Yes, I remember! It was terrible. I was very scared when you chose it.
-Oops, forgive me. I did not know. Well, there was a character there named Ampleforth. Do you remember?
-No, I don't remember the characters. I remember that the world in that novel was terrible, that there was always war and that the world was dominated by a party and by a Big Brother.
-Right. Well, Ampleforth was a guy who worked in the office with the main character, Winston Smith. Ampleforth's job was to rewrite traditional literature so that it would serve as propaganda for Big Brother and the Party. That is, for example, he had to rewrite Shakespeare's Hamlet to be a propaganda of love for Big Brother.
-Sad job
-Yes indeed. But those who invented this coin that I am going to tell you, surely were inspired by Ampleforth because the truth is that it can rewrite the history of humanity forever.
-Oops, won't that be a lot? And what is the name of that coin?
-Ampleforth
-Aha, and this is not another of your follies?
-Well, grandma I'll tell you. This is the seed of a new economy that humanity never knew, and I want to tell you about it before you go to the greengrocer to buy your carrots. The issue is like this. The price of carrots varies constantly, right?
-Do not talk to me. I never know how much I'm going to spend.
-That's because the economy that we all know is based only on the price of things. The price is king, because the quantities of carrots cannot be adjusted automatically according to their availability. It is a great advantage that the greengrocer has. The price is what he says, because nobody knows how many carrots are available.
-I do not understand
-Wait a little. You depend on the price that the greengrocer set, because you cannot know how many carrots are available when you go to buy them.
-And what does the amount of carrots available have to do with me, if I only need one kilo?
-Sure, you go and buy a kilo for let's say $ 1, to make it simple. But suppose that news arrives through TV that irrefutable scientific experiments have shown that eating carrots eliminates all possibility of contracting Covid19, what do you think will happen?
-That everyone will rush out to buy carrots
-Exactly, and what is the greengrocer going to do?
-The very rogue will increase the price
-Correct
-But admit me a little bit of madness for the moment, and then I'll tell you. What happens if a “magic robot” appears and when the price of carrots increases, causes the quantity of available carrots to also increase in the same proportion?
-And how can the magic robot do that?
-Well, for example, he can teach my friend Chad the farmer, (do you remember Chad?) a new cultivation technique that automatically responds to a requirement for increased supply.
-That is a dream!
-It is a dream in an economy run by large food corporations that regulate cultivation and provision. But it is not a dream in an economy driven by mathematics and not by politicians and corporations.
-Again with the miners?
-No, in this case there are no miners. But let's go back to the "magic robot". Suppose that the price of carrots increased 100% because everyone wants to save themselves from Covid19. That is, a kilo of carrots now costs $ 2. What would you think if I told you that the "magic robot" does these two things:
- First, it also increases the amount of carrots available in the market to double, even if the greengrocer does not know it.
- Second, put one more dollar in your wallet, that is, before you had a dollar to buy your kilo of carrots, and now you have two!
-Baby, are you feeling alright?
-Better than ever. Do you understand me? Now there are twice as many carrots because Chad reacted on time, but you also have twice as many dollars, therefore, you continue to buy the same kilo of carrots without having changes in your economy
-But all that is magical as you say
-It is magical if we measure it with the tools of the traditional economy that is only based on monitoring prices. Ampleforth is multivariable, it analyzes price and quantity simultaneously. No speculator can fool mathematics, do you understand?
-More or less. You say that the price of carrots increases, but a magic robot comes at night and puts more money in my wallet and then for me the price increase is transparent?
-That, granny. Your purchasing power is kept constant. Before a kilo of carrots cost you $ 1, now it costs $ 2, but you have $ 2 to pay for it, and before you had $ 1. Understood?
-And how is that Ampleforth thing going to manage a new economy based on a "magic robot"?
-You don't have to worry about that. The world is going to be totally different from the one we know. We may be witnessing a new change of course for humanity. But that's not all, think the other way around. Suppose that on TV they announce that irrefutable scientific discoveries show that carrots are the main vehicle for the transmission of Covid19. What do you think that will happen to the price of carrots?
