Ampleforth Launches SPOT: A Low-Volatility Crypto Asset

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Ampleforth Launches SPOT A Low-Volatility Crypto Asset

YEREVAN (CoinChapter.com) — Fragments, the developer behind the Ampleforth protocol, and the Ampleforth Foundation have introduced SPOT, a new digital asset. SPOT aims to be a low-volatility alternative to fiat stablecoins, blending features of commodity-based money and peer-to-peer digital cash.

How SPOT Reduces Volatility Through Tranching

SPOT achieves low volatility through a process called tranching. This divides the volatility of Ampleforth’s native currency, AMPL, into two assets. The “senior tranche” produces the low-volatility SPOT token. The “junior tranche” is a staked version of AMPL that absorbs most of the network volatility, shielding SPOT from significant price swings.

*A simplified graphic depicting the tranching mechanism. Source: Spot technical docs*

Users can deposit AMPL tokens to mint SPOT and stAMPL. They can also redeem these derivative tokens for the native AMPL whenever they choose.

Stability: How Weekly Tranches Work

Firstly, when AMPL is deposited into the SPOT protocol, it creates fixed-term tranches, classified as senior or junior. Secondly, each tranche has a fixed term of one week and automatically converts back to AMPL upon maturity. Thirdly, this continuous recycling of tranches helps keep SPOT stable.

Notably, this mechanism is similar to perpetual derivative contracts, like perpetual futures. Primarily, the aim is to manage volatility, not eliminate it entirely, making SPOT a practical store-of-value.

*A simplified visual highlighting the perpetual nature of SPOT tranches. Source: Spot technical docs*

SPOT Launches Amid Inflation and Debt Concerns

Interestingly, SPOT’s introduction comes amid concerns over inflation and geopolitical instability. In fact, The United States faces a national debt nearing $35 trillion, with annualized interest payments set to exceed national defense spending. Notably, analysts fear this could impact the global financial system, which heavily relies on the U.S. dollar as its reserve currency.

*Map of debt-to-GDP ratios around the world as of 2022. (Dark green signifies a higher ratio, while orange signifies a ratio of less than 25%.) Source: International Monetary Fund*

Interestingly, former U.S. Speaker of the House Paul Ryan recently suggested dollar-pegged fiat stablecoins as a solution to debt obligations. Additionally, corporations are increasingly adopting Bitcoin treasury strategies to protect their wealth from monetary debasement.

SPOT’s Stability Linked to Consumer Price Index

Primarily, SPOT’s minimum volatility levels are designed to reflect the 2019 consumer price index-adjusted U.S. dollar. Then, as the tranches mature, their volatility matches that of the underlying AMPL.

Moreover, Ampleforth’s spokesperson explained that the segmented volatility mechanism ensures SPOT remains stable. Furthermore, by recycling maturing tranches and replacing them with new ones, SPOT offers a consistent value.

Coinbase Ventures Backs New Digital Asset with $1 Million Investment

Notably, Coinbase Ventures has invested $1 million in SPOT, showing confidence in this new digital asset. This funding supports SPOT’s development as an alternative to traditional fiat stablecoins and other digital assets.

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