Posted 9 months ago | by Ben Armstrong
AMPL and RSR: Two DeFi Newcomers with Massive Potential
With Decentralized Finance (DeFi) booming and making headlines in the crypto world, it is hard to talk about crypto without having to mentioning it.
The spikes in DeFi projects seem to be experiencing appear unstoppable, with some people theorizing that it might slow down only if Bitcoin goes up at a faster rate.
With DeFi projects like Compound, Aave, and Kyber seeing a massive increase in popularity, it is easy to miss smaller projects with massive potential. Two of these are Reserve and Ampleforth.
To learn more about these two projects and learn Bitboy’s predictions for them, make sure to watch the latest Youtube video:
Reserve: A stablecoin for scaling prosperity
Reserve is a flexible pool of stablecoins designed to reduce risk through diversification and decentralized governance but to everyday users Reserve is just an app for buying, holding, and spending digital US dollars.
The platform is marketed as a digital currency for countries with high inflation like Venezuela or Zimbabwe, two countries that suffer hyperinflation and high volatility as its citizens are unable to afford basic needs with their national currencies.
The Reserve project uses two cryptocurrencies Reserve (RSV) and Reserve Rights (RSR), each of them offering different benefits to the platform and its users.
RSV is a stable cryptocurrency that is economically and legally robust at any scale, 100% asset-backed, and funded by top Silicon Valley investors.
The Reserve Protocol interacts with three different kinds of tokens:
- The Reserve token (RSV): A stable cryptocurrency that can be held and spent the way we use US dollars and other stable fiat money. It is economically and legally robust at any scale, 100% asset-backed, and funded by top Silicon Valley investors.
- The Reserve Rights token (RSR): A fluctuating protocol token that plays a role in stabilizing RSV and confers the cryptographic right to purchase excess Reserve tokens as the network grows.
- Collateral tokens: Other assets that are held by the Reserve smart contract to back the value of the Reserve token, similar to when the US government used to back the US dollar with gold. The protocol is designed to hold collateral tokens worth at least 100% of the value of all Reserve tokens. Many of the collateral tokens are tokenized real-world assets such as bonds, property, and commodities with the portfolio starting relatively simple and diversifying over time as more asset classes are tokenized.
To complete its goals, the Reserve team has told the public the project will move through three different phases that are increasingly decentralized as cryptocurrencies are a far better form of money, but they need to be both accessible and a store of value that can be leveraged as a unit of account.
In the project’s first phase reserves will be backed by collateral and pegged to the United States dollar with the second phase aiming to utilize a “basket of assets” and still keep the USD peg, while the third and last phase will see the dollar-peg being abandoned to stabilize the real purchasing power of Reserve.
Ampleforth: Adaptive money built on sound economics.
Ampleforth on the other hand seeks to be a sound form of money built on adaptive economics and as unlike RSR, does not operate based on a basket of currencies in its protocol.
The other big difference between the two projects is that while RSR seeks to protect against inflation this one seeks to create inflation as a good thing within its ecosystem.
Ampleforth argues its use case on its website by stating:
“Demand for currencies is volatile. Varying economic circumstances like recessions, booms, and technological advances, affect how much currency people want to hold. In the case of fixed supply currencies like gold, silver, and Bitcoin, these changes in demand are expressed entirely by changes in the value of the currency."
The result of this is that the volatility of demand translates into the price of anything denominated in that currency, including contracts and notably debt.
For this reason, sudden shocks in demand can destabilize ecosystems supported by fixed supply assets as the greater the complexity of an ecosystem built on fixed supply assets is, the greater the risk of cascading failure.
To address the issue AMPL can fairly and automatically adjust its supply in response to demand, without any need for a centralized authority.
AMPL is nicknamed the “elastic” cryptocurrency due to its ability to expand and contract its supply in response to the demand it is seeing.
While Reserve Rights is used to facilitate the stability of the Reserve token, (AMPL) Ampleforth is redefining how money works, combining the best of Bitcoin, cryptocurrency, and stablecoins.
The protocol's unique token dynamics make it a promising form of collateral for DeFi as while Reserve is a stablecoin, AMPL is not entirely a stablecoin because it doesn’t eliminate volatility but aims to reduce volatility not totally get rid of it.
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