[AMPL] MIP6 Collateral Onboarding Application

[AMPL] MIP6 Collateral Onboarding Application for Ampleforth Token

  1. Who is the interested party for this collateral application?

@monet-supply

  1. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

Ampleforth is a system of synthetic commodity money, based around the AMPL token. The Ampleforth system seeks to keep the value of AMPL as close as possible to the 2019 value (purchasing power) of $1. It accomplishes this through a daily quantity rebasing process; if AMPL is trading above target price (as determined by a Chainlink AMPLUSD oracle), all AMPL balances are increased by an equal percentage, while if AMPL is trading below target all balances are reduced. AMPL quantity adjustment is non-dilutive, in that all balances change by the same percentage so each user owns an equal portion of the network before and after the daily rebase.

  1. Provide a brief history of the project.

Ampleforth completed a private financing round before launching in June 2019 with a public token sale. Since launch, AMPL has gradually seen declining volatility of the token price to more closely track the $1 target, but the overall market cap (which is more indicative of returns due to quantity adjustments) has continued to vary widely. This past week, Ampleforth began an incentive program on the AMPL-ETH Uniswap v2 pair which may increase liquidity and demand.

  1. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

Whitepaper: https://drive.google.com/file/d/1I-NmSnQ6E7wY1nyouuf-GuDdJWNCnJWl/view

Documentation: https://www.ampleforth.org/redbook/

Website: https://www.ampleforth.org/

Source Code: https://github.com/ampleforth

AMPL token contract: https://etherscan.io/token/0xd46ba6d942050d489dbd938a2c909a5d5039a161

  1. Link any available audits of the project. Both procedural and smart contract focused audits.
  1. Link to any active communities relating to your project.

Twitter: https://twitter.com/ampleforthorg

Forum: https://www.ampltalk.org/app/

Telegram: https://t.me/Ampleforth

  1. How is the applying collateral type currently used?

AMPL is currently used as a form of commodity money. Due to its dynamic supply adjustment, the AMPL token has different price and quantity dynamics which may make AMPL less correlated to other crypto assets.

  1. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

AMPL is a decentralized token. No organization bears legal responsibility for AMPL.

  1. Where does exchange for the asset occur?

AMPL is traded on centralized exchanges such as KuCoin and Bitfinex, as well as decentralized platforms such as Kyber, Uniswap, and Balancer. The Ampleforth team is currently sponsoring the ETH-AMPL pool on Uniswap v2 to encourage liquidity.

  1. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.

I am not aware of any publicly available legal opinions addressing the project or token’s regulatory standing.

  1. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.

As far as I know, AMPL is not registered with regulatory authorities in any jurisdiction.

  1. (Optional) List any possible oracle data sources for the proposed Collateral type.

Centralized exchanges from (9) may offer price feeds for AMPL. AMPL supply also expands and contracts as the price deviates from the target price, so the system would need to take the daily rebasing into account.

  1. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.

n/a

Due to the way that AMPL quantity increases or decreases daily, it may be more complicated to add it as a collateral asset to MCD. Potentially the AMPL could be wrapped into another ERC20 with a fixed quantity and floating Token:AMPL conversion rate.

Disclosure: I hold AMPL

7 Likes

@monet-supply out here putting in the work. Keep it up my man! How would debasement work from a risk perspective for Vault holders?

1 Like

Supply expands as a result of price going above $1 target, and all AMPL holders (vaults included) will see their quantity of holdings increase, so this would coincide with the value of vault collateral increasing. The greater risk is a feedback look of falling prices causing supply contraction, which in turn causes prices to fall further as people sell to avoid additional losses.

The market cap has gotten as low as $1M in the past (compared with $20M currently), so large losses are certainly possible. The hope is that AMPL would fall more gradually and have less correlation with ETH, but that hasn’t been demonstrated yet (AMPL and ETH experienced similar losses on Black Thursday).

2 Likes

Sounds like a very real and almost inevitable circumstance given the tokenomics and soft peg to $1.01. In a contraction, vault collateral would actually shrink causing a double feedback loop of liquidations no?

Yeah that would definitely be possible, although in the past big declines have been fairly gradual so it might not put too much pressure on liquidations. I guess the main new risk for vault collateralization is that at ~02:00 UTC each day there’s potentially a discontinuous change in collateral value because of the rebase (up to a few percent per day).

2 Likes

Thanks for starting this early monet-supply. I’m bumping this thread given the increased attention going on with AMPL in recent days.

Some clarifying questions:
-AMPL vaults would have the unique ability to ‘rebase’ every 24 hours, so the supply of AMPL would increase or decrease while collateralized within the vault? Is this even possible given the current vault design?
-Sequencing the rebase and the oracle price will be important because if the supply doesn’t change within the vault before the oracle price change, it could easily liquidate the vault right?

