Friedrich August Hayek has been hailed as one of the preeminent economists from the latter half of the twentieth century. His work on monetary theory and the interdependence of economic, social, and institutional phenomena won him a Nobel Prize in 1974, and his writings from the early twentieth century is still read heavily by graduate economic students today.
Besides his Nobel Prize work on monetary theory and interdependence, Hayek was one of the pioneers and strongest advocates for the Austrian school of economics, along with Gottfried Haberler and Fritz Machlup. Furthermore, after becoming the director of the Austrian Institute of Business cycle research, Hayek became a professor at the London School of Economics.
Beginning in the 1920s, and progressing through the 1940s, Hayek’s work on business cycles, capital theory, and monetary theory as well as the connection between the three brought him international acclaim. According to Hayek, markets evolve due to people- that is to say, markets were never planned, they came to be due to the actions of people involved in the markets. His theories on business cycles caused him to become well acquainted with the work of John Meynard Keynes.
The two battled over the differences in their economic theories, with Keynes an obvious proponent of Keynesian policies, while Hayek believed Keynes’s policies to combat unemployment would inevitably lead to unemployment.
Following his work on business cycles, Hayek turned to the study of social planning, concluding it could not work, as data is necessary to create a functioning market, but it is the markets themselves that generate data. If there were no markets, there would be no data. Hayek turned to combat the growing socialist sentiment in Britain following WW2, in his book The Road to Serfdom (Which you can read for free here, provided by the Mises Institute). It was then one of his strongest opponents, Keynes, who gave him the most praise for his anti-socialism work.
Following his Nobel Prize win in 1974, Hayek became more radical, and began to advocate for the denationalization of money, as an early proponent for the idea behind digital assets. Hayek argued privatized enterprises distributing currency would incentivize them to keep up their purchasing power, as users could choose between different currencies. Hayek pioneered the ideas behind the denationalization of currencies, and his theories can be seen in use today across digital assets.
You can watch his take on the denationalization of money here:
1971 Nixon Shock: The End of the Bretton Woods System
In 1971 United States monetary policy changed in a major way. President Richard Nixon announced that the US dollar would no longer be redeemable for gold or other reserve assets. This effectively ended the Bretton Woods system and with the end of that system came a new period in US and global history.
This was an important moment in history, but it’s also important to understand not just what happened, but how the instruments at the center of the story, gold and US dollars, operate. By understanding their functions, as well as their limitations, we can begin to look forward with a plan to overcome their shortcomings.
This video dives into what exactly happened in 1971, and what compelled the US government to take the bold action they did. It also discusses the advantages and disadvantages of gold and dollars as both long term stores of value and mediums of exchange.
We still have gold and dollars. But this summer, we will have something that learns from their failures. We will have the first synthetic commodity money: Amples. Please check out our website and Red Book to learn more!
This is a post on my decision to join Ampleforth: what it is and why it is so special. Equally as important, this is a brief exploration of one human continuing to find themes that echo and magnify within his life.
As T.S. Eliot once wrote: “Do I dare / Disturb the universe?” Eliot was a young man of 22 when he wrote his haunting “The Love Song of J Alfred Prufrock”. How many times I poured over these lines as an undergraduate at Yale, I cannot begin to guess - I related to T.S. Eliot: as a young man he seemed ‘wise beyond his years’, he had also hated university (specifically Oxford) and throughout his life pursued perfection in his art form (he produced meticulous work but at low volumes). I wanted to be a poet, or a musician, or an astronomer - drawn to the purity of chasing passion and meaning. Computer science was something for robots like my parents - too rigid. But as Senior year approached, the economist (i.e. rationalist) in me took over, I considered Finance and Consulting, though my heart was in neither. Looking back, this was a time of struggling with honesty - I was not honest with myself or others on what I wanted in life.
Flash forward five and a half years - I’m packing two bags in my 325 sq ft West Village apartment (well it’s technically a studio and it’s in Greenwich Village, but it’s always more romantic to say West Village). I’ve stuffed a carry-on with my laptop and a check-in bag full of personal things, scratch that, just mostly full of work clothes. In my phone app is a one-way ticket to Beijing. Some of my friends and family think this is burnout or an existential crisis, but in reality I am just getting good at being honest.
Who is Ampleforth?
