Evan Kuo: AMPL - the Controversial Digital Currency With an Elastic Supply #351

Transcript

[Music] hi i'm sunny agarwal and i'm federica antst and today we have on with us evan cuo he is the co-founder of ample fourth and so you know at epicenter we we try not to like get caught up in like you know bringing projects on at like peak hype cycles because sometimes that's not very productive but we actually reached out to the ample fourth team a couple months ago and had this episode scheduled and lined up and then

it just so happened to sort of line up with this like massive uh hype cycle around ample fourth and these like crazy trading swings and stuff so you know this was definitely uh you know very coincidental so and you know we just want to make a disclaimer like you know just because of the odd timing and stuff around it that you know we're not necessarily endorsing the project or anything here but you know we i think frederick and i both actually have some some of our own concerns about it but and you know we through the conversation with evan we some of them were addressed some of them i still i think i'm still a little bit skeptical on but um

i think it's a good episode to just sort of get some understanding of what they're trying to do and what their goals are yeah what do you think fernika i think it's good to get to try to get some clarity on some things because basically um my feeling is that on twitter and fortune 4chan business and telegram and i mean currently both groups the the pro and the contrast are so loud so basically there's there's the pros um who go like oh this is this is uh uh this is the greatest investment ever and it's going to moon it's gone up four thousand percent this uh month alone who are trying to get more

people to buy into this to actually keep this up and then there's the other side um many of many of whom are very legit um defy and ethereum people who say like this is a scam this is the next bit connect um this is the worst idea ever and i think basically hearing from someone um hearing from evan crowe who's kind of as the founder obviously he's caught up in this um from both sides i think hearing from him directly to me was good i absolutely i don't want to be seen endorsing this

project i thought the interview was interesting i think both of us were somewhat more adversarial than we usually are yeah i mean usually we are all about how does this work and um what what's the mechanism behind uh the protocol and uh what's what's the game theory that goes into it and and what's the technical standard and so on and we didn't do much of that today we just want to see whether the story checks out or we did some of this today but in actual fact the protocol is not actually all that complex complicated yeah it's actually almost like a very simple erc20 token but then just with this like they just modified

how the get balance function works where it kind of you know multiplies by this number and yeah it's really what what it's doing behind the scenes is sort of you know what i'd say it's almost like this like ui uh magic where like it's the balance that you know your percentage ownership isn't changing even within how the how the contract internally account does its accounting it's not changing it's just that when you want to see your balance it's just scaling it up or down and so you know it's an interesting strategy for i think the reality is somewhere in the middle like you know i don't think i know i think it's

unfair to call it a scam or the next bit connect in the sense that it's like you know it's not a ponzi scheme in the sense that like it doesn't you know there's no hidden information all the information is public fully auditable the code's there i i think what it is is but i don't i just don't think it's like the next big thing in monetary theory and it's gonna be like the replace fiat or you know any of the stuff that they talk about on their website because i feel the protocol is almost like very well designed to be so bump like uh super cyclical like you know they they want to be

counter-cyclical to other crypto stuff but they make their own cycles by doing that i think that really comes through especially in the part where they do the 10 uh when the supply adjustment only happens 10 rather than the full 100 and to me that design decision really makes it like okay you're really actually not trying to create a stable coin here you are trying to create a coin that's doing some weird price movements yeah so basically i mean what they what they do claim is that they are the best of both bitcoin and stable coins um which to me is kind of an oxymoron just doesn't go together very well

and my concern is that i mean basically if this were an academic um experiment and uh basically you you want to know what the feedback cycles look like because it's couple differential equations and it's difficult to actually say what exactly i mean you could model it out depending on the behavior of the participants and so on but it's an interesting experiment so basically where i um what i personally take issue with is that the people who buy into this i mean they don't know or they don't understand to the full extent that this is an experiment and i mean yes you can say if you get your investment advice from 4chan business

you know this really is on you um but i think as the founder you do kind of have a responsibility towards the people who buy your tokens and basically what their expectation of this is even if you could rationally say well clearly your expectation is stupid yeah so that's kind of my take cool so let the listeners have their own take and uh enjoy the episode today we're on with evan cuo who is the co-founder of ample forth it's great to have you on evan

can tell us a little bit about yourself and your background and where you're from how you got involved with crypto thanks for having me i'm really excited to be here and to talk with you guys i'm glad that you guys have taken the time we're actually out in san francisco at least have the whole team out here but since the virus hit we've scattered all across the country some folks are in connecticut seattle new york etc my background was originally um at uc berkeley studying mechanical engineering but with a great deal of concentration in computer science as well as i got more and more into robotics thereafter i got a little bit more into the startup world and came across my co-founder brandon along the way who was a long-time google search engineer and at the time he was

working at uber and he and i just started to i guess think really deeply about cryptocurrencies so we had both been introduced to bitcoin early on and i think he like i had reservations about the limitations of a fixed supply asset but we thought it was interesting and i also remember thinking that it was very inefficiently designed and then forgot about it for a while and really when ethereum came out that became an invitation to explore the limitations of what smart contract programming platforms could accomplish and uh brandon and i began our journey there but just to set the context i'd like to introduce to your audience what amples are so the foundation is called ample

fourth foundation and we have a protocol called the ample fourth protocol but the ample ampl is actually a token it is a non-collateralized cryptocurrency like bitcoin with an important twist it's supply elastic and what this means is on a daily basis the token and protocol will automatically increase or decrease the quantity of tokens held in user wallets based on 24-hour weighted volume price what's the mission of ample fourth so what was the thing that drove you to start this what needs that you see it fulfilling so the mission of ample forth is to become an essential building block of an alternative

financial ecosystem and really i think what's interesting is how we came to this realization that we even needed a building block or how we even decided that that would be an interesting thing to produce and just kind of going back to the beginning of the journey with me and brandon like i said we were thinking very deeply about why bitcoin was designed the way it was because it was so obviously difficult to scale and you know two things kind of emerged from that thought process number one it was designed to counteract a sovereign monopoly and that was very different in our minds from say a free market monopoly so say for example you're not happy with how google or facebook function you and i are free to go and create a

