About Lending & Borrowing AMPL

AMPL is an algorithmic unit of account, with a use case is debt denomination. This document expands on the unique properties that arise from lending and borrowing AMPL.

Overview

The Ampleforth protocol transfers the volatility of demand from price to supply. There are two important things to note about this:

• The Ampleforth protocol adjusts supply in response to price algorithmically, but it is market actors reacting to supply changes that restores price to its target behaviorally. Large changes in demand take more time to restore price to its target and small changes in demand take less time to restore price to its target.

• Although holders of AMPL can be certain that AMPL price reverts to its target over time, they experience unbounded stock volatility similar to that of floating-price tokens.

Contract denomination using AMPL has the effect of separating AMPL’s price volatility from its stock volatility because contracts denominated with AMPL are only exposed to changes in price.

• Example 1: Imagine Alice borrows 1000 AMPL from Bob to be paid back at a later date. Bob does not have to worry about the supply changes associated with the 1000 AMPL Alice borrowed because he is no longer in possession of the 1000 AMPL he lent. Bob is simply owed 1000 AMPL at some time in the future.

Lending & Borrowing FAQ

Below we capture some of the most common questions asked about lending and borrowing AMPL and about AMPL. Please join the Ampleforth community Discord server; our team and members of the community look forward to helping you understand and use AMPL.

1. What are the benefits of lending and borrowing AMPL vs a typical token like ETH?

Typically when a person borrows money they intend to put that money to work immediately and then pay the money back at a later date with interest.

When a loan contract is denominated using a floating price currency like ETH, the borrower has to take the price volatility of ETH into consideration. For this reason, most of borrow activity on today's decentralized lending platforms is denominated in centralized stablecoins.

AMPL has a stable long-run average price. As a result, borrowers can take out a loan, knowing that eventually the amount borrowed can be repaid by a value that doesn't change in some unbounded way. For more information see the Ampleforth Network Durability report.

2. What are the benefits of lending and borrowing AMPL vs a stablecoin?

The decentralized finance movement aims to create an alternative financial ecosystem that is open-source, borderless, and resistant to political tampering. AMPL enables the denomination of stable on-chain contracts without any reliance on centralized custodians or buyers of last resort. For more information see the Ampleforth Network Durability report.

3. What are the differences between lending and borrowing AMPL vs a stablecoin?

AMPL has a long-run price target of one 2019 US dollar, but holders of AMPL experience supply volatility that is similar to typical floating-price tokens. Please see the Overview above for more detailed information.