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
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.