Fragments, the developer behind the Ampleforth protocol, and the Ampleforth Foundation have revealed their plans to introduce a new digital asset called SPOT, which aims to provide a stable alternative to fiat stablecoins. SPOT combines the features of commodity-based money and peer-to-peer digital cash to create a volatility-resistant digital asset.
SPOT’s volatility-reducing properties are achieved through a process known as tranching, which involves segmenting the volatility of Ampleforth’s native currency, AMPL, into two separate assets. The first asset, called the “senior tranche,” is the low-volatility SPOT token. The second asset is a staked version of AMPL known as the “junior tranche,” which absorbs the majority of network volatility, protecting SPOT from significant price swings.
Users of the protocol can deposit AMPL tokens to mint SPOT and stAMPL, and they can also redeem their derivative tokens for AMPL as desired. The tranches, which have a fixed term of one week, are bundled together based on their senior or junior status. Once the derivative assets reach their fixed-term maturity date, they automatically convert to AMPL. The SPOT protocol maintains continuity by constantly recycling tranches that are nearing maturity and replacing them with new tranches of segmented-volatility assets.
The goal of segmenting volatility into derivative instruments that constantly recycle is to limit volatility and direct it towards a store-of-value with commercial applications, rather than eliminating it entirely. Ampleforth representatives have stated that SPOT’s minimum volatility levels will be comparable to the 2019 consumer price index-adjusted U.S. dollar.
The introduction of SPOT comes at a time of increasing concerns about inflation and geopolitical instability, which could pose a threat to the current financial system. With the U.S. national debt approaching $35 trillion and interest payments projected to exceed national defense spending, some analysts worry that the U.S.’s deteriorating fiscal position could disrupt the global financial system, heavily reliant on the U.S. dollar as the reserve currency. To address these concerns, former U.S. Speaker of the House Paul Ryan has proposed the creation of dollar-pegged fiat stablecoins to alleviate the debt obligations resulting from fiscal deficits and monetary printing.
In response to these challenges, corporations are turning to Bitcoin treasury strategies to safeguard their wealth and purchasing power in the face of excessive monetary debasement.