search engine to our liking or a social network to our liking and compete on the open market now they have a lot of advantages being incumbents but nobody would tell us you cannot compete with google you cannot innovate upon facebook we're free to try but in the case of money it's not such the case right so historically people have tried to create their own currencies like even things like the liberty dollar minting their own coins started to use them in circulation and then been stopped by the government and that's the difference between a sovereign monopoly and a free market monopoly and one thing that struck us is that the bitcoin protocol went to great lengths to counteract the sovereign monopoly in being censorship resistant

and made huge concessions along the way for this reason we think that if if the service that you're producing doesn't really require that level of censorship resistance you might be handicapping yourself a great deal in attempting to say create a better search engine on a smart contract programming platform because of scale and usability limitations and so on and so forth how would you say um the bitcoin protocol has restricted itself and basically you said earlier that you think it's not scalable what's behind that can you go a little bit into technical detail what exactly you think is not scalable i think as a layer one blockchain it has a limited tps right and as the ledger gets bigger and bigger

you run into all sorts of congestion issues and let's say comparing it to something like visa it can't here and handle nearly as many transactions per second and again this is thinking back to our interpretation of the original paper title in a peer-to-peer digital cache and of course our naive understanding of money at the time was that cash is that which i use to purchase coffee and there's something different about how bitcoin is designed right but i also want to just move forward to the next point of realization that we came to which is really important and the bitcoin protocol succeeded in articulating scarcity in a purely digital context right so unlike gold and natural commodities which are just naturally scarce by

the physical limitations of the world the bitcoin protocol was able to define scarcity using just an algorithm and that's very unique in the digital world like not very many things are scarce in the digital world somebody takes a photo it gets replicated you can't really undo that you can't say this is the only instance of that digital photo so that was a really big idea and the takeaway for me and brandon was that the the most salient opportunity to apply this sort of technology is money and then what happened was we began to wonder about what was wrong with money right so we saw that bitcoin has succeeded in creating a censorship resistant fixed supply asset that's analogous to a digital gold

but what was even wrong with gold is there anything wrong with gold and you know we really recruited a very helpful and we're super grateful for this team of investors and advisors uh pantera capital true ventures founder collective even brian armstrong and folks from the hoover institute at stanford which is you know they've been thinking about money for a very long time and we started to wonder collectively about what was wrong with gold and it turns out there's nothing wrong with gold but for when you start to use it as an essential building block as part of a financial ecosystem and we've seen this happen multiple times so under bretton woods gold if you'll recall was redeemable for dollars by foreign governments and

central banks and at that time just like as it is today the dollar was already a global reserve currency and the rate of which dollars were being demanded by the global economy was outpacing the rate at which we could obtain the gold to back it and of course one thing happens in a condition like this and that's the price of gold starts to go up and what happens when the price of gold or fixed supply acid starts to go up is people believe that you know well my one nugget of gold today could buy one refrigerator but my one nugget of gold today or tomorrow might be able to buy two refrigerators so i'm not gonna sell my gold i'm gonna hold it and so just as the economy is requiring more and more gold to enter circulation there's an incentive

to hold gold for longer and longer and this risks entering into what they call a deflationary spiral and it was kind of a big deal because like and this is just an interesting story by the time uh nixon was about to announce the cancellation of redeemability uh there was a very popular show on television known as bonanza kind of a cowboy western and it was one of the shows that everybody tuned in to watch all the time and one of his advisors came to him and said mr president we need to make the announcement tonight and he was like oh no no let's wait till tomorrow everybody's watching bonanza tonight and the advisor said no mr president if we do not cancel tonight there will be a run on gold and so is very much one of those moments like we interrupt the scheduled programming

for an important announcement by the united states president and that's when he delivered his cancellation announcement and thereafter we've been on a fiat monetary supply policy which is elastic by nature because at some point in the industrial revolution it became viable to produce paper money that was cheap but expensive to counterfeit so cheap to print but expensive to counter that was an important innovation and that allowed us to move into a fiat monetary system which is great because it's elastic we've reaped many benefits from the central banking system as as we know it today and the one kind of criticism of it is is really that it's discretionary so it's not a rule-bound system

the supply of money isn't just about printing money it's about a complex system of accounting but largely that's at the discretion of a group of really well-meaning people and it turns out that even the most well-intentioned central banking efforts are vulnerable to at least two major problems one of which is inflation which hasn't been a huge problem in the prior decades but is something that can be devastatingly bad if it gets out of control and the second thing that central bank policy has a difficult time containing no matter how well-intentioned their efforts are is the cyclical nature of boom and boss cycles that kind of afflict the entire global economy we're all in this together we're in this hyper interconnected world and things tend to go up all together

and down all together most of us are aware of the fractional reserve and bretton woods and so on what in your mind is ample fourth's value proposition in all this you said we have this bitcoin system which doesn't scale in terms of transactions per second how does amplifiers now come into this just to set the context that wasn't my claim about the problem that amples are solving that was just part of an observation that led us to investigate the problems of money but really when you think about bitcoin and as a building block it's very similar to gold and where we just swap bitcoin for gold at the end of bretton woods

no matter how liquid bitcoin is i don't think we've been much better off it's still vulnerable to that deflationary spiral problem and so we went into an investigation of what sort of you know commodity like money could have been swapped in the most ideal scenario where it's very liquid for gold under bretton woods and potentially you know function and so that would have to be the type of you know money that could increase its supply in response to demand or decrease its supply in response to demand and elastic money essentially the main goal here is to shift from a discretionary monetary policy to a rules-based system how do you know that like the

rules-based system that you guys have designed sort of this contract like simple contraction and expansion of the money supply is sufficient and it definitely is a much simpler protocol than what's used for example at central banks around the world today is the complexity of central banks mostly just because of their discretionary decision making or is it are they still following some more complex rules and protocols i think fundamentally i guess let me just re-articulate the value proposition here it's to create a constructive building block for a decentralized finance ecosystem and the nature of these