Now it’s late 2018 and I meet Evan and Brandon at a coffee shop. We (FBG Capital) are meeting with portfolio companies to push them to list: it’s as enjoyable as pulling teeth out. However, Evan and Brandon are different from others we are meeting, they appear refreshed, relaxed and certain - they are looking to list. The team clearly believed in their idea and project - and could give a damn what the market was. I am intrigued, having heard about Ampleforth under its old moniker, Fragments. The crypto-investor community in SF is small and Fragments had generated quite a lot of buzz with its invention of an ‘elastic supply protocol’ in early 2018. I returned home that night to read up on the whitepaper and website, sucked into the vision that was presented to me. To my luck, our interactions were extended by on-going support FBG was providing to Ampleforth.
As I came to know the people behind the project, I quickly realized a combination of three things that was rare among the 100+ other projects I had come across:
Integrity & Professionalism - The team exhibits a level of integrity and professionalism that can sometimes be lacking in the darker corners of our beloved crypto-space. Starting from Evan & Brandon and continuing to the rest of the team, there is a genuineness to the actions and direction of the project: honesty is abundant.
Realistic - The team shines as one of the most ambitious blockchain projects, but has paired this with a heaping dose of realism. They understand the limitations in the short-run, and embrace this - turning it into an opportunity to leverage as they grow towards their ultimate goal.
Optimism & Sense of Fairness - Pursuing a grand vision requires a healthy mix of optimism and strong foundational beliefs. Though Ampleforth focuses on money and monetary economics - a boring and overlooked subject to most folks - Evan and Brandon have developed an intense passion and core belief in fairness. Mixed with an optimistic view of the world, the combination is a refreshing and inspiring change-of-pace. It is what drives the project relentlessly towards creating an “ideal money”.
But enough about the people behind the project, let’s get to the star of the show...
What is Ampleforth?
Ampleforth is a digital-asset-protocol for smart commodity-money. Founded with a mission to create fair, politically independent money, the protocol’s creators noticed that commodity-monies like gold and silver are naturally fair and independent.
Unfortunately, commodity-monies cannot efficiently respond to changes in demand, making them a poor substitute for central-bank-money. To address this shortcoming, the project's founders designed a synthetic commodity-money that propagates price-information into supply, much like how thermal expansion propagates nearby kinetic energy into a material’s volume in the natural world.
Let’s unpack this: The Ampleforth protocol is a protocol with an absolutely scarce amount (i.e. fixed supply) of native tokens, called Amples. These Amples can be thought of as a commodity, sharing qualities similar to Bitcoin or other natural resources (e.g., gold or oil). However, one distinct characteristic makes Amples different: they always seek a price-supply equilibrium, and will automatically enter a state of unrest until they find one. In a way, it is a ‘smart’ version of a commodity - a smart commodity! To illustrate this, here is a simple example:
Alice has 1 Ample worth $1.
Alice has 1 Ample worth $2.
Alice has 2 Amples each worth $1.
The vice-versa scenario occurs when the price decreases (i.e. Amples contract). To summarize: when demand changes, the system seeks a new equilibrium point by universally expanding to, or contracting from, balances and holders. It is the elastic supply protocol.
It’s 2016 and I spend my birthday alone in the W Hotel Downtown Atlanta. My shirts and suits hang in the closet while I watch TV (maybe Yukon Men while daydreaming about moving to Alaska...?). I stare at my work laptop, where I’ve begun writing and collecting a series of poems I hope to one-day publish, something like Frank O’Hara’s Lunch Poems collection, but shittier… way shittier. I’m considering getting an MBA and finding a line of work that allows me to find the intersection of “analysis and creativity”... a direct quote from one of my discarded business school application essays. I wonder if I can find a career-path with the depth and richness that only poetry and music seem to possess.
Flash forward again (like a Christopher Nolan movie), I’m in Beijing at my Liangmaqiao apartment. I’ve fallen in love with the city despite the smog, the crowds and the fact that I moved overseas utterly and completely alone - not a single friend or relative within ~5 hours of Beijing. On the phone is my Director, (boss, friend and mentor), who is speaking excitedly: he’d very much like for me to stay in Beijing, and not to consider business school or returning to the USA. I spend a night turning it over in my head and decide it’s a leap I’m willing to take - he’s shown me the ropes of the crypto-world -- what an amazing opportunity to learn from someone who was an early investor in Ripple, is close with Jihan Wu and works with the board of Circle. He’s had me analyze various exchanges for potential acquisition by Circle and also diligence BitPay’s Series B. Even more, I seem to have found my calling: a space that matches my level of imagination, my feelings as an ‘outsider’+‘underdog’ and most importantly, my deep-rooted desire for meaning. The next day I sit down with the Partner at the pristine IDG Capital offices near Jianguomen. He shakes his head and says no, there is no future for me in China - there will never be a road for me to Partner. The scene fades to black. Maybe I should learn to be more realistic...
