What Is The Ampleforth Protocol? AMPL And Forth Explained

AMPL

AMPL: The account ERC-20 token’s unit of measure. AMPL’s price is set at the CPI-adjusted 2019 USD, but the quantity of AMPL tokens in user wallets automatically rises or decreases in response to demand, as determined by the market.

While AMPL’s price may diverge from its long-term aim when market demand suggests that there is either too much or too little supply, it will always ultimately revert to its long-term target.

Forth

The governance token for the Ampleforth ecosystem.

FORTH is an ERC-20 token that can be used to oversee protocol parameter modifications, control liquidity mining emissions, and guide the usage of DAO treasury assets that are committed to fostering ideas in the elastic finance and larger DeFi sector. Holders of FORTH tokens cast their votes using their tokens.

How Does The Ampleforth Protocol Work?

This protocol targets the CPI-adjusted 2019 US dollar and automatically expands or contracts the amount of tokens in user wallets dependent on the price of tokens in the wallets in question.

Consider AMPL to be comparable to Bitcoin, with the exception that the quantity of AMPL tokens in your wallet rises when there is more demand and drops when there is less demand.

Policy of Elastic Supply

Price exchange rate of AMPL > 1 2019 USD indicates that the market believes there is a greater demand than there is supply of the product.

Ampleforth automatically and proportionately raises the supply of tokens in user wallets in response, eventually lowering the price down to the objective.

Contraction: When the price exchange rate of AMPL is less than 1 2019 USD, the market is signalling that there is more supply than demand for the currency.

Ampleforth responds by automatically and proportionately reducing the amount of tokens in users’ wallets, progressively increasing the price of tokens until it reaches the desired price of $1.00.

However, the price of AMPL will depart from its objective when market demand suggests that there is either too much or too little supply. However, the price of AMPL will always finally revert to the CPI adjusted 2019 dollar.

Even though AMPL holders endure supply volatility, contracts denominated in AMPL are relatively steady over the long term.

The Ampleforth protocol, rather than attempting to eliminate demand volatility entirely, transfers demand volatility from one party to another. As a result, AMPL is not susceptible to market forces and does not require any collateral, treasury, market maker, or buyer of last resort in order to achieve its long-term target.

For more information on how supply changes are computed and how often the protocol updates supply, please see the protocol’s documentation (or rebases).

Applications Currently in Use and in the Future

Modern-day cryptocurrencies are unable to operate as units of account because of their price volatility.

This function of money is crucial because it allows for the denomination of predictable contracts, which may then serve as the foundation for more complicated financial systems to be established.

In order to achieve this, several efforts have been made to create stablecoins that may be used as a unit of account as well as a hedge against market volatility.

But systems that have sought to completely eliminate volatility have so far shown themselves as solutions that are either very censorable or extremely unstable in their performance.

Fundamental building blocks, in our opinion, should be made as strong as is reasonably practicable.

As a result, the Ampleforth ecosystem has chosen to first distinguish between the objective of constructing a lasting unit of account and larger efforts to hold near-term value, and then to rebuild the financial stack with more modular, durable, blocks in the process.

It is possible to create robust on-chain contracts using AMPL as a building block since it does not need the use of centralized custodians or purchasers of last resort.

As a result of this feature, a variety of use cases are possible, such as lending on the blockchain and borrowing on the blockchain, as well as the production of on-chain derivatives and the establishment of collateral for a decentralized stablecoin.

Lending on a Decentralized Basis

The most straightforward use of AMPL is decentralized debt denomination. It is common for people to borrow money with the intention of putting it into action as soon as possible and then repaying it over time with interest.

When a loan contract is denominated in a currency with a fluctuating exchange rate, such as ETH, the borrower must account for the volatility of the ETH exchange rate.

We may use the following basic example to explain our point:

A loan in the form of ETH is shown in the following example: Consider the case in which Alice borrows 1 ETH, which is worth $1000/ETH, with the aim of returning it at a later date.

• Alice must first sell the ETH she got in exchange for $1000 in order to put the money to use in order to pay back her loan. Suppose the price of ETH climbs to $3000 per ETH, in which case she will have to pay $3000 in order to get additional ETH.

Because loans in price-volatile currencies are so dangerous, the vast bulk of borrowing activity on decentralized lending platforms is regrettably denominated in centralized stablecoins, which is regrettable given the nature of the cryptocurrency market.

AMPL removes this reliance and makes it possible to lend and borrow in a sustainable manner on decentralized lending networks.

• Example of an AMPL Denominated Loan – Assume Bob borrows 1000 AMPL with the intention of repaying it at a later date. If Bob sells the AMPL in order to put $1000 to work, he can be reasonably certain that the cost of repurchasing the AMPL in order to pay back her loan will be reasonably stable in the long run due to the mean-reverting price of the AMPL, even if the size of the AMPL network significantly increases or decreases.

