Ampleforth + Compound is an Entirely New Instrument

Brandon Iles
Aug 15, 2019 · 3 min read

The third Compound.finance community vote is happening on August 28th. AMPL has been included into the short list of 12 high quality projects, from which the top two will be added.

Image for post
Image for post

AMPL is already used as collateral for margin trading on our biggest centralized exchange partner, Bitfinex (along with Tezos, Stellar, and Cosmos), but we’re super excited to also lend our support to the DeFi community.

If you’re a Compound user, vote for your favorite project (😉) to help us with this mission!

Ampleforth Project Info

If you’re new to Ampleforth and want to read more about the protocol, check out our One Sheet, Website, or Red Book. You can also join us on Telegram at https://t.me/Ampleforth and ask us any questions.

And Now for Something Completely Different

DeFi’s utility only grows if there is a diversity of assets to trade. Take a look at the current activity on the platform:

Image for post
Image for post
Two of these markets are not like the others

Almost all borrow activity on Compound is for stablecoins. The biggest reason for this is it lets you leverage your existing assets into a long position somewhere else.

Most likely, if you’re longterm on the others or you’re using them for utility, it’s cheaper to buy them outright than to pay interest along the way. So borrowing other assets is only useful for shorting, which sees less activity.

High borrow activity, leads to higher Supply APR and more incentive for suppliers, so healthy Compound markets need reasons for Borrowers to come to the table.

Why Borrow AMPL on Compound

If you wanted to leverage long into an outside asset, you’d typically follow these steps:

  1. Borrow USDC
  2. Transfer to another market (gas fee)
  3. Buy, say, XRP (trade fee)
  4. Wait for price to go up
  5. Sell XRP for USDC (trade fee)
  6. Transfer USDC back to Wallet (gas fee)
  7. Repay Borrow (compound fee)

Not to mention the exposure you also get to market movements as you complete these steps.

However, if you borrowed 10 AMPL, you get full exposure to the Ampleforth protocol’s rebase adjustments on those 10 AMPL without any other actions.

  1. Borrow 10 AMPL
  2. Wait for price to go over Price Target. Rebases cause 10 AMPL -> 11 AMPL
  3. Repay 10, Keep 1 (minus compound fee)

If you’re bullish, you can take a long position directly on Compound and disintermediate the stablecoin.

If you’re bearish, well, you can still borrow AMPL to short like any other asset and help the market’s price discovery.

Why Supply AMPL on Compound

If you’re an AMPL HODLer, supplying on Compound gives you a new way to interact with your holdings with more control over your risk.

For example, say 100 AMPL have been supplied on Compound and 30 have been borrowed. The remaining 70 on the platform get rebased. This rebase amount, since it does not interact with borrowers, is distributed among the suppliers — via the exchange rate between cAMPL and underlying AMPL. Suppliers would, in this instance, get 70% of the rebase exposure.

As a supplier, you get to smooth out the exposure of rebases: you get less of the positive rebase, and also less of the negative rebase. Allocating more of less of your AMPL holdings to compound gives even finer control.

In return, you get the stream of interest you’d get from supplying any asset on Compound. Supplying lets you HODL AMPLs in accordance with a different risk profile.

Community Vote

DeFi is the perfect breeding ground for innovation. This is a chance to build an instrument that’s never existed before inside or outside of crypto.

The vote takes place August 28th and lasts two weeks. Votes are weighted by lifetime usage of Compound so if you’re a heavy compound user, consider what you’d like to see out of the platform and make your voice heard!

Ampleforth Blog

ampleforth.org

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store