It’s been a big month for Ampleforth in the DeFi world. We’re thrilled to announce that we’re live on Bancor- an exciting prospect as AMPL brings some new tech and as a result, some new opportunities to Bancor. For example- did you know there’s a guaranteed AMPL arbitrage opportunity every 24 hours on Bancor?
Here’s how it works.
Instead of trades being transactions between makers and takers, a single user simply exchanges tokens in Bancor’s token reserve pools. Every ERC20 and EOS token market on Bancor contains a pool of that token and also a pool of BNT, the default trading pair.
The quoted exchange rate is just a formula based on the relative sizes of these two pools.
As demand for a token increases and people buy out of that pool, it gets increasingly expensive to exchange out from it and increasingly cheap to exchange into it. So the exchange rate naturally adjusts based on relative demand of the two tokens, represented by the size of the two pools.
Ampleforth is the first sound money with an elastic supply. Initially deployed on Ethereum as an ERC20 token, this provides the AMPL token the ability to work with all DeFi projects in the Ethereum world. AMPL is a brand new type of instrument which makes it interesting in the DeFi space, both for exchanges, inputs and collateral. Although AMPL has been live for just over 50 days, the project has been making major headway as Ampleforth is currently partnered with Compound, AMPL is live on Uniswap and now, we’re excited to share that we’re live on Bancor!
Ampleforth was founded with a mission to create fair, politically independent money in the long term, but before that stage is reached, Ampleforth is very interesting to traders and as a new instrument for the DeFi space. A big reason for this is because Ampleforth’s token AMPL is somewhat like Bitcoin, gold, or silver but with a unique elastic supply that constantly seeks price-supply equilibrium. When AMPL price changes, the system seeks a new equilibrium point by universally expanding to, or contracting from all holders.
Snapshot of Ampleforth Dashboard
The rebase operation that adjusts supply happens once every 24hrs.
Bancor + AMPL
When the Ampleforth supply policy executes its rebase, all holders’ AMPL balances potentially increase or decrease together in a single transaction. This also includes contracts which hold AMPL balances.
So what happens on Bancor? The AMPL reserve automatically adjusts, changing the relative size of the AMPL and paired pools, causing a new exchange rate to be immediately available upon rebase.
So, every 24 hours there’s a potential arbitrage opportunity between Bancor, Uniswap and Bitfinex/Ethfinex — the currently supported platforms and centralized exchanges.
How would you make use of it?
Buy low at one place, sell high at the other, every 24hrs at 8PM UTC.
Of course, deposits and withdrawals take time on centralized exchanges. So if you have existing balances on-chain and on-exchange, you can do these two buy and sell ops at the same time. You’d just need to periodically rebalance your holdings, but you can do this at your leisure.
How else could you benefit?
If you’re not confident enough to try this arbitrage yourself, you can at least profit from the trade volume that naturally comes out of it.
Bancor allows anyone to supply liquidity into the exchange pools. Active traders pay a small fee of 0.1% and this is added directly back into the pools so the combined reserve balance increases with every trade.
When you decide to pull your funds out, Relay Tokens change in value based on the Relay’s usage and the price of its underlying assets.
On top of this, since the AMPL reserve scales up and down with rebases, you never lose your exposure to rebase adjustments. Pretty cool!