As seen above with Bob’s loan, despite the fact that AMPL holders suffer the same type of fat-tailed stock volatility that is typical of floating-price tokens like ETH, contracts in AMPL remain long-run stable. AMPL is presently accessible as a lend and borrow asset on the AAVE marketplace.

Decentralized Derivatives

Derivatives are a sort of financial contract in which the value of the contract is determined by the value of an underlying asset.

Contracts requiring a unit of account for denomination are supported by AMPL, which also supports the formation of derivatives that may be traded on the blockchain. Let’s look at a basic illustration to better understand the example.

For example, suppose Bob wishes to divide the stock-volatility of AMPL into two derivative tranches, a senior (low-risk) tranche and a junior (high-risk) tranche; this is known as the AMPL derivative example.

Bob may create a simple smart contract that takes a redeemable AMPL deposit and assigns one-tenth of all future supply changes to the senior tranche token, while assigning nine-tenths of all future supply changes to the junior tranche token.

When a tranche reaches maturity, the senior tranches are the first in line to be redeemed, followed by the junior tranches.

Bob will have generated two derivative tokens: a senior derivative token that is significantly less volatile than the underlying AMPL and a junior derivative token that is much more volatile than the underlying AMPL, both of which will be free of any additional oracle risk. Please visit ButtonWood to keep up with the latest developments on this.

Decentralized Stablecoin

The notion of on-chain derivatives discussed above may be used to the creation of safe-asset (senior) tranches, which can be utilized as transparent and strong collateral by the issuer of a crypto-collateralized stablecoin when properly structured. ‌

Because the tranche ratios of the underlying derivatives are pre-defined and redeemable, the volatility tolerance of a senior tranche token can be precisely determined and quantified (ie: it can be initialized such that the safe-asset derivative can tolerate an X percent fall in demand).

This kind of redeemable on-chain derivative does not need the use of liquidation markets and does not include the introduction of extra oracle risk. ‌

A breakthrough in safe-asset collateral would enable crypto-collateralized stablecoins to lessen their dependence on tokens backed by conventional assets (such as USDC) as collateral, hence increasing their decentralization and reducing their dependency on traditional assets.

Risks Associated with Oracles

As part of its autonomous supply strategy, the Ampleforth protocol takes a volume-weighted average price exchange rate via a network of Oracles, which allows it to be implemented.

In principle, while assaults on this Oracle network might cause temporary corruption of the inputs to Ampleforth’s supply strategy, considerable effort has been taken to mitigate the effect of Oracle attacks.

First and foremost, due to the fact that AMPL is non-custodial and that the policy is proportionate, no money may be stolen or redistributed as a result of an Oracle Attack. In order to further clarify this, let’s go through a simple example.

Stable Transfer Application Example

Consider a straightforward application that lets its users to transmit a dollar-denominated sum of money from one wallet to another; we’ll refer to it as Stable Transfer for the sake of this discussion.

• As an example, if Alice wishes to transfer $100 to Bob, the Stable Transfer contract consults an oracle to determine the price-exchange rate of Ethereum to US dollars, and then transfers an automatically computed amount of ETH from Alice to Bob.

The number of oracle inquiries increases in proportion to the number of transfers since each transfer asks an oracle to compute an ETH amount before transferring it to its recipients.

Each of these oracle queries contains an exploit potential and entails an additional financial cost to the user. Senders may also lose money if an attacker successfully exploits the exchange-rate Oracle, or if there is a fault in the Oracle that causes it to incorrectly calculate the amount of money to be sent.

AMPL Example

Another option is that the AMPL counterpart of the Stable Transfer application isn’t truly an application at all.

At the moment of the transfer, Alice would simply transmit 100 AMPL to Bob, and there would be no oracle query performed on the data. In the example of AMPL, rebases occur once per day, while oracle queries occur once per day, resulting in O(1) requests per day.

And perhaps most significantly, since the protocol’s supply policy is proportionate and non-dilutive, oracle assaults cannot result in the theft or redistribution of assets.

Governance

The FORTH token, which controls the governance of the Ampleforth protocol and ecosystem, is used to transact business. For further information, please read the Forth Governance article on this site.