decentralized finance ecosystems is because they're decentralized you kind of need to apply rules-based methodology i think that in the case of central banks you're really talking about an apples to oranges situation because things like the federal reserve have very specific mandates that are connected to the fact that they govern people like the fed has this mandate to maintain employment right and to keep moderate long-term interest rates and to prevent like you know prices from increasing exorbitantly or in some uncontrolled manner and therefore they have to have this kind of way of checking against overstimulating an economy such that prices inflate or

making modifications that increase unemployment or decrease unemployment too much right and a government independent money really doesn't have any of those mandates and so i think one of the great points of confusion that we experience out in this decentralized finance world is like you know often i see folks trying to recreate a central banking system in a decentralized context but what you're moving from is a sovereign debt money to an independent money which doesn't really have any of those mandates right and so the goal again let me just reiterate is to create a base money that's non-collateralized that can support a more sophisticated financial ecosystem but that has a very different mandate sunny already kind of talked about this

in passing sunny you said it's a system that this kind of hallmarked by the contraction and expansion of its supply so maybe let's talk about how it works before we go into why it should work or why it shouldn't work and so on so maybe that's that's just clear up terms so basically can you tell us about how many amples are in existence and how their worth is determined and so on i can and i'd also just like to say really quickly that the main innovation here is that the ample fourth smart contract and system of smart contracts can increase and decrease the supply of ample without a transaction between peers and without a bank so typically when you think about supply

increases or decreases you're imagining you know some banker air dropping a bunch of money or buying back a bunch of money and because of this smart contract programming platform we're able to actually increase and decrease the quantity of money in a systematic rules-based way without necessarily requiring a transfer between peers and we do this by adjusting a global scalar variable that affects all wallets proportionally so what i mean by that is like you know think about a scalar variable like the gravitational constant like let's just imagine in this universe you increase the constant the planets get slightly closer together or you decrease the constant and the planets get slightly further apart it's it's more of that nature than throwing a tractor

beam at a planet and dragging it towards you or shooting a rocket at one and pushing it away so it's a very simple way of increasing and decreasing supply my erc 20 balance is never actually changing it is changing the token that is in my wallet like i'm not getting airdropped more of that or it's not being taken away it's just my ui is multiplying the balance in my wallet multiplied by this like constant scalar variable somewhere almost it's a little bit lower level than that right so it kind of works in a seamless way so imagine you have this ledger and you haven't plugged it in it's run

out of battery for a very long time but supply has increased or decreased the moment you let you plug this ledger in what it's going to do is it's going to invoke a method called get balance which is a public erc 20 interface that's shared across all of these tokens and we've overwritten this get balance method to take into consideration the global scalar variable this coefficient of expansion in returning the balance to you and so by the definition of the token itself your balance is absolutely changing even as we're not sending transactions to you and you're not sending transactions to me and this is kind of an important i guess cognitive hurdle for people to overcome because as engineers we look at lines of code they all just look like

more and more lines of code but it's important to understand that there's an important abstraction barrier where a token is defined by by a specific standard that has very specific variables it can ask access and methods that it can invoke like get balance and transfer and transfer from and approve right and all of these interact privately with this global scalar variable but all public interactions with these public interfaces are denominated and in ample and speak the language of ample so effectively you are gaining supply in no uncertain ways you probably have some array in the smart contract that has numbers in it but with uh people associated with addresses but what

you're saying is that you know that is not your balance that's just like some internal accounting tool used by the smart contract really you should be thinking the result of get balance is your balance that is true the result the what get balance returns both in our system and in any erc20 token is your balance that is the abstraction barrier that's important for people to understand because you can't get around it in a sense right so if there's an on-chain decentralized exchange and it's calling get balance that is what it is now you could write some sort of wrapper on top of it that tries to undo this arithmetic but that would not be the balance of the underlying asset no matter what you hope

to accomplish with this wrapper so can you now talk a little bit about how this scalar value is determined and like yeah how does this like rebasing process work i would love to tell you about that so what happens is uh once every day at 7 p.m pacific there is a window in time where this rebase occurs and what it does is it accepts a 24-hour volume weighted average data input from an oracle and then it looks at the price difference between that 24-hour v-op price and the target price so the target price in the apple uh fourth protocol is the cpi-adjusted 2019 dollar so to give you an example let's just say

apples are trading at greater than a dollar say they're trading at two dollars right so if the difference between the volume weighted average price is one dollar so it's like it's trading at two dollars but price target is one right and then that in theory based on the quantity theory money can be offset by a 100 supply increase now we take that number and divide that by 10 and as a result there would be a 10 supply increase and the reason why we do this is because the quantity theory of money is not actually an end in itself it's actually just a way of systematically applying uh supply pressure because that phenomena doesn't really hold in the near term merely offsetting supply does not result in a direct

change in price in the near term it's actually just buys and sells in the open market in response to those supply chains that modifies price and so it would be a mistake to think that merely changing supply itself would modify price changing supply actually just applies a certain amount of incentive pressure one way or another and what unfolds thereafter is more of a game theoretical analysis of what might happen given that everyone else knows that this is going to happen and so this is where the second interesting component of the apple protocol comes into play so we designed this protocol to address the concerns of fixed supply assets we made something very simple and directly elastic that doesn't require

the formation of a bank but upon further analysis we then hypothesize that this would introduce a fundamentally different set of incentives because now in the ample fourth network price is no longer the only proxy for gains and losses because your balance is changing and price is changing it's actually the product of price and supply that is the proxy of gains and losses and this would have a different effect on the behavior around the trading of the coin which we suspected might cause the ample token to decouple from existing digital assets like bitcoin so that's just kind of you know the second interesting thing about the ample token you're trying to get the price of an

apple as possible to a 2019 us dollar if the price is above a dollar every day at 7 pm the supply is increased and if the price is below a dollar the supply is diminished that is almost right just as the use of the quantity theory is merely a way of systematically determining how to increase or decrease supply the presence of a price target in itself is not actually the goal and this is something that i'm really glad i have the opportunity to share with you because a lot of people think that because a price target exists that it itself is an end goal but the way we think about a price target

