaches were very fragile, Ampleforth’s founder and CEO Evan Kuo told CryptoSlate, adding that “the graveyard of failed decentralized stablecoins” already proved this to be true.
Due to its method of maintaining price stability, AMPL differs from stablecoins that rely on deposits or debt issuance and redemption.
Designed to be elastic and non-dilutive, the protocol adjusts the supply of AMPL every 24 hours in a process called “rebasing,” with anyone who owns tokens seeing the balance in their wallets change every day at 2:00 UTC.
The protocol must know the price of AMPL and whether it has diverged from the US dollar, in order to correctly adjust the supply, meaning that if the price rises above the target, the total supply increases, and if the price drops below the target, the supply shrinks, with users always retaining the same proportion of the overall cache.
“Moving forward we’ll see methods of separating AMPL’s price volatility from its supply volatility,” said Kuo, adding that “the first real taste of this is AMPL on AAVE, but there’s far more to come, and it will undoubtedly shape the way folks are thinking about application design moving forward.”
$AMPL on $AAVE is officially LIVE!! ??#Ampleforth Rebases everyday at 2am UTC ?
(10pm EST) pic.twitter.com/YERxdg8V6Y— Ampleforth #AMPL (@AmpleforthOrg) July 24, 2021
The non-collateralized crypto ideal
Kuo recently touched on Twitter how AMPL’s price target has changed over the last two years, taking inflation into consideration as it went from $1 two years ago to $1.051 today.
Pretty interesting to watch inflation unfold this way.
I used to think of it as such an invisible and abstract force. That was its great strength and weakness.
As a price target in our protocol, it’s visceral.@AmpleforthOrg @mrinconcruz @brandoniles @aalavandhan1984 https://t.co/Q8tTUdHJQP
— Evan Kuo ? (@evankuo) August 3, 2021
According to Kuo, a cryptocurrency relying on traditional collateral like the US dollar would have a tough time holding a fixed reserve ratio if the underlying asset was hyper-inflated.
“One key advantage with AMPL is that it’s non-collateralized,” said Kuo, adding that “this allows it to sustainably return to the consumer price index (CPI) adjusted 2019 USD price target.”
$AMPL deals with this using PCE. Glad to see people catching on. But the basket as a price target isn't the challenge.
The beauty of being non-collateralized is you can have a "flat" price target without running the risk of ever being under-collateralized in a reserve. https://t.co/NQeKVZdJDs
— Evan Kuo ? (@evankuo) August 5, 2021
“I believe there is a solution to the decentralized stablecoin dilemma around the corner, but it’s not what people in the space currently think,” Kou told CryptoSlate, adding that “the approach that will ultimately work is crypto-collateralized.”
The price target isn't the hard part guys …
We need on-chain collateral that 1) isn't vulnerable to price inflation, and 2) has predictable volatility
One solution is to re-segment the risk of un-collateralized cryptocurrencies into tranches @mrinconcruz
— Evan Kuo ? (@evankuo) August 5, 2021
According to him, “there will be ways of re-segmenting the risk of non-collateralized assets like AMPL and Bitcoin (BTC), to produce safe asset collateral to be used by the issuer of stablecoins as an alternative to USD Coin (USDC).”
While reflecting on the current stablecoin market and the intensified scrutiny surrounding the sector, Kuo pointed out that “the regulation draws attention to the fragility of the space today.”
“The irony here is all this innovation, the secret of crypto today, is simply the US dollar,” he added, saying that “thankfully this won’t be the case forever.”
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Ampleforth is a digital-asset-protocol for smart commodity-money.