Protocol Specifications in Extensive Detail

• A global scalar coefficient of expansion is updated every day at 2AM UTC to account for supply modifications, which are referred to as “rebases” in the industry. A single transaction between peers is not required to apply this change to all addresses since it is implemented globally.
• In order to alter supply, Rebases only change it if the price of AMPL deviates from its goal by more than the deviation threshold. This threshold is determined by a configurable hyper-parameter, which is presently set at 5%. You may see the current volume-weighted average pricing (VWAP) of the network by going to the dashboard.
• Rebases are smoothed by a sigmoid curve, which limits supply changes at its asymptotes and caps demand changes at its inflection points. Lower asymptote, higher asymptote, and the steepness of the curve are all determined by shaping parameters in this equation (ie: growth rate). These settings are presently set to -0.1, 0.1, and 3 for the sake of this experiment.
• The supply adjustments caused by the Ampleforth protocol are proportionate and non-dilutive. Assuming a user owns Y percent of the network prior to an AMPL reset, the user will continue to hold Y percent of the network indefinitely until the user purchases or sells additional AMPL.

The FORTH Governance In Details

The Ampleforth protocol is regulated by holders of the $FORTH token, who take part in a series of consecutive stages that reflect increasing degrees of agreement from the community. 

Concepts and ideas are discussed in our discord channel and public forum, and they are completed when they are implemented on the blockchain.

A diagram showing the evolution of increasingly binding consensus is seen below. GitHub has a repository of token contracts.

Steps

Discussion

Discussions at the highest levels of government may take place in a variety of venues, including (but not limited to) the #governance channel on Discord, the Governance Forum, social media, and community DAOs. 

The notion may be formalized by submitting an Ampleforth Improvement Proposal (AIP) or Configuration Change Proposal (CCP) when it seems that there is sufficient public support for the idea in question (ACCP). forum.ampleforth.org.

Proposals (AIPs / ACCPs)

AIPs and ACCPs are formal papers that specify a proposed modification to a protocol or protocol configuration. They are used to record protocol changes. aips.ampleforth.org.

Targeted Discussion

Each proposal has an associated forum thread where debate about the proposal’s outcomes takes place. Offchain consensus should be formalized at this point in order to bring any outstanding concerns to a close. forum.ampleforth.org.

Off-chain Signaling

If the preceding stage failed to produce a clear consensus, token holders’ opinion may be obtained in a non-binding manner using off-chain signaling.

By using real voting power, this gives greater information into the possibility of the result of the final binding vote than would otherwise be possible. signal.ampleforth.org

Technical Development

Implementing requirements in code, launching them on a testnet, and auditing them for security are all steps in the development process.

Binding Vote / Deployment

The last phase is a legally binding vote that takes place on the blockchain. The success of the onchain vote is “binding” since it results in the execution of code without the need for any intermediaries.

This involves the deployment of new protocol contracts as well as the modification of the status of existing contracts.

Community members may vote with their FORTH tokens either directly or by delegation to another address, which can then cast their votes for them. On the Tally dashboard, you may view proposals, allocate authority, and vote.

Read About Forth Dao by clicking here.

Wrapped-AMPL is a token that wraps AMPL similar to wrapped ETH. It facilitates ecosystem integrations on both centralized and decentralized platforms. In some cases wrapped-AMPL (WAMPL) will be used almost invisibly in the background for bridging, routing, custody, etc.

In other cases WAMPL will be a direct access point for end users who want to take a position in the AMPL network, but don’t immediately need to use it as a unit-of-account.

Key Benefits

Totally Redeemable On-Chain — Wrapped-AMPL is completely redeemable for AMPL when it is traded on the exchanges. At https://wrap.ampleforth.org, you can find a user interface for wrapping and unwrapping AMPL.

Zero Technical Integration – If your platform supports ERC-20 tokens, it will automatically support WAMPL by default, and there will be no need to make any technical adjustments.

Simple to Understand – Users have grown to assume that asset values will rise when there is a greater demand for them and will fall when there is a lesser demand. Additionally, WAMPL has this simple to comprehend attribute, which implies that less initial instruction is necessary. Through the use of WAMPL, users may progressively get a better grasp of AMPL.

Rebasing is not required since the number of tokens in user wallets is automatically adjusted depending on demand. As a result of this critical characteristic, AMPL may function as a decentralized unit of account as well as a DeFi building-block. The nature of fluctuating balances, on the other hand, challenges standard assumptions for matching engines, custodians, and other service providers. Wrapped-AMPL has a basic floating price that does not fluctuate. Despite the fact that WAMPL cannot be used as a unit of account in the same way that AMPL can, it can be retained by users and the network and unwrapped as required on the fly.

WAMPL tokens have a fixed quantity of 10 million tokens, which is the maximum total supply of the token. The possession of 100,000 WAMPL is comparable to the possession of one percent of the AMPL network.

Transfer of Network Effects — Because AMPL and WAMPL are completely redeemable for one another, the expansion of the Ampleforth community and demand for AMPL translates directly into demand for WAMPLand and vice versa as a result of the network effects described above.