is you need some sort of goal post to tell you whether there's more demand than supply or less demand than supply and if you don't have a frame of reference at all you simply cannot do that and so we selected a price target such that we now know as a system whether there's more demand than supply or less demand and then supply and that allows the protocol to apply pressure one way or another and so thinking about again bretton woods what was missing was an incentive i think for people to increase the circulating supply of gold when there was more demand than supply and you know what we observed with the ample actually just in the recent year is that as it's expanding you know for example in the

past month it's spent a great little uh deal of time above the price target and we've been increasing the quantity of tokens in user wallets and what has happened as a result is the circulating volume of ample has increased quite a bit and therefore it suggests that that is functioning by design as well the one thing i want to reiterate is that the price is not a goal in itself it's a reference point by which the system can systematically infer whether there's more demand in supply or less demand and supply by inflating or deflating the balances of all existing ample holders what you're in effect doing is you're changing the denomination you're not changing the

worth in itself you're changing the denomination right it's it's kind of like when countries decide that currency has debased too much and basically they go from saying this is a thousand dollars to saying this is one new dollar the existing value in circulation shouldn't change just because you're moving decimal point not quite so this is where things get really interesting yet again so the other thing i'd want to kind of mention here is that these supply adjustments are completely proportional in this sense it's non-dilutive so if you owned one percent of the ample network at a 10 million market cap say you bought one ample for one dollar to 10 million market cap and

it grew to a 100 million dollar market cap but you would still have one percent of ample and in an ideal scenario you would have 10 times the number of ample so 10 amples at a 100 million market cap and i think what you might have been asking is like aren't we simply transferring price volatility into supply volatility is that the question you're asking or were you asking whether we're changing the denomination itself because those are kind of two different questions i know you're not changing the nomination itself but in fact it's equivalent to changing the denomination if you're instead of saying the price is volatile you're saying the supply is volatile because basically one multiplied by the others the total market crap right interesting

yeah so this is where things get really fascinating as well and i'm glad that you guys have done your homework by the way i thought i was gonna have to start from the basics but what's happening here because again the quantity theory of money does not hold in the near term when we increase the quantity of units in your balance that does not immediately result in a price offset on traditional order books with bid ask spreads right again what i'm saying is the system algorithmically adjusts supply but it's the behavioral incentives that propagate those changes back into price and they don't happen immediately so amms and pools like uniswap not withstanding in a normal exchange what happens let's just say if ample is

trading at two dollars and you're currently holding you know a thousand apples or whatever say we increase the quantity of amples in your wallet by 10 so now you're holding 1100 amples the moment we make that supply adjustment you're holding 1100 amples that are still priced at two dollars per amp in a traditional order book system and therefore that is different than simply translating price volatility into supply volatility and i'm not saying that it is something that becomes immediately stable i'm saying quite the opposite that it just introduces a novel movement pattern and instead of incentives to the system so this thing is a beast of its own

so it's a non-collateralized cryptocurrency unlike what we see in traditional markets and unlike what we see currently in digital markets but it is supply elastic right and does have a novel uh movement pattern and one other thing i would draw attention to in your analogy with the central banks increasing or decreasing money is like these um kind of sovereign currencies they also have this property that cryptocurrencies don't yet have which is they have real exchange rates so because the government can force in the united states the ability or they can enforce the requirement that we pay our taxes in dollars at least right and that merchants denominate goods and services in dollars there's a stickiness a nominal rigidity that exists by virtue of having this

real exchange rate in addition to having a nominal exchange rate like an exchange between dollars and you know euro or yen in some forex exchange and that contributes to this phenomena where you know when central banks increase their money supply doesn't directly affect the value of the currency kind of creates this weird timeline but that's not really present in the current cryptocurrency world we've got primarily nominal exchange value there's not a lot of things being denominated in cryptocurrencies and these are trading on exchanges with matching engines and bid ask spreads and the supply policy actually it just creates a different incentive pattern and that results in a different movement pattern and that's very interesting to us as well

why is the price not basically immediately shifting with the like when the supply changes like i feel like i think i've read that most exchanges shut off spot trading at the time of rebasing who's the schmuck that's keeping their orders at open at a bad price if i'm an ample user shouldn't i know that like if i'm holding buy orders of something higher than one dollar when the rebates is coming i'm gonna get screwed there are no schmucks there are simply people who have placed orders on an order book and because you have so much visibility into the predictable nature of this

supply policy a lot of the smarter traders right we've seen these kind of strategies start to adjust where people waited until right after the rebase to make their move and then we saw people start to understand that well they can do their own valuation on a market cap basis of what amples are worth and place their bids long before a rebase occurs and those can persist until after at the end of the day a lot of the more sophisticated traders are just understanding what they think is an overvalued market cap or an undervalued market cap based on their knowledge of what's going on and if you see this for example in the perpetual futures markets even they have the notion of rebase and its ultimate effect

on market cap as they understand it today baked into these market index prices and so i would actually say that there's no schmuck people can trade uh based on their expectation of what the market cap will be before and after and their prediction of what they think you know is over undervalued or the position that they're attempting to accumulate as a percentage in the network long term and near-term all these strategies can work but they do need to transition into thinking more about this from a market cap perspective than not in a lot of your documentations you bring up this concept of fast traders and slow traders so maybe you can explain

that but then my question for that is as a slow trader why would i be leaving orders open on a order book if i'm a slow trader of ample i think of a slow trader as somebody who's just more like a holder so imagine somebody who enters their position in ample like on january 1st and they might think about exiting it if ample does a huge run-up like six months from them there right and so they're really looking at market cap appreciation or losses let's just say they entered their position at a ten million dollar market capital grew to a billion dollar market cap and then fell to a 500 million dollar market cap and then grew to a 750 million market cap and then one day they decided i'm

