Idea summary
Ample is an especially challenging asset for holders at this stage of its lifecycle. While the medium and long-term potential of Ample is bright, until the asset gains more steady, organic demand, it will continue to fluctuate around its “peg” and spend periods of time in both positive and negative rebase cycles, which has benefits and drawbacks for investors.
Mature financial ecosystems feature numerous products that provide options to invest in, speculate on, or use assets in ways that reduce the risk of capital loss. The Ampleforth Ecosystem currently lacks products such as these.
Also, Ample’s ability to organically increase its liquidity has not yet been fully appreciated or maximized in decentralized financial products. This is because Ample is not yet being used a fundamental part of a DeFi/Elastic Finance protocols in ways that take advantage of its unique strengths.
Wrapped Ample (wAMPL): A New Representative Money
Representative money has a long history in economics. For example, for about a century in the United States, silver certificates were issued, which gave the bearer the right to claim a certain amount of silver upon presenting the dollar at a bank. Representative monies are paired with commodity monies because they can be exchanged for the commodity (such as gold or silver).
Ample is a digital commodity money and is thus an very appropriate asset to pair with a representative money.
wAMPL would be a form of representative money that always entitles the bearer to claim a certain amount of AMPL, in this case 1 wAMPL = 100 AMPLs.
But, unlike physical representative monies, wAMPL would have an additional benefit: Because the asset is backed by an expansionary elastic currency (AMPL), wAMPLs would also produce passive income for holders. Also, AMPL sold during positive rebases would help to maintain the wAMPL system.
This presentation (click here to download) provides more information about how wAMPLs would work. In summary:
- AMPL holders would exchange 100 AMPLs for 1 wAMPL. Their AMPL would be locked in a smart contract and redeemable by anyone holding wAMPL token (wAMPL would be a tradable asset)
- Holders can be confident that the value of 1 wAMPL will never go below 100 AMPL because various mechanisms would be used to defend wAMPL’s peg, including:
- A percentage of surplus AMPL generated during positive rebases would be sold for ETH: If necessary, this ETH reserve would automatically be sold for AMPL to maintain the 1 wAMPL to 100 AMPL ratio
- Extra AMPL generated during positive rebases would be held in reserve to be depleted during negative rebases to reduce the likelihood that reserve ETH would be sold
- Holders of kMPL, the AmpleSense DAO’s upcoming multi-use asset would serve as a backstop for wAMPL’s value, meaning that a percentage of kMPL staked in contracts would be sold for AMPL if necessary to maintain the 100 AMPL to 1 wAMPL ratio. (kMPL holders would receive ETH rewards for providing this service.)
The wAMPL protocol would generate benefits for each participant in the system:
- wAMPL holders would be able to invest in AMPL with little downside (negative rebase risk). Their capital (in AMPL terms) would be preserved. They would also benefit from positive rebases because a percentage of ETH gained during positive rebases would be allocated to each wAMPL holder providing them with passive income and making the wAMPL’s true value 100 AMPL + ETH claimable by wAMPL holders
- kMPL holders staking in the system would receive ETH rewards in exchange for helping to crate a strong foundation for the system
It is also likely that wAMPL would be utilized across DeFI protocols, creating other opportunities for holders to benefit from lending, borrowing and trading — all while maintaining exposure to AMPL in a risk-minimized fashion.
The process of minting wAMPL would also drive organic demand for AMPL, and lock up more of the currency, which could lead to longer periods of expansion, benefiting Ample holders.
Idea implementation/execution:
The system would have the following components:
- Contracts required to mint wAMPL and lock AMPL in reserve for wAMPL holders to redeem
- A trustless accounting system that would keep track of the global ETH rewards claimable by wAMPL holders
- A rules based system that determines how much AMPL to sell during positive rebases, depending on the rebase amount
- A staking system that allows kMPL holders to earn rewards from backing wAMPL while not giving up other privileges of holding kMPL
- Sufficient ETH liquidity in the system to bootstrap it if it were launched during a negative Ample rebase cycle
For more information about the system design, please download this presentation (click here).
Budget/cost:
- Estimated smart contract development fee: $7,000 – $12,000
- Estimated audit fee: $9,000 – $14,000
- ETH to capitalize the system if launched during a negative rebase cycle: TBD
Examples of similar ideas: The wAMPL system has similarities to MakerDAO (in terms of kMPL holders serving as the ultimate backstop of the system) and cDAI, aDAI, which provide owners with interest income and are tradable. It is likely that we would look these systems while developing the smart contracts.
Idea Timeline:
- DAO Approval and Funding: 1 – 1.5 months
- Smart Contract Development, Testing and Front End Development: 1 – 2.5 Months
Like this idea, maybe try something like wampl and guarantee it hold a steady denomination of ample. Like a $100 American bill is worth 100 usd. And we could have wample for different denominations, 5, 10 etc.
Due to sustained negative rebases, I was thinking of an instrument that could counter-act the erosion of value through something simple. But I like the idea of wAMPL because it has multiple protective and proposed “rebalancing” mechanisms.
In addition to ETH, what about adding a basket of assets such as tokenized BTC, some pre-determined (or adjustable) percentage allocation of stablecoins, and perhaps some inverse financial instruments such as iBTC/iETH? Could also consider DeFi+ ETF tokens.