Why is Ampleforth Special?
I can do this in a simple list, Ampleforth: (1) Solves the deflationary problem of Bitcoin and other natural resources; (2) Addresses the ‘killer use case’; (3) Has a realistic approach to both short- and long-term time horizons; and (4) Is innovative and requires the blockchain
Deflationary problem of Bitcoin (BTC):
This is a well known and discussed phenomena about Bitcoin. With a defined absolute quantity of 21 million BTC, Bitcoin’s supply is capped, and thus deflationary. As demand naturally increases (e.g., increasing population of the world, increasing adoption of the blockchain) in conjunction with an inelastic supply, the price of BTC will rise. In a story similar to Japan’s deflationary spiral, this force may become so strong that eventually no one will want to spend Bitcoin even if it is universally accepted. This means one day Bitcoin might be increasing in value so much that in the time it takes for you to pick up a pair of jeans then pay for it, you’ve lost money by simply transacting in BTC. Better to “HODL” than “SPEDN”!
Amples avoid this issue through its elastic supply protocol, as demand increases or decreases and the price changes, the automatic (or rules-based) protocol will adjust in a predictable and transparent manner. This applies a gradual pressure to bring the market to a new equilibrium point, albeit at the same/similar price but a different quantity (the total market capitalization could now be higher or lower). Oversimplifying: the Law of Supply and Demand allows Ampleforth to maintain around a target price while scaling in-line with the market demand and overall usage/adoption of the token. In this way, it has innovated and improved on the pivotal foundation Bitcoin has laid.
2. The killer-use case of the blockchain:
Those who consider themselves ‘crypto-insiders’ are likely familiar with the term “the KILLER use case”. It grew to a crescendo near the end of 2018 and has largely quieted as we’ve seen DApp users rise (although slowly) and deployment of DLT in traditional industries. However, in any debate around the ‘killer use case’, we must not forget Satoshi’s original white paper - "Bitcoin: A Peer-to-Peer Electronic Cash System". The original vision for the blockchain was a ledger for electronic cash. In this sense, the purest form of the killer blockchain use-case appears to be supporting a peer-to-peer digital cash, but not just any cash: one that does not rely on any central authority.
In this, Ampleforth once again checks the box. In its long-term lofty vision to create an ‘ideal’ or ‘fair’ money, it is tackling what I consider to be the Holy Grail of the blockchain space: a non-sovereign currency. The current monetary system is obviously integral for society as we know it, but also exhibits flaws. To use an anecdote: back in 2015 when the European Central Bank (ECB) was in the midst of austerity programs impacting citizens of Greece, Portugal, Italy, Spain, etc., a protestor disrupted a press conference by throwing confetti on Mario Draghi (President of the ECB), screaming “End the ECB dictatorship”.
What was this all about? The protester was highlighting the ECB as ‘illegitimate’, Mario Draghi is arguably the most powerful man in Europe, being able to impact millions of citizens across multiple countries with his decisions, yet he is not elected ‘by the people’. This represents some of the issues around what economists call a discretionary monetary system: central banks work with imperfect knowledge (do we trust a single individual or committee of individuals to tell us what is best vs a robust free market?), and are prone to self-interested behavior (i.e. it is hard to say that central banks’ policy decisions are completely divorced from the influence of public or private interests). In the end, I think the system is not perfect, and will likely not be completely replaced, but we should at least have an alternative option so we can hedge our risk or ‘vote’ with our own choices. Would you rather live in a world with only one choice? Or maybe two or more?
Now, it is important to pause and understand that Ampleforth is not purporting to replace the existing financial system, it is merely providing an alternative option. As F.A. Hayek noted in his oft-quoted essay “The Denationalization of Money”, competing currencies can be a positive as free markets and competition lead to innovation and improvement. If this seems too far-fetched and in the future for your taste, then read ahead to…
3. Realistic short- and long-term goals:
There has been a late-2018 Morgan Stanley report circulating with a graphic describing the ever-evolving Bitcoin/Crypto thesis:
Though the graph is closely tracking the market’s attitude towards BTC, the market’s evolving thesis itself has clearly not been so sharp. The collective thesis has moved in the order of Digital Cash → Financial System Antidote → Replace Payment System… → New Institutional Investment Class. What has happened is we’ve started with a grandiose vision for Bitcoin, which has slowly deflated overtime to settle on its reality: a new and orthogonal asset class. Rushing too far ahead (i.e. Digital Cash), is like a runner getting ahead of his or her body: face meet ground.
As an alternative framework, I propose the non-delusional and more realistic vision of how the crypto thesis should evolve:
In the short term, Amples are a new investment class, high risk-high return - this use-case has been under our nose the whole time, for at least 10+ years. They should be volatile and uncorrelated with the traditional market; therefore, an interesting portfolio diversification tool (read more on this topic here, from our Growth Lead). Only in the medium- to long-term will Ampleforth begin to shift the paradigm of money, but a whole host of steps must occur first (see graphic above).
To summarize: Ampleforth’s vision means in the short-run, it will have a high risk-return profile as a new and uncorrelated investment asset. The issues with Bitcoin was it was hailed as ‘digital money’ far too early… as its very first use case. This is not only isolated to Bitcoin, many crypto projects dive in head first assuming we are in the deep end of the pool, only to realize it’s in fact the kitty pool and the bottom is concrete. The reality is ‘digital money’ is the end of the crypto-rainbow. To arrive at this achievement will require the hurdles of becoming a unit of account, store of value and medium of exchange. Ampleforth understands this, and the best part of this realization is that Ampleforth has a balanced approach: it has not given up sight of the ultimate goal - re-defining what ‘fair’ and ‘money’ means.
4. This innovation actually requires the blockchain! (Not to be underestimated...)
To be more scientific with our description of Ampleforth, Amples are a synthetic commodity. Until now, synthetic commodities have mostly been left in the realm of monetary economists ‘theorizing’ from ivory towers. Since the arrival of Bitcoin, the floodgates have opened for synthetic commodities coming to the market (though the general public is likely not aware or familiar with this concept).
Given its short history, synthetic commodities are the cutting edge of monetary economics and the evolution of ‘money’ as an instrument or technology. To this end, Amples are innovative as they are able to apply a rules-based monetary system directly and equally to all balances, addressing issues of deflationary and inflationary pressures through the elastic supply protocol. Additionally, synthetic commodities like Amples avoid the ‘supply shock’ effects that natural commodity monies face.
Until now, there was no possibility Ampleforth could have been created - the blockchain is integral and absolutely necessary for this project. As such, it passes the most elemental and important hurdle of a blockchain project: it actually requires the blockchain. Amples are pushing the envelop along multiple edges, challenging what we think of as investable assets, synthetic commodity moneys and of course, cryptocurrencies.
I’m lazily glancing at a nice brownstone across the street as the sun sets, I’m on the phone with my parents in an apartment in NYC, I tell them I have an opportunity at a fund in China who invests in this crypto stuff. They think it’s crazy - I’ve got a stable job at a reputable firm.
I’m looking out the window at the coal-fired smog clouds from my apartment in Beijing, I’m on the phone with my parents and I tell them I’m coming home and applying to business school. They’re glad I’ve gotten over this hump.
I’m staring at a blank wall as I chat with my parents - I didn’t get a single business school interview (750 GMAT? Yale? Hello, is anyone home?). I tell them I’m going to move to SF, I can’t quiet the voice that tells me this is a sign that crypto is my calling, that it’s the real deal and a part of my story.
I’m on the tarmac in Shanghai, taking-off for Haikou. Moments earlier I was on a Wechat call practicing pitching myself in Chinese with my parents. After landing, I take a Didi for an hour to meet Vincent, the founding partner of FBG Capital. When he greets me, he does so without a smile or nod, and takes me to breakfast. I’m not sure if he likes me - remembering the last time I sat across the table from a Partner in China - but I get the job and become their one and only man in SF (plus all of the Bay Area for that matter).
I’m shivering because the crypto winter is in full force and firms are making cuts. Bad news seems to crowd CoinDesk - the market precipitously dropped again only two weeks ago. Outlook is at a low when I walk into a coffee shop to meet these Ampleforth guys who seem strangely optimistic… … a few months of close collaboration have passed and over a drink I ask Evan why he is doing this. Without pausing he says that we can choose the things and legacies we leave behind, that lines of code can be like whisps of thoughts for future generations to remember us by when we are in the ether. I can tell that is an honest answer. Long ago I’ve started to think of computer code as poetic and the blockchain as strangely rhythmic. I realize I've stopped writing poetry since joining the blockchain space, or have I? I am certainly more optimistic now, as I laugh and start to think...
