Fragments, the development company behind the Ampleforth protocol, announced today the launch of SPOT, an inflation-resistant store of value that can be used as peer-to-peer digital cash. Designed to solve the systemic risk of the crypto industry’s over-reliance on centralized stablecoins and dollar substitutes in decentralized finance, Fragments developed SPOT to be a freely redeemable, non-custodial, stable asset that can safely wind down to zero users under stress without interventional bailouts. SPOT is built on Buttonwood, an Ethereum-based collection of smart contracts used for building DeFi protocols.
“This year’s events showed us two things are true: first, we need publicly auditable systems that protect users from the custodial risks of centralized systems; second, to accomplish this on-chain, we need radically different designs that don’t rely on continuous growth or bailouts,” Evan Kuo, CEO of Fragments.
The systemic failure of the crypto markets began with the collapse of the algorithmic stablecoin, TerraUSD (UST), and escalated with the downfall of Celsius, Voyager, BlockFi, FTX and hundreds more. “DeFi remains in many ways intimidating in its complexity. Part of what attracted people to centralized exchanges was that the interface was simply easier for buying and selling. I hope the FTX fiasco has illustrated the dangers of centralizing what is supposed to be decentralized,” commented the financial historian Niall Ferguson.
Together, these collapses underscore the need for radically new ways of designing transparent systems that can safely operate under all market conditions.
“Combining Ampleforth with Buttonwood into SPOT is an exciting novel approach that could significantly improve how inflation-resistant tokens in Ethereum work,” said Fernando Martinelli, Co-Founder & CEO at Balancer Labs.
The SPOT token is a freely redeemable claim on a basket of on-chain collateral. A holder of 1% of the SPOT supply can redeem it at any time, for 1% of the collateral. Since all assets are distributed proportionally upon redemption, the ratio of different tokens in the collateral set remains unchanged before and after any given redemption. This means the value of SPOT remains the same even as withdrawals unwind to an empty collateral set. There are no pegs, feedback loops, or liquidation markets used in the system’s design.
The price of SPOT is determined by the market. Its value is the collateral for which it can be redeemed. Because of how SPOT’s collateral is prepared and rotated, the redemption value of 1 SPOT token will tend towards 1 CPI-adjusted dollar.
“Demand-deposit contracts–which a lot of DeFi projects imitate–suffer from the age-old problem of runs, which is when depositors rush for the exits. Runs on banks, money market funds, or Terra are just some examples. Implementing proportional redemption is a clever way for SPOT to avoid this perennial issue,” said Manny Rincon-Cruz, creator of Buttonwood.
To learn more, access the SPOT whitepaper here: https://bit.ly/spot-whitepaper
The whitepaper details how collateral is prepared into tranches and rotated, explains why this results in the value of SPOT claims tending towards 1 CPI-adjusted dollar, and outlines a system of incentives for rotating fresh tranches in and mature tranches out.
Watch a video about SPOT here: https://vimeo.com/778950575
Fragments is the development company behind the Ampleforth protocol, co-founded by Evan Kuo and Brandon Iles.
Ampleforth is a blockchain protocol for designing supply elastic units of account. The protocol transfers the price volatility of crypto assets into supply volatility to maintain stability without relying on traditional banks, centralized monies, or lenders of last resort.
AMPL is the first supply elastic unit of account powered by the Ampleforth protocol and serves as a key building block for denominating stable contracts in decentralized finance.
SPOT is a decentralized peer-to-peer inflation-resistant store of value that can be used as censorship-resistant digital cash.
Buttonwood is a collection of smart-contract “building blocks” that can be used to create robust DeFi protocols. Teams that are building on Buttonwood include Fragments, Nimble Navigators, and Prometheus Research Labs. Projects built on Buttonwood include SPOT (inflation-resistant cash), Hourglass (dynamic convertible bonds), Zero (liquidation-free bonds), and Auctions (double-sided auctions).