What is Ampleforth, the new stablecoin that defines itself as “a protocol based on digital assets for Smart Commodity Money”?
Ampleforth receives exchange rate information from reliable oracles and disseminates it to token holders (AMPL) by proportionally increasing or decreasing the number of tokens held by each individual address.
This way AMPL might look like a stablecoin, but it’s not. The objective is in fact to maintain a price of equilibrium, but without removing volatility altogether.
The value of the AMPL tokens is volatile, so much so that it is not a risk-free asset and people can earn or lose from trading.
Even as a payment currency, AMPL is more like bitcoin or zcash rather than a stablecoin, since both the price and the offer could be volatile at the time of launch.
AMPL is a new type of digital asset, which will operate in a different way, untied from the main cryptocurrencies currently in circulation. It is designed to be used as a monetary base, a form of guarantee to be used as part of a centralised or decentralised banking system, similar to how gold was used before the decline of the Bretton Woods Agreements.
For instance, when traders are bullish it is likely that there will be a positive price action that pushes the price forward until a resistance is encountered. And when traders are bearish, there will probably be a negative price action that will be triggered until a support level is reached.
For traders, these changes in the exchange rate and quantity result in changes in the market capitalisation of AMPL. Traders with short time horizons, particularly those using automated or algorithmic approaches, will need to devise new strategies for trading AMPL.
As such, traders’ behaviour in response to protocol incentives should produce a pattern of price movement with a lower correlation than bitcoin as compared to other cryptocurrencies.
This makes AMPL suitable for certain uses, which vary according to the time horizon of the investment. For short-term investments, it can be used to diversify a crypto portfolio.
Over the medium term, it can be used as collateral in decentralised banks such as Maker DAO.
In the long term, however, it could become an alternative to money issued by central banks, such as bitcoin but “macroeconomically friendly“, which means more suited to the current global monetary system.
The whitepaper also states that synthetic commodities such as bitcoin have so far shown low correlation with stocks, currencies and precious metals, but are highly correlated with each other and with bitcoin itself. Ampleforth is, therefore, a new synthetic commodity with a volatility that is distinct from other existing synthetic commodities.
The redbook contains two courses, one dedicated to trading and the other to economic aspects.
On the dashboard of the official website it is possible to view the reported data, updated in real-time, about the exchange rate from the oracles, the equilibrium price, the circulating supply, the total supply and the market cap, allowing to monitor the functioning of the protocol.
It is now possible to trade AMPL tokens on Bitfinex and Ethfinex.