-It's going to zero
-I don't think so, there are a lot of people who don't watch TV or who don't believe what they say there. But surely, the price will drop a lot. You can now buy a lot of carrots. But you cannot eat more than one kilo of carrots. You need only one kilo. Suppose Chad manages to store the carrots until the news is proven to be false. Meanwhile, he's not going to keep sending carrots to your greengrocer. Your greengrocer is going to have fewer carrots. And now carrots are going to cost for example $0.5. Chad is going to send half the carrots and you are going to pay $0.5 for one kilo. The “magic robot is going to take you out at night in your sweet dreams, $0.5 that you won't need, because carrots now cost half.
-I don't like that very much
-Why? Why do you want $1 if you only need $0.5 to buy your kilo of carrots? You want a kilo of carrots, right?
-Everything seems very magical to me, as you say
-What happens is that we are victims of many centuries based on traditional economic thinking. This is why I told you that Ampleforth, as in 1984, may be rewriting economics. There is a strong possibility that Ampleforth is the seed of an ideal economy, and that he "rewrites" 500 years of economics based on mercantilism. It is the age of Aquarius granny.
-Baby, the greengrocer is going to close, I'm going to buy carrots, if you stay, I'll make you your favorite, grandma's carrot cake
-I stay granny, it makes my mouth water
Image of congerdesign in Pixabay
Image of Claudia Peters in Pixabay
I can assure you that there is no carrot cake like my grandmother's.
We ate the carrot cake and the grandmother went to rest for a while.
2) The interrupted equilibrium
Now, with Grandma taking a nap, I am going to try to make a future scenario about what a model like Ampleforth can mean in our lives and those of future generations.
Many years ago I discovered Dr. Lynn Margulis and her revolutionary theory of cooperation in evolution. In the middle of the 20th century, the so-called chaos theory began to be seriously considered in scientific settings, even though its foundations date back to the 19th century. The theory of chaos or complexity has a different narrative than deterministic science and a totally different conceptualization. And in this area Dr. Margulis worked, proposing the "interrupted equilibrium"
Let me give you a very simple example to explain interrupted equilibrium.
The armies of Julius Caesar and Napoleon operated with a difference of 2,000 years, but they were essentially the same: they both depended on carts and horses. Seventy years after Napoleon's death, steam trains reached speeds of more than 70 km per hour.
Image of Dean Moriarty in Pixabay
Typically a known species dominates the picture.
But sometimes something happens and the equilibrium is "disrupted."Suddenly, without warning, the environment changes dramatically, and dominant species quickly disappear and are quickly displaced by others. Evolution makes a quantum leap, and a new spontaneous order begins.
There is growing support among chaos theory scientists for a revolutionary theory of evolution known as "emergence", which explains how simple systems "spontaneously" became more complex systems.
According to this theory, the origin of life would have been a sequence of chemical changes, through which each step increased the degree of complexity of the system.
Dr. Lynn Margulis states that suddenly, a new type of cell appeared about 2 million years ago and became the basis for the cells of all plants and animals. This sudden appearance was not due to a genetic mutation, but to a symbiosis, that is, to a type of cooperation between cells that protected each other from external aggression that consisted of the increasing concentration in the air of a poisonous and deadly gas: oxygen.
Image of Arek Socha in Pixabay
Certain weak superficial organisms survived as "collective entities", while supposedly strong ones, failing to learn the trick of cooperation, suddenly disappeared and cut the evolutionary chain. So the oxygen holocaust may have meant a quantum leap in evolution.
Many bacteria died poisoned by oxygen, others sank underground or under the sea to protect themselves, and others learned to breathe it through symbiosis and collaboration. It seems as if some cells have discovered the trick of cooperation to react against the hierarchies that dominated the planet for centuries, and emerged to shape a new collective organism, following the reasoning of Dr. Lynn Margulis.
Dr. Margulis says that Darwin's survival of the fittest received a lot of press and cooperation and symbiosis was not discussed in any medium. The truth is that I do not believe that God made the world in 7 days, but I also do not believe that we descended directly from monkeys, and in general, to me Darwin's theory seems more like a political theory than a scientific theory, and we know well who are interested in Darwin's theory being the true one.
Many of you will be making an analogy between “interrupted equilibrium” and the appearance of Bitcoin 11 years ago, and it is okay to do so. But I'm more interested in making that analogy with Ampleforth's appearance in 2020.