4 Likes

The recent 42% crash was predictable. AMPL is not good collateral.
1 Like

It crashed 28% if you consider the rebase.


I’d like to add that because of AMPL’s liquidity incentive program, there’s a lot of on-chain liquidity.

1 Like

With decent liquidity in uniswap, and the incentive to keep it there, the discontinuity would be dependent on what market cap Uniswap is anchored to. If price leaning AMPL side, may be a little exaggerated, if not may be a little reduced (depending if AMPL majority or not). At least when its up, seems always leaning ETH so MC gets a slight bump from rebase calculations.

I think this bump can be accounted for in collateralization ratio padding.

Note that rebases are smoothed to minimize shock using something they call a “rebase lag”. Rebases occur every night at 10:00PM central time, U.S. The rebase amount is calculated and then divided by 10 so only 10% of a supply adjustment occurs within a 24 hr period.

The project needs more history to prove itself but a key application being touted is as defi collateral. Is certainly interesting.

4 Likes

Hard pass from me. This collateral type screams volatility and is designed specifically for those selling the lows to take massive losses and those selling the highs to profit. Since MakerDao would never be selling highs and always be selling lows this is bad collateral not only for MakerDao to take on, but it would also be harmful to vault holders that we put into a bad situation by allowing them to borrow against this asset (forcing liquidation on them eventually in most cases). No.

5 Likes

I quite like this project. I think AMPL provides a unique collateral opportunity as it is uncorrelated to other crypto assets and its own sound monetary policy would keep the value around $1. Here are a few observations:

1. Timing.

While I think that AMPL is ingenious, and has a lot of potential as collateral, I do think it is necessary to assess when would be the appropriate time to enable it.

The way I see it now, the project is going through explosive, early stage growth now. With a small market cap, price fluctuation is much more volatile, as there are less participants to take either side of the trade. Right now, there is an astonishing influx of players and money into the AMPL ecosystem. I’ve been tracking the soaring number of active wallets and market cap.

I strongly believe AMPL is here to stay, the question now is: when will it have consolidated enough to become useful collateral?

***I would propose coming up with a multi-prong test such as: ***
a) a minimum of time above a certain market cap ($1 Billion?) AND;
b) a minimum of time with the price consistently around $1 (or the ability to prove that as the price fluctuates, the protocol can successfully self regulate to $1)

2. Rebase/Debase.

While I believe that the unusually high coin value (closer to $3 as of the time of writing) and the resulting unusually high rebase (15%+) are a unique feature of very rapid, early stages growth, I do think it is necessary to address the challenge of using something as collateral as the supply increases or decreases automatically every 24 hours.

In this regard, I think we need to employ a hybrid thinking model framework.

The core of the theory is that the % change in supply can be mitigated through the Maker collateral ratio.

If collateral ratio is high enough, the theory would suggest that even if the supply shrinks, the remaining AMPL tokens value would go back to 1 dollar. Hence the collateral ratio must be calculated with this remaining $ value in mind.

Similarly, when collateral is pledged, regardless of the actual price of AMPL at the time, the nominal value should be of $1, as it is known and expected for the network to issue more coins over time to eventually balance around that price target. The buffer between the current price and the nominal value, plus all the resulting tokens from rebasing should provide more than adequate buffer.

Final thoughts. AMPL is the only collateral options that seems uncorrelated and has the ability to stabilise itself when all other collaterals plummet. We just have to be creative in designing the appropriate requirement and processes that accomodate for this coin’s unique monetary supply system.

I would encourage further conversations on this topic, including a deeper exploration of the merits and concerns of the monetary supply model and the opportunities or threats for Maker that arise from it, while we monitor the (heated) price action and growth over the next few days and weeks.

4 Likes

I regard Ampelforth as highly interesting, but looking at the price data for the AMPL token I am dumbfounded. The token is extremely volatile. Not an insurmountable issue but not exactly what you want from something that wants to be a 1:1 stablecoin. The problem is that once the AMPL peg is broken wild speculation sets in due to the mechanics of the token. The second issue I have with this kind of token is the legal framework for it - it is after all an algorithmic stablecoin. It would be preferable if the Ampleforth team could be more open about their legal efforts.

Well said. I would not vote to enable this right now. Too wild and crazy. I did vote to give it some mindshare and observation.

They do not claim to be a stablecoin. In fact, they make a point of saying they are not. The “Rebase Lag” (which I consider to be a smoothing mechanism) acts too slow for this to be a stablecoin. It will trend towards $1.00, however.

1 Like

If we configured an oracle that capped the AMPL price at $1, this might dampen a lot of the volatility for using it as collateral.

image

Data: https://docs.google.com/spreadsheets/d/1yvHGNrixELO-3dfl22WoqwyKxTX351zPOvNNZxH_iV4/edit?usp=sharing