interested in exiting my position and they make a sell that's how i think of a slo and honestly that's how i trade things like bitcoin i don't have the time to be you know trading constantly i don't have a quant fund i love bitcoin and so i've taken a position in it but i'm also aware of these more macro fundamental cycles and sometimes i feel like i should exit my bitcoin position and sometimes i feel like there's an opportunity to accumulate more bitcoin but i'm not doing it 24 hours a day every time you know every day a fast trader i think of is more of a quant trader right so people who are looking to benefit from arbitrage and inefficiencies across exchanges across networks and they're just always doing the calculus

of like what does the spread look like what does the depth look like what are the rates on this exchange versus that exchange and moving in and out so that's what i think of as a fast trader so so where are the profits coming from from these fast traders then so let's let's talk through this example where let's say i owned one ample for apple and the price was a dollar when i bought it and the price somehow in the past day went up to 1.5 and then the rebase happened so it has one point i have now have 1.5 amples each worth 1.5 dollars and you're saying that there's a short gap of time where a fast trader can

make take advantage of that who's taking the other side of that trade like are these people who are betting against the rebase being successful it's a really good question and i guess we have to put time into perspective a little bit here what what's happening is people are betting on the network continuing to grow so there is a rational bet still that like just because ample is trading above the price target doesn't mean that it will immediately correct after a rebase because as we discussed price doesn't adjust immediately as a result of a rebase in a traditional exchange and if people feel like there's an increasing number of new people who

are willing to take a position in ample at its current market cap and because they believe it'll go up then they might very well rationally buy into the network even if it's trading above the price target just just as they might do the same even as it's below the price target and so that window of opportunity where you bought you had one ample it was trading at two dollars per ample now you have greater than one ample at two dollars per ample if you believe that that will persist for yet another day right then you might wait or if you believe that it might increase to another day you might wait but you know eventually there will be a topping out so let me put in another way you could think about it as a conditional

probability statement so given that the ample fourth protocol has three different states expansion contraction and equilibrium right so imagine you're in this expansion state you might ask the question given that amples are expanding what is the likelihood of cell pressure kicking in in one two three n days right and you might have some expectation that says like okay n is five and in five days i think that's when the cell pressure kicks in so i might wanna sell on day four right and similarly if amples are contracting you'd be say you'd be saying something like given that apples are contracting what is the likelihood of by pressure kicking in in one two three n days but as we go through more of these cycles

right um say last time n was 90 days right and we're in round two of the similar cycle this time i'm gonna sell it 89 because i know that everybody else saw that n was 90 last time right and and from there you start to see this and i would expect decrease over time because that's just how i believe the game theory will play out so once people have observed some of these cycles it's like okay maybe apples won't be trading at three dollars and expanding for 30 days in a row this next cycle because that happened already and you know i missed the top and this time i'm gonna sell a little bit sooner um that's just like how i think the game theory will most likely play at play out and okay so basically can i just interject here so basically

i'm kind of hearing a couple of very different things and i'm struggling to actually put them into the right order in my head maybe you can help me what i what i heard earlier is that one of your issues with gold and digital gold is that basically if i have a gold nugget and i can buy a fridge today i might want to wait a week and buy two fridges instead and i also heard at the criticism that basically the bitcoins are not used as a unit of account on behalf of their volatility i haven't volunteered that yet so i didn't say that yet i'm happy to get into that a little bit later but yeah okay so i'm hearing two different things now so basically

earlier i heard if i have a gold nugget and i can buy a fridge for it today i might wait until next month because i might be able to buy two fridges um from the same gold nugget and that's that's bad so basically it would be better to have like a duplication process where basically the the amount of gold nuggets is increased to have a more stable supply a more stable uh denomination you also said that one of the shortcomings of bitcoin is that people are not using it as a as a unit of accountant that basically prices are typically denominated in something stable like the u.s dollar and then you pay for it

in bitcoin and now the other thing that i'm hearing is that there's a whole different price dynamic because there's layers and layers of speculation layered on top of each other and i totally buy that i think that that happens i i mean it's it's it's a system of couple differential equations and there'll be complex movements uh or movement patterns but basically my question is to me it seems like this should just be increasing the volatility and the bubbliness of of of the acid rather than decreasing it which i think i heard earlier was kind of the intent but maybe i miss that maybe you can clear that up

yeah i mean there are a few things that i'm happy to clear up so just to set the context well let's just start from the beginning right so um you were kind of repeating back parts of what i said which is that like one of the concerns with bitcoin you know now that we've kind of articulated it is hoarding right at a time when the market requires an increasing circulation circulating supply of like gold by comparison under bretton woods people were incentivized to hoard it and therefore the circulating supply of gold uh decreased at a time when we needed to increase right and and one of the consistencies inconsistencies i think that you were trying to point to was that

well don't people have an incentive to hold ample as well right they do but as we saw as ample was expanding and we were increasing the supply uh in these wallets what happened the circulating volume of amp will increase profoundly and that wouldn't have happened under bretton woods with goal right so just because not everybody sold there are many strategies that i think many people will um take on at any given time uh just because uh some people want to hold doesn't mean that the incentive isn't increasing the circulating supply of ample when demand is greater than supply in fact it has certainly done that so the the other thing that i want to

talk about is just the the unit of account function of of money that is so so important for how central banks work i really don't have a lot of criticisms for bitcoin i would say i i quite like bitcoin i think it's a very good asset and i think it's very interesting but i do think it would be very difficult for people to denominate with bitcoin um it has been it hasn't really seen that type of use thus far and it will be difficult to denominate with bitcoin as it is difficult to denominate with gold even in the long run and with ample i think perhaps in the very long run it could be used for denomination if the

efficiencies of this game theory and markets started to really pick up right such that the price was correcting itself a little bit more quickly yeah perhaps that could happen but you know i don't i wouldn't say that is a goal in it of itself like i said uh you know the thesis of our paper was very straightforward here it was you know can we create a non-dilutive digital asset with a different movement pattern that was a question that we asked and can we create a better building block for a financial ecosystem that's another question that we asked and so we introduced supply and elasticity and we're observing a different movement pattern and i think like one of the things people

tend to get confused is like what do we consider to be success in this you know environment and i do think that if the asset is offsetting price by increasing supply or offsetting price by decreasing supply if it's if it's counter cyclical as a policy uh and if it's moving differently from bitcoin then those are the two strongest indications that we're achieving what we sought to out the gate does that help yeah i mean to put the question very blankly would be like do you think this is a good design for being a like standard medium of exchange unit of account like

do you expect people to start to use this in the in the long term let's say in five years or 10 years 20 years as a transactional medium of account what will i be able to or will it sort of be sort of more of this um base money so i think you guys are missing one critical piece here which is like there's like the so-called holy grail of what we transact as a common medium of exchange that even today sits on top of a complex banking system right which uses a base money the stock of paper right and prior to that we had all sorts of other base monies like gold and there are folks today who believe that bitcoin could be such a

base money like the folks who have authored books like the bitcoin standard right and that's kind of you know treated separately from the idea of a commonly used medium of exchange and when i think about a base money i really think of it as a building block or an infrastructural piece of a financial ecosystem that tends to be more complex and maybe the ecosystem isn't entirely rule based and maybe the ecosystem isn't entirely decentralized maybe it's a hybrid of this and that but those layers sit on top of these more primitive building blocks and our goal here with ample is to build another essential building block as part of this new ecosystem and so i don't know if that helps you but there is this tendency to think that

either something is the most commonly used media of exchange or it's not quite money and as i talked to my academic advisors it really just seems like money is a very poorly defined concept even hayek used to lament that money itself was a noun he would prefer if different things were described as having different money-like properties to different degrees and what we're talking about here is a base money and a building block and so the more we can form this analogy in our minds at least for the purpose of this conversation where we're thinking about gold not as a commonly used media of exchange but as a building block or we're thinking about bitcoin not as a commonly used way of buying coffee but as a building

block a component of a larger system and we're thinking about ample as a building block as a component of the larger system and i can give you some more examples for reasons why i'm really excited about the design of ample it has interesting synergies in how it interacts with other existing d5 platforms that we're working on right now so you're familiar with things like uniswap right it's a constant product exchange where there are two balances right a pair uh say one is ample and one is e right and the product of those pairs is always an invariant constant and the spot price is derived by swaps right when when the balances shift in quantity it has an inferred spot price one of the phenomena that

we're struggling with i think as an ecosystem is the phenomenon of impermanent loss where if one asset starts to appreciate or depreciate in a big way relative to the other there's this loss that emerges from it so say just have two coins red coin and blue coin red coin goes up 100 blue coin goes up only 10 and that gap never gets bridged that becomes uh punitive for the pooler in the form of impermanent loss there's a new um kind of startup pooling system called balancer um which i'm sure you're probably familiar with as well we just had them on last week they're fantastic because they generalize this constant product pooling um concept where it's like now i can have red coin times a blue coin times

green coin and have that equal and invariant but what does that mean that means that i could also have red coin times red coin times blue coin equals invariant and that's the same thing as red coin squared times blue coin to the one equals an invariant and so long as these exponents add up to one they can be treated as a waiting parameter in a smart pool a way of rebalancing a portfolio so to speak of n balances it so happens that the way the ample supply policy interacts with balancer can be designed such that the supply changes perfectly offset these weighting parameters and because ample is cyclical in price

right we know that it eventually will return to one whether it's over or under it can basically make impermanent loss truly impermanent where in the original example where red coin grew up 10 blue coin grew 100 and that gap never gets bridged that can be eliminated um through the interaction of this rules-based supply policy with the fact that um ample is cyclical and an interaction with the waiting parameters in a balance or smart pool i'll give you another example of an ecosystem level maybe let's go into these ecosystem integrations later i i don't think i fully buy the balancer one but let's talk about this later i have

a last protocol question just as in how the protocol works before i'd like to move on to the token distribution or the initial token distribution so basically you need a price feed right in order to to determine whether you increase or decrease the total token supply where does this uh price feed come from so we actually have two oracles so there is a cpi oracle and there is a market oracle so the cpi oracle that's how we target the you know purchasing power of a 2019 cpi adjusted dollar that comes from the bureau of economic analysis once a month and chain link is also supplier

to that oracle input the market oracle provides 24-hour volume weighted price and we are a direct oracle front we have we receive information directly from biffin x and kucoin but also from chain link which aggregates price information on top of other aggregators so we kind of just have a little bit of redundancy in terms of where this price information comes from but that is one of the more interesting questions here like how how do we decentralize a price information oracle over time but that is where it comes from things i have about the sort of uh rebasing stuff is why does it only rebase

10 uh of like the amount that like you know if it went up by 50 percent it doesn't actually uh increase the supply by 50 it actually only increases it by five percent so what's the reason for sort of capping capping that at the 10 amount well the underlying reason for that is that number one the quantity theory of money doesn't work in the near term so it wouldn't really fully offset price if we did it you know fully anyways and it'll matter less unless i believe over time what that reaction lag parameter is but that that is a smoothing parameter so that we don't over correct one way or another so again if you accept that the quantity theory of

money doesn't really work in in the near term and you accept that these supply adjustments are just nudging the market one way or another then this is a smoothing parameter to prevent things like overcorrection from occurring just as like 24-hour volume weighted average price as opposed to spot price at a given moment kind of starts to you know smooth things out a little bit and and this is already very fast but by the standards of like say like a central bank which might you know adjust supply at a much much much lower rate can i follow up on the oracle question so basically you said that you get the data from chain link right yeah we get the data from different x and kucoin and through chain link which aggregates a great number of

other aggregators okay so basically the the chain link is the one that's hard coded in the smart contract or can that be updated so that can be updated right so this uh that is not hard-coded into the smart contract yet so basically you guys have an admin key to the to the smart contract and you can reset how the factor of the supply is set no well so what we would like to introduce governance around in the longer term or actually just even in the near term is two hyper parameters one of which is that rebase reaction lag parameter that you were talking about which is the number that we divide

the supply offset by right that's a number another hyperparameter that we're going to decentralize the governance of is the deviation threshold and this is actually they're just those are the two hyper parameters of the system the rebase reaction lag which is that smoothing parameter and the deviation threshold because right now it's set to five percent above or below the price target and that's something we'd like to decentralize the governance of lastly we'd also like to decentralize the governance of oracle inputs such that eventually it would be the community decides like when to add another data feed source or not but there are also really promising things around the corner just because the ecosystem is evolving

while there is no generalized solution on chain for the oracle problem at large we are soon coming to a reality where there could be a decentralized solution to the price oracle problem like for example uniswap provides a price oracle we're not yet ready to take advantage of things like that but it could be soon there are also kind of a high throughput decentralized exchanges that are being developed and and really what we want is to get a price oracle input from an exchange with a matching engine that would be wonderful like you look at what sam at fdx is doing with serum and on solana these things are starting to become possible um so what i thought once would be a very very difficult

problem to solve and that we would probably have to solve just through decentralized governance of what is a valid oracle input or not could soon become a hybrid of like we're getting an on-chain decentralized oracle feed and in addition to that we're also accepting um off-chain oracle inputs and gradually decentralizing that but it i'm not without hope that this price oracle problem could theoretically be solved by some of our ecosystem partners and i can't say that that was the case when we originally launched this okay cool so that that kind of clarifies my question the next um kind of area of topics i would like to talk about is the token distribution so i know that you guys did a token sale

um about a year ago where you sold 5 million of a then 50 million total supply so what happened to the remain remaining 90 of the tokens at the time oh i'm sure you can look up the the pie chart i'm not looking at right now but some some fraction of it is was allocated for employees and um advisors some fraction for an ecosystem fund some fraction for a treasury fund and actually what i'll do is i'll do one better we have an updated transparency report coming up with the current state of token distribution it really looks quite different than what the original state was there's far more

amples in the wild than there appeared to be we'll link to that in the show notes so i actually have the numbers for initial distribution so a quarter actually went to the team and the advisors 23 or so went to investors and 20 is in the ample fourth foundation treasury and uh 20 or so was set aside for the ecosystem incentivization that we can also go um into in a little bit i think the geyser that was launched recently as part of that if you look at a token that is so little decentralized from the get-go i mean basically you sold if you sowed 10 in the token sale 25 went to uh the team and advisors

so how do you expect that to gain the traction of a truly more or less decentralized system like bitcoin or ethereum i mean basically if you if my personal opinion is that if like some of the super old satoshi coins would be moved today that would be a an enormous amount of turbulence for the system just because um it would be clear that like 10 or so is in effect still controlled by a single person or a group of people um and i think the fact that the bitcoin price has moved the way it has is largely attributable to the fact that that never happened and these coins

never moved and basically people assume that they will never move so how do you expect for a token distribution that is so lopsided to actually become a what in effect is a speculative asset just like bitcoin okay so again ample just to set the context is a decentralized um building block and i'm flattered that you're comparing us to bitcoin which is you know a a beautiful design a lot of those numbers that you're looking at right now don't represent the route reality today so for example the 25 percent that was dog-eared for

employees and advisors that's a pre-allocated amount that doesn't mean it has all been distributed as such a great deal of investors have unlocked their tokens and have been trading them and they are in the wild and a great deal of eco system funds have also been distributed and we will continue to deploy them as systematically as possible so the geyser program was was really just the beginning and when we launched you know we were adhering largely to kind of the standards of a finance i o and a bifidex ideo but we do have a plan for systematically distributing the ecosystem fund through geyser and geyser-like programs you know we do have a forthcoming transparency report that i

think you should just link to and see what the system actually looks like today um this will be an ongoing consideration for us you know how do we get the ownership of the coin into the hands of the market in a systematic way and you know just just look forward to an update on that because it's it's not quite what you're describing it to be that remember that report is over a year old so so you mean a lot of the a lot of the team and the advisors have already cashed out or what what's the argument exactly so they already sold to the market no not so much the team but i know that the investors have moved a substantial

amount of money so they're unlocking on a monthly vesting schedule some of them once they're no longer in the control of of us right it's not no longer a pool that's allocated for these people it's constantly being unlocked so what that pie chart was meant to represent was actually a release schedule right so when we did the i o we all kind of subscribed on top of our four-year standard vesting to a gradual release schedule so that even folks who had you know taken a position in the asset early days or had hit a vesting cliff would not be able to suddenly release their tokens and since then you know

almost a year has passed and over time things have kind of reconfigured themselves so really the best way for me to help you here is to provide you with a new transparency report and it is forthcoming okay do you think that the investors who have already shared who've already sold their ampos did so for the greater good of the ample ecosystem or because they wanted to cash out at an opportunity i really can't speak for the investors so i mean when you think about an io in a block round for example it is a moment in time where a lot of people are plowing in a concentrated manner right i can say this that like our early stage investors i'm very close

with they've been very supportive this whole time of our long-term vision and and we did raise from people who have you know the bright mentality i think in terms of how to balance advising an early stage product into like getting some amount of traction and they have their own calculus for how to think about their portfolios and so on and so forth but we managed from a mix of traditional vcs and also crypto funds so some of them have the capacity to trade in real time even provide liquidity so one way of distributing tokens that's pretty responsible i think for the space is like by being a traditional liquidity providing market maker and a lot of folks in my investor pool they've kind of

contributed to programs like the geyser as well or or at least just like uniswap liquidity pools right so if they if they don't have the ability to market make on a centralized exchange as not every investor is a hedge fund some of them are welcome to participate and have participate in a uni-swap liquidity pool some of them simply can't do that i'm not sure uh if that helps you but i do think that you'll appreciate in particular the transparency report that's coming out soon so speaking of like like the uh unisop liquidity pool and geyser and stuff so essentially you know what it is is it's like a way for you know sort of a liquidity mining for like allow people to earn ample tokens by providing liquidity to unit swap

what is sort of like the integration hurdles with ample because i imagine that like one both for centralized exchanges but then also especially for like other smart contracts is i feel like it's many smart contracts probably aren't used to the paradigm of the their own token balances changing without some interaction happening with them and so have you run into any integration challenges because of this um less so with the things that are on chains because ample is kind of natively on chain and it overwrites things like get balance um like in the case of uniswap it was there was very little

