From USDT to DAI, AMPL: What kind of accounting unit does DeFi need?

Taking the DeFi movement that flourished last year as the dividing line, the voice of the crypto market transaction payment carrier began to gradually shift.

Previously, the market share of stablecoins has been occupied by centralized stablecoins such as USDT and USDC, while over-collateralized stablecoins (DAI, etc.) and flexible currencies (Ampleforth) have been regarded as niche experimental products.

However, with the explosion of the DeFi market, the latter two have gradually entered the user’s field of vision and have become the first echelon in the payment field: in the past year, the issuance of DAI has increased by more than 18 times, becoming the decentralized stable currency with the highest market value; the issuance of AMPL has been A surge of more than 30 times, with more than 100,000 coin holding addresses.

Flexible currency has also set off an upsurge after liquidity mining and has become the focus. Although many projects eventually ended in a crash, their mechanism has been widely recognized and discussed by the encryption industry, and it is a rare and valuable currency experiment.

As the ancestor of flexible currency , Ampleforth has experienced initial price shocks and its volatility has begun to decrease. Now it has become an important building block of the DeFi market, and has entered the ecosystem of various DeFi protocols such as AAVE to become a denominated currency.

In April of this year, Ampleforth announced the launch of the governance token FORTH, transferring the governance authority from the founding team to the community, marking its official becoming a fully decentralized DeFi protocol. Recently, Ampleforth announced the launch of the second version of Geyser (Geyser v2), which improves user capital utilization by introducing a new standard universal vaults.

” Looking forward, we expect that AMPL will continue to power more and more DeFi use cases and will serve more and more blockchain ecosystems. ” The Ampleforth team said.

From the beginning of 2018 when no one paid any attention, to the accumulation of accumulation and detonation of the market, to the deepening of the industry and expanding applications now, what problems have to be solved by the flexible currency designed by Ampleforth, how to reignite the crypto market, and even step out of the crypto market and move towards mainstream commodities The currency of the world? The Ampleforth team accepted an exclusive interview with Odaily Planet Daily to answer the above questions.

AMPL: Encrypted native denominated currency to resist centralization risks

In the past 18 months, with the development of encrypted finance, as an indispensable part of market transaction pricing, the scale of the stablecoin market has increased dramatically. Coingecko data shows that the total market value of stablecoins has grown from USD 5.9 billion in January 2020 to USD 100 billion today, an increase of nearly 2,000%.

The glorious data not only proves the potential of the encrypted market to the outside world, but also exposes the fragility and hidden dangers of encrypted finance: the fiat currency stable currency may have the risk of thunderstorms.

Today, the top three stablecoins are USDT (61.884 billion U.S. dollars), USDC (26.634 billion U.S. dollars) and BUSD (11.178 billion U.S. dollars), all of which are legal currency stablecoins, using U.S. dollars as collateral and exchanged at a 1:1 exchange rate. Due to long-term operating habits, many people also believe that fiat currency stablecoins are more convenient, stable and reliable.

The problem is that the trust built on centralized institutions is not reliable, and no one can guarantee that there are sufficient dollar reserves behind it. Take USDT, which occupies more than 60% of the market size, as an example. Its officials have admitted that only 75% of cash and its equivalents are used as reserves, and the remaining 25% are various types of mortgage debt, which poses a risk of loss. This also means that USDT cannot achieve 100% rigid payment.

In addition, the compliance of the legal currency stable currency is always in doubt, and the regulatory blade hanging overhead is also an issue that has to be considered. Many organizations, including the World Bank, have issued multiple documents requiring stablecoins to meet appropriate anti-money laundering and supervision requirements, and currency holders should accept user identity verification KYC; the United States also drafted a stablecoin-related bill (STABLE Act) at the end of last year. ), requiring stablecoin issuers to obtain a bank license… USDT, the king of stablecoins “working without a license”, has recently been reviewed by the US Department of Justice again (this is not the first time), and its executives may face criminal penalties for bank fraud .

All in all, the faster the fiat currency stable currency develops, the deeper the impact on the crypto market. Once a thunderstorm occurs, it will inevitably lead to a major collapse in crypto finance. For the cryptocurrency ecosystem, there is an urgent need for native denominated currencies as payment media and carriers to avoid the risk of thunderstorms in regulatory and centralized institutions. The rise of the DeFi movement provides a good opportunity for development.

