Ampleforth Research Report | April 3, 2024
Ampleforth Overview
Ampleforth (AMPL) is a decentralized unit of account.
A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions.
AMPL is a price-stable but supply volatile cryptocurrency that targets the CPI-adjusted dollar. It is used as a unit of account and collateral asset.
The AMPL protocol automatically increases or decreases the quantity of tokens in user wallets — such that the price of AMPL reverts to 1 CPI-adjusted dollar.
Ampleforth is ultimately a decentralized, inflation resistant stablecoin.
Investment Thesis
Both AMPL and FORTH directly benefit from the adoption of SPOT as a decentralized stablecoin, thus AMPL and FORTH are direct bets on the adoption of SPOT. We believe acceleration in SPOT adoption is likely as it is backed by Brian Armstrong who has the ability and incentive to support SPOT on both Coinbase and Base L2.
AMPL Thesis
Ampleforth is uniquely positioned to capture demand for decentralized, stable, inflation-resistant money, the market for which is incredibly large. Ampleforth has several potential growth catalysts that should greatly increase the use of AMPL and SPOT.
⁃ Brian Armstrong, the founder of Coinbase, invested in multiple funding rounds for Ampleforth, which means Coinbase is fairly likely to provide support for SPOT adoption on both Coinbase and Base. ⁃ SPOT and AMPL have recently expanded to Base, one of the most popular chains at the moment.
FORTH Thesis
DeFi protocol revenue sharing is expected to become the norm. Ampleforth recently updated their fee structure. If they were to share fee revenue with FORTH holders, FORTH would have upside in direct proportion to fee generation and protocol growth.
Understanding AMPL and SPOT Mechanics
AMPL Mechanics:
AMPL simply rebases towards the 2019 CPI adjusted dollar (currently ~$1.19) by reducing the supply of tokens when price goes down (due to lower demand) and increasing the supply of tokens when price goes up.
If you hold 1% of all AMPL tokens, and the price of AMPL rises to $2 due to high demand, the price will rebase back towards $1.19 but you’ll own more tokens such that you still own 1% of all AMPL tokens.
For a more detailed explanation, it is highly recommended that you take 10 minutes to watch this video on AMPL: https://www.youtube.com/watch?v=e-8yjmsshFg
SPOT Mechanics:
AMPL is deposited into rotating tranches with fixed maturity dates where the the volatility of AMPL can be segmented into a low volatility asset (SPOT) and a high volatility asset (stAMPL).
The low volatility asset, SPOT, can be used as an inflation resistance decentralized stablecoin.
This very likely made zero sense whatsoever and only has you more confused about how SPOT works.
For that reason, those seeking a better understanding should take 10 minutes to watch this video on SPOT: https://www.youtube.com/watch?v=y0PtaMmL1I8
Investors
Ampleforth has a strong investors profile including 2 rounds that included Brian Armstrong, the CEO of Coinbase. This has helped the wAMPL and FORTH tokens to get listed on Coinbase where over 100 million users have access.
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Ampleforth Comparables
Ampleforth is comparable to other stablecoin protocols.
USDT - $104B
USDC - $33B
DAI - $4.9B
MKR -$3.5B
FXS - $667M
FRAX - $643M
LUNA - $41B at peak
USTC - $19B at peak
AMPL - $239M
FORTH - $85M
SPOT - $1M
Addressable Market & Market Outlook
The addressable market for a decentralized inflation resistant stablecoin is orders of magnitude higher than most other crypto use cases and falls into the category of “store-of-value”.
As Brian Armstrong mentions in a recent video where he highlights Ampleforth, stores of value like BTC are volatile and difficult to spend, opening the door for stable alternatives.
If SPOT were to gain significant use and adoption, the potential market cap for storing wealth in a liquid, decentralized, inflation resistant stablecoin is massive, which directly translates to AMPL upside.
SPOT Use Cases
Similar to to any stablecoin, SPOT has 3 main use cases.