Dr. Lynn Margulis
3) How Ampleforth can change our concept of "money" and "value"
According to the Austrian economics cycle theory, cycles are initiated by an artificial expansion of credit not supported by prior saving. This is what happens when central banks lower interest rates or print money. (Do you know any examples of this?) Low-interest rates lead to overinvestment in activities that would not have been viable with interest rates at normal levels. This creates a false economic boom, a bubble, which is punctured when cheap credit is cut. The resources (capital and labor) destined to the bubble must be reallocated to really productive projects. But since capital goods are heterogeneous and cannot be reallocated from one sector to another easily, the adjustment will lead to losses in value and thus depression.
More than 95% of the money in circulation is made up of bank deposits. The moment a retail bank grants credit, it is creating a deposit. That money created is debt in private hands. The money issued by Central Banks is what the retails banks demand. The only thing that the Central Bank decides is the interest rate and depending on this, the retails banks decide what amount to ask for, based on market interest rates, the final demand for loans, and the profit they can get. The reserves issued by the Central Bank are established based on the deposits that retail banks want to create based on their profit expectations.
Ampleforth can disrupt this equilibrium, as no other cryptocurrency could, not even Bitcoin. Ampleforth eliminates retails Banks and Central Banks too.
Scarcity and limited supply are the main characteristics of Bitcoin, and what is most valued about this asset. The volatility of its price is not too much of a problem for hodlers, although it makes it very little use for small everyday transactions.
The introduction of stablecoins has allowed a practical decentralized financial system to be created. However, many of these stablecoins, being tied to the value of fiats such as the US dollar, are at risk of suffering the consequences of the fiscal policies of the US Federal Reserve, such as the current post-pandemic stimulus measures, that it is nothing more than a fictitious credit expansion, according to the Austrians, and that we all know how it will end.
Then Ampleforth appears, which is not a stablecoin because its smart contract is not designed to peg to any currency, but which seeks to respond to the need for a multi-variable asset that can be less volatile and elastic like fiat, but that works inside a blockchain’s decentralized ecosystem, like Bitcoin or Ethereum.
Ampleforth (AMPL) is a cryptocurrency created in a smart contract that controls its supply, which expands or contracts its supply according to market dynamics. As the demand causes the AMPL price to rise, the smart contract increases the total supply, thereby diluting the capitalization among more coins and normalizing the price. This happens in reverse in the event that the supply causes the price to fall, then the supply contracts, eliminating tokens so that the shortage pushes the price to stability.
AMPL's design is thought around the idea of maintaining purchasing power over time, something that fiat money cannot achieve anywhere on the planet. Not knowing how to maintain the purchasing power of the population is like a “necessary evil” of the world economies, which allows politicians and Central Banks to have space to govern. AMPL's target price is adjusted according to the Consumer Price Index (CPI) and not with the value of the dollar.
AMPL may end up being the ideal asset to build the DeFi ecosystem, as more stable collateral over time than stablecoin systems pegged to fiat. The AMPL is a cryptocurrency designed to be an asset that is not correlated with the performance of any other cryptocurrency such as Bitcoin, nor with the decline in the purchasing power of a fiat currency. AMPL is based on prices and quantities simultaneously, this is the multivariable dynamics of its supply. This supply expands or contracts according to the market price of the token. Every day the "rebase" operation is carried out, which is the calculation made by the smart contract to carry out the supply to a breakeven point. Decentralized oracles such as ChainLink intervene in this process, providing the smart contract with data on current market prices, exchanges, and dollar adjustments according to CPI.
It is true that retail banks have never liked cryptocurrencies. Bitcoin represents the opposite of traditional banking. Cryptocurrencies offer a new paradigm of money and value management, in which the figure of the intermediary, which banks comply with, does not exist. Cryptocurrencies propose a new way of making and relating to money, which leaves banks out of the system.
At first, with a banking industry hell-bent on not accepting bitcoin or other crypto assets as a payment method, the relationship seemed irreconcilable. But following Facebook's Libra announcement and China's plans to launch a cryptocurrency, Central Banks saw their role threatened and began to show interest in developing their own cryptocurrencies.
AMPL means a mortal wound for the Central Banks. If a global decentralized system can be put together with a genius idea like AMPL to regulate the level of the monetary base as prices vary, what role does Central Banks and the politicians that run them play?
Is it Hayek's spontaneous order dream?
Is the equilibrium interrupted?
This song is for you Dr. Lynn Margulis.
As usual, none of the things written in this post are financial advice and are not intended to replace personal research.
Thank you for reading!
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