After the wave of liquid mining , the flexible (algorithmic) currency represented by Ampleforth inspired market participation enthusiasm with its characteristics such as reflexivity, speculation, and arbitrage, which became the focus of the moment and pushed the cryptocurrency experiment to a new height.

The so-called flexible (algorithmic) currency is a currency that automatically adjusts the money supply mechanism according to algorithmic procedures. Increase the market supply when the token price is higher than the anchor price, and reduce the market supply when the stablecoin price is lower than the anchor price, so that the token price maintains a balance near the target price.

Specific to the Ampleforth (AMPL) protocol, every 24 hours, the total supply of AMPL may trigger a rebase function according to the time-weighted average price (TWAP) determination rule of each AMPL to automatically increase or decrease AMPL’s Market supply:

When the price stays between 0.961 US dollars and 1.061 US dollars, it will not trigger a return to base and maintain the current supply unchanged;

When the price is higher than US$1.061, it triggers a positive base, increases the supply, and prompts the market to sell and lower the price;

When the price is lower than US$0.961, it triggers a negative base, reduces the supply, and prompts the market to increase the willingness to buy and raise the price.

And, more importantly, the tokens in each AMPL wallet address will change proportionally.

To give a simple example, Xiaoqin is an AMPL holder who holds 1000 AMPL before “returning to base”; if the price triggers a positive base and the total supply of AMPL increases by 10%, Xiaoqin’s account now holds 1100 AMPL ,vice versa. In short, the proportion of tokens held by Xiaoqin in the entire AMPL network has not changed.

This design is also the original intention of the founding team. Traditional commodity currencies (such as the U.S. dollar) are subject to the centralized institutions behind them, and may face inflation, which may lead to dilution and plunder of users’ personal wealth. Ampleforth is a truly independent financial element, which exists independently of any central institution like Bitcoin, effectively avoiding currency depreciation.

“AMPL is the first and largest flexible currency. Its value is closely related to 1 U.S. dollar, which means that it can be priced stably for contracts. Unlike traditional stablecoins, AMPL is not officially pegged to the U.S. dollar, which makes it free It is affected by the possible inflationary pressures of fiat currency stablecoins, and provides DeFi users with more flexibility when creating contracts.” The Ampleforth team told Odaily Planet Daily.

In the ever-evolving DeFi movement, Ampleforth has become an important participant, entering the ecosystem of various DeFi protocols such as AAVE, Balancer, etc., as a denominated currency. The data shows that AMPL’s issuance has surged by more than 30 times, with currency holding addresses exceeding 100,000.

The development of AMPL is not only the result of its own protocol design, but also an important manifestation of the efforts made in the encryption field to pursue native denominated currencies. It marks another important step towards decentralization in the encryption field.

Analyze the stability, flexibility and reflexivity of Ampleforth

After Ampleforth, the flexible currency track has also flooded with many new players such as ESD, Basis Cash, and DSD.

However, these latecomers were only a flash in the pan, and eventually ended in a price crash. It is also the demise of a number of imitation disk projects, which highlights the superiority of Ampleforth’s design.

1. How does Ampleforth stand out?

First of all, the network-wide “Rebase” is the biggest difference between the Ampleforth algorithm model and the seigniorage share model adopted by other protocols.

Just like Uniswap’s automated market maker mechanism, Ampleforth’s model also has the elegance and simplicity unmatched by similar competitors. Ordinary users are very easy to understand its basic operating core, which is conducive to the better spread of the agreement. More importantly, every time Ampleforth returns to the base , all token holders can maintain the same network share, which is attractive to users suffering from the inflationary pressure of commodity currencies.

On the other hand, agreements such as ESD have introduced multi-tokens and a “seigniorage share” model, which makes the rule design more complicated and not easy to spread. In addition, price changes are highly dependent on subsequent capital investment, and eventually become a capital-tray relay race. Looking at these projects, the growth path is basically the same:

In the early days, through opening up liquidity mining to attract funds to enter the market, the amount of locked positions increased sharply;

In the mid-term, the currency price rose for a short period of time, which caused the mining revenue to rise sharply, creating a wealth effect to drive more funds into the market. At this time, the currency price deviated from the target price, triggering the positive base , and the number of tokens increased-but the currency price did not decrease as a result. Further stimulate the entry of incremental funds in the market, reaching its apex;

In the later stage, no new funds entered the market to take orders, and the currency price fell, triggering a “negative base”; more funds began to leave the market, accelerating the currency price decline, forming a death spiral, and the project eventually collapsed.

Old projects die, new projects are reborn, and the market enters a new cycle. In such a game, flexible currency has long since deviated from its original intention and has become a tool and helper for making money. Because of this, many people comment that flexible currency is a “scam”, the core of which is Ponzi’s fund mode.

Secondly, Ampleforth is more “stable” compared to competing product prices, which is also an important condition for it to become a basic payment tool in the crypto market.

“It needs to be emphasized that AMPL has a stable performance in a long time frame, which is not available in other flexible currencies. In the past two years or more, AMPL has maintained a stable peg to the US dollar and has crossed The bull-bear cycle, which shows its long-term durability.” The Ampleforth team told

Of course, the stability of AMPL is also relative, not absolutely stable, and its team has always declared that AMPL is not a stable currency . According to statistics, from its establishment in 2019 to the end of February this year (more than 500 days), AMPL’s time-weighted average price exceeded the target range (0.961~1.061) three-quarters of the time; especially when the DeFi boom just started in June last year , AMPL exceeded the target range for more than a full month, and the price reached a maximum of US$3.83. However, since February, it has exceeded the target range in less than a quarter of the time. This also means that over time, AMPL prices have begun to stabilize. Considering that the agreement is currently in its infancy, there is still a lot of room for development.

2. The elastic currency paradox

In fact, for AMPL and other flexible tokens, in order to run for a long time and be adopted by more protocols as a denominated currency, stability must be achieved and volatility must be reduced to maintain it within a specific target range.

However, this is difficult to achieve for most flexible currency projects because it is highly reflexive: demand is driven by market sentiment and momentum; these demand-side forces are transferred to the supply of tokens, This in turn generates further directional momentum, which may eventually become a fierce feedback loop. To put it simply, the increase in demand leads to an increase in the price of flexible currency. After the increase in supply, the market does not turn around. Instead, it further stimulates demand and forms a positive cycle, and vice versa.

At this point, we can find that there is a paradox: in order to achieve price stability, the market value of the flexible currency must be large enough to minimize the impact of reflexivity on the market, that is, the increase (decrease) of the supply will not cause the price to be violent. Volatility; however, the market value of flexible stablecoins can only be expanded through a high degree of reflexivity, and the two form a contradiction.

Therefore, for flexible currencies, it should be initiated through arbitrage, speculation and other modes in the early stage to expand the market value as much as possible; at the same time, it needs to obtain toughness from the reflexive cycle, obtain loyal users and market recognition, in order to maintain its own price stability. Thereby reducing the impact of reflexivity. It should be noted that speculation is only a means to achieve the ultimate stability of elasticity, but not an end. For AMPL, it has experienced these three stages:

The early market value was low, there were fewer users, and the price fluctuated greatly;

During the DeFi period, liquidity mining (introduced later) and a high degree of reflexivity attracted a large number of users. The market value soared 18 times within 20 to reach hundreds of millions of dollars, but it also led to further volatility;

Now the market value has stabilized and can carry reflexive volatility, and the price has also tended to the target price.

Nowadays, although flexible currencies headed by AMPL occupy a place in the DeFi field, the overall scale is still small, far inferior to the influence of DAI (collateralized stable currency) and USDC (fiat currency stable currency).

Although the road ahead is long and there is a long way to go, I think AMPL, as the original cryptocurrency, will have a market value comparable to DAI in the future. Today’s AMPL, just like Bitcoin in 2011, is still fragile and lacks time for development.

Ampleforth enters a new phase

The crypto market continues to flourish this year, with various DeFi projects emerging one after another, and the amount of locked positions on the chain continues to break new highs. The DeFi industry is changing with each passing day, and Ampleforth has not stopped moving forward and has continuously made new breakthroughs, mainly focusing on the following items: issuing governance token FORTH; cross-chain entry into the BSC ecosystem and the launch of the second version of Geyser (Geyser v2).