Unit of Account - SPOT can be used as a unit of account for other assets. Instead of trading BTC/USDT, you’d have the option to trade BTC/SPOT. SPOT denominated markets would allow traders to denominate in SPOT vs USDT which is centralized and subject to inflation. When denominating in USDT you carry the the centralization risk of Tether freezing your funds or being dishonest about USDT’s backing. You also lose purchasing power over time at the rate of inflation. Because SPOT’s price is pegged to the 2019 CPI adjusted dollar, SPOT’s value slowly rises over time at the pace of inflation.
Here is a chart of AMPL’s price compared to the slowly rising CPI adjusted target over time:
Remember, SPOT is a low volatility derivative of AMPL, so the expected path of SPOT’s value is similar, but with much less volatility.
Liquid and stable store of value - When you hold US dollars, USDT, or USDC you are losing purchasing power at the rate of inflation. This is why many choose to store value in things like Gold, BTC, real estate, or US treasuries. All of these are subject to volatile, unpredictable price action. Real estate has large capital requirements, low liquidity, and high fees associated with buying/selling. SPOT, once scaled, will be inflation resistant, stable, and liquid. Many turn to lending markets on Aave or Marginfi to earn yield on their stablecoins. The same markets should eventually exist for SPOT, enabling users to earn additional yield on their SPOT holdings.
Spending - As mentioned by Brian Armstrong, people don’t really like spending BTC and other stores of value like BTC, Gold, US treasuries, and real estate are difficult or impossible to spend. SPOT has a potential use case as a more spendable store of value once payment integrations through more scalable networks like Base become commonplace.
Risks
- Ampleforth is quite complex for the average person to understand. In crypto, the more simple things (like memecoins) tend to perform better.
- SPOT works best when there is a lot of demand and liquidity in the system. Right now, there is not significant demand for SPOT as few know it even exists, making SPOT more volatile than it would be at scale. If Coinbase and/or Base does not support Ampleforth by adding and supporting SPOT markets, Ampleforth could remain unnoticed by the masses.
FAQ
What is SPOT backed by?
SPOT is backed by senior tranched AMPL.
Is AMPL & SPOT like LUNA & UST? Can AMPL & SPOT safely unwind?
There are some similarities, but the key difference is in Ampleforth’s mechanics for safely unwinding and also not promising an unsustainable 20% APY. SPOT is backed by the most stable (senior) tranche of AMPL in the collateral basket. So even if AMPL crashes, the junior AMPL tranche absorbs the majority of the volatility, leaving SPOT price unaffected. Again, see this video: https://www.youtube.com/watch?v=y0PtaMmL1I8
Summary
Ampleforth is a rebase token that is used to derive SPOT, a decentralized, inflation resistant stablecoin, for which we believe there is a large market for considering the high inflation of the US dollar and its centralized stablecoin counter-parts.
AMPL gives exposure to the growth and adoption of SPOT.
FORTH is the protocol governance token for Ampleforth that may potentially accrue protocol fees at a later date.
SPOT may receive significant support from Coinbase and Base as Brian Armstrong has invested in multiple Ampleforth funding rounds which may be the spark that kicks off the AMPL/SPOT flywheel.
The end-game for SPOT is adoption similar to that of USDT. Unlike USDT, however, SPOT is decentralized and does not lose purchasing power over time.
Where to buy $AMPL & FORTH
$AMPL can be purchased on Uniswap with this contract address: 0xd46ba6d942050d489dbd938a2c909a5d5039a161
You can also buy $WAMPL on Coinbase to get the same exposure as owning AMPL.
$FORTH can be purchased on Coinbase or Bingx. It can be purchased on Uniswap with this contract address: 0x77fba179c79de5b7653f68b5039af940ada60ce0
Disclosure: Sistine Research has invested in $AMPL and $FORTH.
Additional Resources
AMPL Explained:
AMPL Benefits:
SPOT Explained:
SPOT Benefits:
