Money IS as Money DOES
Another way to look at Money...think differently
Conventionally, Money IS assigned the 3 roles: Store of Value, Medium of Exchange, and Unit of Account.
Another model looks at what Money DOES.
E.g., Moneyness of ETH:
In this new Model, Money functions to uphold these properties:
Adaptive Supply
Durable Peg
Stable Value
Money exhibits these these properties, but only two can be optimized. In all cases, the Money does its best to maintain some kind of current value for transactions. E.g., $1.
"Stablecoin"
Fiat upholds the properties of Adaptive Supply and Durable Value.
Fiat holds its purchasing power, but the Adaptive Supply is modulated by a Central Bank. Price controls are also exerted centrally to maintain a Durable Peg.
These schemes are not sustainable.
Collateral Money upholds Durable Value and Stable Peg.
Coins like USDC & USDT are backed by fiat reserves, supporting their Durability of Value. Peg is Stabilized as a result of Trust and Convertibility between ERC-20 token and fiat paper.
"Bank runs" rekt everyone this time. See: LUNA, 3AC, Celsius, Anchor, FTX.
What about Adaptive Supply and Stable Peg combo?
In place of a fallible central authority, Adaptive Supply is upheld by Smart Contracts. Rules-based Supply Expansion (QE) and Contraction (QT).
AMPL's purchasing power is (almost) always pegged to the 2019 CPI adjusted USD.
Rebases (expansions & contractions) are proportionate across all AMPL holding wallets. This ensures purchasing power of each AMPL remains equal for each holder.
In contrast, the Cantillon Effect dilutes incrementally the purchasing power of USD as it reaches each end USD holder.
Adaptive Supply = Δ Quantity
Stable Peg = minimal Δ Price
Durable Value = minimal Δ Market Cap (Price x Quantity)
AMPL has been very volatile. The Trilemma does not accommodate Durable Value.
AMPL's Market Cap has swung from over $1 Billion to under $50M over its lifespan.
For Durability of Value, the Float Volatility - Market Cap - must be contained.
Or transmuted.
AMPL's price = 2019 USD, but Price Volatility is converted into Float Volatility via Supply Volatility.
Spot.cash runs on this transmuted Volatility.
This is also the way of Nature.
The Nervous System uses Supply Elastic monies - Neurotransmitters.
More in this excellent thread:
To learn more about this fundamental evolution in Decentralized Finance, check out @ButtonDeFi @AmpleforthOrg @NimbleNavis
In the future, we will explore how this Model maps on to Neurotransmitters and the Nervous System.