1. Open DAO governance

Nowadays, DAO (Decentralized Autonomous Organization) has become an important direction for many DeFi projects, and Ampleforth is one of them. To put it simply, DAO initiates proposals through blockchain and smart contracts to coordinate member actions and resources. Members can vote on proposals. The more tokens they hold, the greater the voting power.

In April of this year, Ampleforth officially announced the launch of the governance token FORTH, marking a new stage of its formal DAO governance.

“The launch of the FORTH governance token is an important milestone and a crucial step for Ampleforth to take the road to decentralization. Through FORTH, Ampleforth’s management process was officially handed over to the community. ” The Ampleforth team explained the respective positioning of AMPL and FORTH. “The launch of AMPL (monetary assets) + FORTH (the governance token) is the realization of Ampleforth’s original vision.

AMPL is a unit of account that exists outside the scope of traditional banks. FORTH ensures that this system cannot be managed by a single entity similar to the Federal Reserve. The will of the community will promote the development of AMPL. “

Specifically, FORTH’s governance mainly includes two aspects: economic governance and technical function governance.

Economic governance includes changes in the economic ecosystem that determine AMPL, such as the setting of the supply base, changes in the number of AMPL, etc. FORTH holders decide how many of these parameters can be set through voting; technical function governance includes the characteristics of supply policy , The characteristics of the programmer, the characteristics of the oracle middleware, etc. Users can directly use FORTH to vote, or delegate their tokens to “representatives” to vote.

In the past, many DeFi agreements will have the following two major problems in the implementation of DAO governance:

The large currency holders cooperated with each other to initiate a proposal that would dominate the large accounts but harm the interests of retail investors. The proposal was passed due to the large proportion of large accounts holding multiple votes. Recently, DeFi Education Fund obtained millions of UNI Tokens through Snapshot voting and smashed them.

Voting rights are too concentrated, and some retail investors are not interested in voting. Insufficient participation has led to unfair voting results.

In order to prevent the occurrence of the above-mentioned situation, the initial distribution of FORTH governance tokens is inclined to the community to truly realize decentralized community governance and prevent totalitarianism.

According to the official announcement, those who have interacted with AMPL on the chain are eligible to claim FORTH, and the unclaimed FORTH will be placed in the DAO; 67% of the tokens in the creation circulation (15 million) will be directly distributed to the community, only 33% of the tokens are allocated to FORTH early supporters (including the core development team, consultants, supporters and Ampleforth Foundation); and, in order to prevent the subsequent concentration of chips, FORTH adopts an inflation system, with an annual inflation rate of 2%.

It is worth noting that after the launch of the FORTH governance token, major mainstream platforms such as Binance, Huobi, OKEx, and have successively launched token transactions. The current market value of FORTH in circulation is 130 million U.S. dollars.

2. Geyser V2 improves capital utilization

As early as the midsummer of 2020, Ampleforth announced the launch of a liquidity mining incentive product called Geyser (geyser) on Uniswap v2. Users who provide liquidity for AMPL will receive AMPL token rewards.

At that time, the annualized income of Geyser (APY) exceeded 100%. Its liquid mining project attracted tens of thousands of participants to participate in pledges on major decentralized exchanges such as Sushiswap, Uniswap, Balancer and Mooniswap. The DeFi craze in the summer of 2020 played an important role and also opened the door for the rapid rise of AMPL.

Ampleforth is not the first project to launch a liquidity plan, but compared to other projects, Ampleforth has also made some innovations. For example, the introduction of a bonus period (Bonus Period), users who hold AMPL for a longer period will get more rewards, thereby preventing users from suddenly withdrawing liquidity. In addition, Ampleforth has successively launched a multi-period liquidity plan since then. Although revenue has declined, it has always occupied a certain market in the DeFi mining market.