Contract Address —  The WAMPL mainnet contract address is: 0xEDB171C18cE90B633DB442f2A6F72874093b49Ef, view it on Etherscan.

Github Repo — The contract code can be found on github at: https://github.com/ampleforth/ampleforth-contracts/blob/master/contracts/WAMPL.sol.

Key Points

SPOT is a cryptocurrency that operates on the ERC-20 standard.

The SPOT price will be set to target the CPI-adjusted 2019 dollar and will serve as both a hedge against volatility and a hedge against inflation.

It is anticipated that AMPL-backed derivatives would provide complete collateralization for SPOT.

SPOT will not be rebased, and holders of SPOT will not be subjected to supply volatility in the future.

The FORTH token will serve as the governing token for SPOT.

The Ecosystem

Ampleforth Papers, Website, and Socials

• Website: The official Ampleforth website
• Docs: The official documentation for the Ampleforth ecosystem
• Whitepaper: The official Ampleforth white paper
• Durability Report: The latest Ampleforth network durability report
• Foreward to the Gauntlet Network Report: A reflection on the Ampleforth motivation and correlation analysis.
• Gauntlet Network Report: A third party report on the Ampleforth protocol and theory conducted by gauntlet network
• Redbook: The Ampleforth Red Book is a sequenced list of foundational reading materials on the Ampleforth protocol, and its units (Amples).
• Github: The official Ampleforth labs GitHub hosting all public repos
• Discord: The official Ampleforth community discord and primary channel for discussions around governance and works in progress.
• Telegram: The Ampleforth telegram for enthusiasts (now community moderated).
• Twitter: The official Ampleforth Twitter for all major news and updates regarding the Ampleforth ecosystem
• Forum: The official Ampleforth governance forum
• Medium: The official Ampleforth Medium for all major partnership announcements
• Youtube: The official Ampleforth YouTube channel

Ecosystem Projects

• AMPLtools: Community created and maintained repository of Ampleforth links and projects
• Mooncake: Uses AMPL as collateral for liquidation free tranched lending and borrowing
• Buttonwood: Utilizes financial primitives to build the decentralized financial stack. Features AMPL in their risk-tranching protocol ButtonTranche
• ElasticSwap: Decentralized AMM for rebasing tokens featuring AMPL as a prominent pairing
• HourGlass: Financial derivatives for time preference built on top of Buttonwood’s lending platform, prominently featuring AMPL
• Forth.Tools: Community created and maintained repository of FORTH links and information

Ethereum

• Balancer Smart Pool: A Smart Pool that eliminates the impermanent loss typically incurred by liquidity providers on popular AMM’s like Uniswap.
• Balancer Smart Pool Blog Post: A Blog post outlining the motivation and behavior of the Balancer Smart pool.
• Uniswap: A decentralized automated market-making application that utilizes a bonding curve to facilitate swaps and discover price
• AAVE Lending Pool: AMPL asset lending pool, featuring high APY’s on the AAVE lending platform
• Beehive Geyser: Staking pool that rewards depositors of Uniswap AMPL-ETH liquidity LP tokens
• Old Faith Geyser: Staking pool that rewards depositors of Uniswap AMPL-USDC LP tokens
• Splendid Geyser: Staking pool that rewards depositors of Uniswap AMPL-aAMPL LP tokens
• Mooniswap: DEX with an aAMPL/AMPL liquidity pool

Avalanche

• Trader Joe: DEX for AMPL assets on the Avalanche Network
• Pangolin: DEX for AMPL assets on the Avalanche Network
• Pangolin PNG Farm: PNG incentivized liquidity pool for AMPL lp deposits on the Avalanche Network
• Crystal Geyser: Staking pool that rewards depositors of Pangolin AMPL-AVAX LP tokens

Binance Smart Chain

• Pancake Swap: DEX for AMPL assets on Binance Smart Chain

AMPL Exchanges

• Uniswap: A decentralized automated market maker and swap exchange
• 1-inch: A DEX aggregator on Ethereum, Binance Smart Chain, Optimism, Polygon, and more
• Bitfinex: A major centralized cryptocurrency exchange
• FTX: A centralized crypto and crypto-derivatives exchange built by traders for traders
• KuCoin: A major centralized cryptocurrency exchange
• MXC: A rapidly growing asian centralized cryptocurrency exchange

FORTH Exchanges

• Binance: The largest cryptocurrency exchange by trade volume
• Bitfinex: A major centralized cryptocurrency exchange
• Coinbase: The largest US cryptocurrency exchange by trade volume

Security Audits

• Security Audit Repository: A github directory hosting all of our security updates to date

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