like certainly with v1 i remember it just kind of worked automatically with v2 there is a sync call that you know can be that was like layered on to the rebase but very light very very light with compound i know the team has done you know quite a bit of research on that it seemed very light as well uh it depends on whether this smart contract program or platform that we're dealing with it really depends on what they do with it but i will say that with centralized exchanges there is an integration process it's not a vanilla erc20 token it's not like okay we got basic attention token that means we can have ample because uh they do need these exchanges they pool wallets right so

you know they have wallets the amples in those wallets will automatically increase and decrease in supply but they need to propagate those supply changes into the system of accounting that they have for their users which is typically a database you know at the end of the day and if they don't do that then you know their users are going to be quite angry because it's kind of like the early days of the neo gas token where you know those the supply increases weren't being shared with the customers and and binance was the first to actually do that to just actually make that database update and that gave them a lot of early days traction and so it is kind of one of those things where the exchange does need to be conscious of the fact that the apples in their pooled wallets are going to automatically increase but they

need to propagate those increases and decreases to the user accounts that they represent and they hold custody for and so we do have a generalized integration guide and increasingly now you know exchanges are trying to list us often without our it's not that we give permission or not with but without um you know asking for feedback on whether their integration is going to work or not and some and sometimes they don't even know and so we're trying to maintain a list of integrations that the team has run live test cases on that we believe are approved and that like accurately propagate supply changes in their pooled wallets to the user accounts that they represent so there's been quite a lot of trading

activity on amp over the past month or so so the market cap has gone up many fold i i want to say like more than 100 fold but i don't know i i could look it up but it's very very significant and the price of ample has um traded well above one dollar for all of july sometimes at almost four dollars do you think the people who actually trade amples understand the underlying mechanisms of how the supply and the price change i mean there's quite a lot of marketing activity going on on twitter and 4chan business and so on do you think people actually

understand what they're buying into um given how quickly things have grown one of the things i'm most excited by is how the community has mobilized around disseminating information about ample i can't even keep up with it all to be honest because this is not something that's really in our control the community has taken a life of its own and that's wonderful the telegram community is very very lively and i think that they are doing their best to communicate the principles of ample to as many people as they think are interested in a short timeline but i do think there are a few things that have been

lost in communication along the way i think for the most part people understand the mechanism supply increases supply decreases that's cool i don't think they understand just as kind of even in this conversation there was some confusion around what the goal of a price target is right so to me it's a proxy for determining whether there's more demand and supply or more or less of demand and supply as opposed to goal in and of itself and i think some things that are lost are you know the the the whole view of this particular cryptocurrency and a lot of these other more base cryptocurrencies as building blocks rather than anything else um and so yeah i gotta say i can't really speak for what people understand or don't

understand but i do think they understand the mechanics and but i do think there's a lot more education that we can do and it's kind of why i'm excited to at least have this opportunity to talk with you guys in a live environment answer some of these questions that you know i i see here and there coming up from all angles i have kind of gotten past this moment where i can respond to every mention of ample there was a time not long ago where anytime somebody asked a question about apple i could actually just answer it and but now we're kind of past that and so we need to kind of provide more material for the community and that's why we launched a new discord community that's a little bit more ordered there's no trading talk allowed there if they want to talk about trading

then go to the telegram community which is really fun for doing that but in this community it's going to be mostly about support about an education about economics about developer programs and so on and so forth and even just general questions and that's starting to grow a little bit um maybe a thousand people in the last day or so and i find it much easier as a medium for answering questions than telegram which again i think is really exciting and and great it's just hard to have a longer form conversation there right now but i would encourage anybody who has questions to join the uh the discord and ask ask that's them there i've actually checked out the telegram

and some of the content on 4chan business which is not my usual haunt online to be honest but um i mean i i'm not going to speak to as to how you come to have this community but you have this community that's very aggressive about marketing and from the point of a die-hard techie who believes in the ideology of decentralized technology rather than a speculator also seems irresponsible and opportunistic but if you look at your team as a whole it's an incredibly solid team so your team has uh fantastic backgrounds you have great advisors like

joey crook and brian armstrong and a couple of people from the hoover institute at stanford which is this conservative think bank you have vc backing by pantera by slow ventures by true ventures and etc what do they make of this well it's a phenomenon right so when i talk to those people at first glance would say that like wow this community is uh very different from you guys right because you guys are so well i guess boring by comparison but yeah i think a lot of the attention we're getting is a result of the fervor that has emerged in this organic

way on things like 4chan so i'm not even sure how we got on their radar i think if i had to guess it was because we did a chain link integration we were very excited about that and a lot of the chainman community also has a presence there and so there was kind of a little bit of a cross-pollination and then when we launched the geyser they just mobilized and it's to a lot of people who come into that channel it reminds them of like an early bitcoin or early chain link like vibe and really for me we just want to make sure that we have a voice in this and we have an opportunity to actually answer the questions like the very good questions that you guys have

asked me and so i'm kind of just grateful to be here but also i'm glad that we're starting to really take the reins of the discord community and increasingly there will always be other communities that we don't moderate and that are not our official channels and so the official channel will be discord and and that's what we'll have a different type of conversation that perhaps is easier for folks like you and me but you know much less fun for other folks and you know i think there should be something for everyone but a lot it was all organic honestly it was just organic and yeah i think that's a pretty good closing statement so evan thank you so much for coming on we're interested in seeing how this goes yeah i'll send you

some follow-up materials and if you have follow-up questions drop me a line we'll link to it thanks guys i hope you enjoyed the interview debrief and you can get access to it every week by becoming a premium subscriber as a premium subscriber you'll get access to a private rss feed where you can hear the debrief every week and you also get enhanced features like full episode transcripts in your podcast player and interview chapters that allow you to easily skip to specific sections of the interview you'll also get exclusive access to roundtable conversations and bonus content we put out from time to time to learn more and become a premium subscriber go to premium.epicenter.tv thanks