In July of this year, Ampleforth announced the launch of the second version of Geyser (Geyser v2). Compared with Geyser v1, V2 version has the following advantages:

One is that v2 allows users to retain the right to supervise tokens. In v1, participants must hand over the supervision of tokens to the Geyser smart contract, and v2 introduces a new standard-universal vaults. The General Vault is a composite NFT standard that provides an interface for locking and unlocking tokens, and provides users with a non-custodial pledge option.

The second is that the V2 version greatly improves the capital utilization rate. Previously, due to limited funds, AMPL users could only participate in liquid mining projects on a certain platform such as SUSHI, which resulted in low capital efficiency. Now V2 does not require users to transfer tokens from the wallet, and can lock the tokens in multiple reward plans at the same time, saving Gas fees; and the V2 version supports cross-chain, and users can participate in liquidity plans on other chains.

The third is that V2 supports the NFT standard and can receive NFT tokens. In addition, all LP tokens are stored in the common treasury, and the treasury itself can also receive rewards. Therefore, NFTs can be issued based on the ownership of the common treasury and become the building blocks of other DeFi protocols.

3. Cross-chain access to BSC, Acala and TRON

Starting in September 2020, Ampleforth began to discuss the possibility of multi-chain development. At that time, Binance Smart Chain became a hot market, and AMPL’s listing of BSC became the most discussed topic.

However, it was not until this year that cross-chain was truly realized. In June of this year, Ampleforth core software engineer Nithin Krishna announced that cross-chain formation: “$AMPL on BSC is ready and should be launched in the next two weeks. We are ending some final tests.”

Then, AMPL launched PancakeSwap. Odaily Planet Daily’s daily inquiry found that the current AMPL-BUSD mining income on Pancake can reach 145%.

From USDT to DAI and AMPL, what accounting unit does DeFi need?

“We definitely want to see Ampleforth continue to be deployed on other blockchains. DeFi is increasingly adopting a multi-chain approach, and AMPL must follow suit. By deploying on multiple chains, we can use each as needed. The advantage of the platform, and where anyone stores value or conducts transactions. We hope to provide a universal, decentralized and stable contract pricing option for the entire DeFi ecosystem.” The Ampleforth team told Odaily Planet Daily that they have also recently cooperated with Acala and TRON have established new cross-chain integrations to support the growing needs of these communities.

In the future, AMPL will continue to be deployed on Layer 1 (Polkadot, Cosmos, Fantom, Solana, Cardano) and Layer 2 (Polygon) chains. But Ampleforth’s monetary policy, oracles and governance modules will exist on Ethereum, as long as it is a chain with the highest level of security and decentralization. Today’s Ethereum has the highest level of decentralization, sufficient usage to prevent 51% attacks, and has the most active community and developers than any other blockchain.

As for AMPL token contracts on other chains, they will share the same supply pool, they can replace each other, and they will be governed by the same monetary policy.

Can flexible money enter the mainstream society?

As Bitfinex’s first IEO project, Ampleforth raised US$4.9 million in 11 seconds, and the market is very optimistic about its development potential. In the past two years, Ampleforth has also met market expectations. Whether it was the 312 crash in 2020, the oracle failure in December 2020, and the 519 plummet this year , Ampleforth has withstood the test and became more and more courageous. Ampleforth eventually grew into a flexible currency with the highest market value, and it is also one of the safest and most battle-tested protocols in the DeFi field.

Of course, the ultimate question is: Can the flexible currency advocated by Ampleforth step out of the crypto market in the future and move towards the mainstream market to become the currency of the real commodity world?

In this regard, the Ampleforth team has sufficient confidence. “In the crypto world, Ampleforth can become a key component of DeFi, partly because it is very suitable for smart contracts. The reality is that Ampleforth can be used to price any type of contract, not just “smart” contracts, so Provide a wider range of potential use cases.

As Ampleforth continues to gain adoption in the crypto market and the DeFi world, it can also be easily expanded to be similar to real-world contracts outside the DeFi ecosystem for pricing. The opportunity here is great, and it is still in its infancy. “

Flexible currency may become an important alternative to real payment tools in the future. On the one hand, with the integration of encrypted finance and traditional finance, supervision will limit the living space of fiat currency stablecoins and give flexible currencies more room for development; on the other hand, the use of encrypted currencies for cross-border payments will become the mainstream in the future, flexible The living space of currency will be further expanded.


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