Ampleforth: not just an ideal school to send your kids if you’re Catholic and can afford it, but also, “an ideal money”. More specifically (and perplexingly):
A decentralised store of value protocol that is volatile in price and supply at launch, but is strictly better than Bitcoin at steady state because it converges on a stable unit of account.
And Niall Ferguson, the rightwing British historian and who once called himself a “fully paid-up member of the neo-imperialist gang”, has joined its advisory board. A bit late to the crypto party? Maybe. But this isn’t the first time Ferguson has dipped his toes into the world of crypto. He suggested last year in a Bank of England seminar that cryptocurrencies were “the financial system of the future”. He also said he felt it’s “only a matter of time before the next financial crisis”.
A potential answer, apparently, is stablecoins. These are digital currencies that run on blockchains, but that don’t float freely. Instead, they are pegged to fiat currencies like the dollar, or currency baskets like the IMF’s Special Drawing Rights, either via the (supposed) backing of those currencies, or via the magic of an algorithmic central bank that expands and contracts the money supply to keep the price stable. Ampleforth is trying the latter.
Here’s Ferguson, quoted in the press release:
The idea of reinventing money excites me. Bitcoin, currently, is incapable of being ‘money’ that can be a means of payment. But at the same time, I am doubtful of fiat-pegged stablecoins. As someone who is deeply interested in financial innovation, I’m attracted by Ampleforth’s mission to reinvent money in a way that protects individual freedom and to create a payments system that treats everyone equally.
But how does this free and equal system work, we hear you ask? Well, it’s quite simple really:
Ampleforth is a digital asset protocol that moves volatility from unit price to unit count and achieves price stability by algorithmically expanding and contracting supply among holders based on demand… Ampleforth employs an algorithmic supply policy to democratise the issuance of money and create assets with independent value.
Capiche? Good. Essentially, the idea is that Ampleforth — named after the character in George Orwell’s 1984 who is responsible for translating poetry into Newspeak — would be pegged to the dollar by means of a “smart contract” that would pump “Amples” into the system when its price topped a dollar, and withdraw them when the exchange rate fell below $1 per Ample.
It’s easy to see why Ferguson might have been attracted to such a project. In his 2008 book The Ascent of Money, he writes:
If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.
If any of the Ampleforth stuff is sounding familiar to you, it might be because we wrote about a similar algorithmic stablecoin with academic backing last year: Basis, which was had John Taylor on its board. (Basis is now bygone, having returned what was left of the $133m it had raised from investors.)
Ampleforth is a little different from Basis, but not very. It is cleverly not pushing the idea of “bond tokens” or “share tokens” which, as Basis found, might make the SEC nervous. Also, it acknowledges that it will be “volatile in price and supply at launch” (though it doesn’t acknowledge that volatility might extend beyond the launch).
We asked Nicholas Weaver, computer science lecturer at Berkeley, for his thoughts, who told us:
The Basis concept, recapitulated here, is fundamentally flawed. This is a dumb central bank currency peg, which only lasts until someone figures out how to make money destroying the peg.
We’re not sure how much time this advisory role requires, nor the nature or scale of the compensation (we have asked). But Ferguson probably has some time on his hands since resigning from a senior leadership role at a Stanford University free speech programme, Cardinal Conversations, last year. We wonder whether he has commissioned any “opposition research” on the host of stablecoin rivals that Ampleforth must try to compete with.
Related links: The John Taylor-backed “stablecoin” that’s backed by, um, stability – FT Alphaville It turns out “bond tokens” and “share tokens” might just be classed as securities – FT Alphaville