The idea is to diversify and reduce the risk of default and losses incurred by kAMPL holders.
Another advantage of products like wAMPL is that it could motivate the introduction of financial instruments like Perpetuals, but made specifically for Elastic Finance.
More products could attract liquidity, and in turn lead to a robust and healthy AMPL eco-system.
Thanks davoice321 for this post. I am honestly surprised by the number of negative responses in the comments…AMPL desperately needs something like wAMPL and if implemented correctly it could attract huge adoption from investors and traders currently uninterested in the project.
While Ampleforth is an incredible idea, it has unique barriers to entry that other projects don’t.
- I realize there are derivatives and you keep the same percentage of the market cap but there really isn’t a way to hedge your position like you would other assets. This is a deal-breaker for a lot of people managing large positions and trying to protect their wealth in a volatile market.
- There is a high level of complexity and a lack of understanding from investors regarding the token mechanisms. Go into the discord, telegram, twitter, etc. and see the number of questions from people that don’t understand why their balances are lower than when they bought. To be clear, this is not the project’s fault but being able to promote and educate investors on both AMPL and wAMPL would create a way for long term investors to protect their investments.
Most high net worth individuals/funds I talk to about the project simply can’t get over the hurdles AMPL brings on. Examples of questions and comments I often get are:
- Why would anyone invest $100k in a relatively illiquid asset knowing their dollar value is going to slip away each day it’s below a certain amount?
- Why wouldn’t I just wait until it is over a dollar and then receive the same benefits as other investors that held through the negative rebases?
- Even if I open a short position on a futures contract, I am still taking a significant hit on my underlying exposure.
I don’t think it’s the right approach to just write off investors that have these concerns when a possible system could be created that benefits the complete ecosystem. Just the ability to pool wAMPL on uniswap while avoiding prolonged negative rebases along with easier exchange integrations would be enough to justify the added work from the dao.
I understand concerns on something like a death spiral but objecting because it sounds like something similar to another project in the market or it’s complex might not be the right perspective. AMPL is different. Other projects don’t have rebases and a mechanism like this serves a completely different purpose than derivatives on centralized exchanges.
I hope the community can keep an open mind on this proposal and really think through its potential benefits. If it is denied because there are risks and negative implications that keep it from making sense I think we can all live with that. If it is denied because some of the reasoning I have seen in the comments and we miss attracting a completely different set of market participants, adoption, and liquidity I think it would be a significant blow.
Thanks @ag30 for your comment. We’ll be discussing wAMPL a lot more as it goes through the proposal development and voting process. I’ll be making some adjustments based on the comments for AmpleSense Progress Proposal and then it will be up for a community vote.
This is SNX all over again but amateur build, we already have tons of derivatives platforms which work very well.
AMPL is confusing as it is, slapping this on top will be even more confusing.
Thanks for your comments. We’ll see how the overall community perceives this idea once it is fleshed out more in an AmpleSense Progress Proposal, which will be open for official voting.
I strongly object
Its basically creating yet another collateralised SC, of which there are plenty already.
From economic point of view, all what you are doing here, is collateralising negative and positive cycles. By definition of AMPL in long term they should all smooth out, and there should no need for such instrument, and in the short term this volatility is normal as it educates the market agents how AMPL actually works. So I vote strict no to this.
Thanks for your response.
I disagree with the assertion that just because an asset is similar to others that it shouldn’t be considered for development. All of these assets are relatively new by finance standards and are still innovative, as they are in the crypto economy, which is still an early adopter arena.
Secondly, the wAMPL product is specifically for individuals / hedge firms, etc. who would be seeking a hedge against Ample’s extended negative rebase cycles, which are common during this stage of its lifecycle.
It helps to de-risk Ample., in exchange for lower upside benefit due to their not being exposed to the full positive rebase, and token rewards from Ample positive rebase cycles being distributed to a larger pool of stakeholders.
Yes, Ample’s supply inflation / reduction should theoretically smooth out over an extended period of time, but many investors and users are not well-prepared to ride out negative rebase cycles where 60-80% of their fiat capital investment is eroded due to supply reductions that don’t result in upticks in buying demand as expected.
In fact, this uncertainty about negative rebases actually significantly reduces demand for the asset given its persistent failure to react to supply reduction inducements to date.
What wAMPL provides is the opportunity for investors and speculators to get exposure to Ampl through an instrument that both de-risks Ampl and delivers a steady token rewards stream to holders.
With wAMPL, Ample becomes more of a buy and hold asset, which theoretically should also increase demand for Ampl once the product has been de-risked.
Those seeking more upside exposure or who are willing to tolerate the capital loss associated with lengthy negative rebase cycles are welcome to hold the original unwrapped asset.
Another benefit is that wAMPL may allow Ample to be indirectly listed on more DEXs and CEXs due to the fact that the rebase mechanic is eliminated and there is no need to educate new investors about changing token balances. This could help make Ample become a more mainstream asset and increase demand as investors mint wAMPL or purchase it on the open market.
Haven’t thought about inverse assets, good idea, with inverse it helps hodlers whether price goes up or down to counter the main asset