“Do I dare / Disturb the universe?” To me, blockchain represents the audacity to challenge what we know and believe. After spending years as a consultant for the financial services, I have seen how executives on Wall Street and Main Street think. To be frank, they are damn good at preserving the current order, but will usually shy away from pushing too close to the bleeding edge. Our current financial system is obviously absolutely necessary, but is also extremely inefficient. On top of this, one of the most stagnant areas to address is that of money. What is it? How do we use it? Most people would have immediate answers to these questions, treating them as a priori truths; however, I think with the entrance of Bitcoin and now Ampleforth, the door has opened to adding a much needed jolt of innovation to such an old tradition. I sincerely believe that blockchain technology and the cryptocurrencies it supports will play a transformational role in the traditional financial system. The daily lives of everyone will be impacted, and I want to be a part of that driving force.
In regards to Ampleforth, the opportunity, the timing and the team - the decision was natural. Not only do I believe that Ampleforth is a promising project, but also an amazing platform to educate everyday citizens (i.e. non-monetary economists): a way to help people realize that it is an amazing time to be alive with innovations occurring in such a long-ignored area. Hopefully we can do this while raising the bar around the intellectual rigour and discussion within the crypto space, focusing on ‘economics’, not just ‘tokenomics’.
Let’s re-define what ‘fair’ means.
Follow me on Twitter, connect with me on LinkedIn, or message me on Telegram. For more in-depth information on our project and the team, visit our website and read the Redbook and Whitepaper at: www.ampleforth.org.
Ampleforth's Blog and Telegram group are the best ways to closely track our progress and updates.
About Me: With a simple handshake on a street in Guangzhou, Vincent propelled me to the position of Venture Partner at FBG Capital. He has given me a chance when others have said ‘no’. Fittingly, I think Evan, Brandon and the Ampleforth team are allergic to the word ‘no’.
As Venture Partner, I will retain my position (albeit in a minor role) at FBG, primarily assisting in portfolio company support and deal sourcing where the opportunity presents itself. Effective immediately, I will be full-time as Chief Business Officer of Ampleforth - inspired by the honesty, realism and optimism of the project.
Decentralization was always an interesting thought, largely unachievable at scale until the advent of the digital world and peer to peer (p2p) technologies. These p2p technologies opened the door for a new digital revolution in Bitcoin. Since Bitcoin was created tens of thousands of individual blockchain projects, Dapps, and tokens are currently being developed. Every day more and more of these projects are launched, live and functioning. Like most burgeoning industries, there will be an extremely high attrition rate, and many projects will fail. Some of the mistakes that cause projects to end in bitter failure are easily avoided. Although digital assets are new and cryptocurrencies, including Bitcoin, are at the bleeding edge of technology, we can look to the past for some time tested lessons and concepts that can help us avoid simple mistakes.
One of those time tested ideas was pointed out in an article from late 2017 by Ethereum developer Nick Johnson.The article is a phenomenal read, and certainly a strong piece for anyone who may be interested in cryptocurrencies and cryptography. In the article Nick pointed out very serious concerns he had at the time with IOTA’s viability as a cryptocurrency. One of the most important lessons from the piece was what Nick states as rule 1 of cryptography - don’t roll your own crypto. It’s enticing for some teams to think they are beyond the blocking and tackling of basic rules like this as they aim to innovate and push the envelope of current technology. However, the lesson can not be ignored, and teams should not fly in the face of battle hardened and time tested cryptography. Read more in the article, but a grossly inappropriate TL;DR explanation would be that cryptography is under constant attack, and only crypto that has been mercilessly pressure tested and held its ground can serve as secure crypto you can depend on.
Let’s not get it confused, innovation in blockchain is one of the things that makes it great and the future of digital assets so bright. We need teams to innovate and invent in order to usher in advancement and better tech. However, there are areas that are ripe for innovation, and there are areas that are solid. Just like cryptography, sound economic principles are foolish to mess with. Just like the relentless attacks that proven cryptography has endured, economic principles have weathered many storms over long periods of time. Economic principles that work have survived and flourished with changes in administrations, changes in bull and bear markets and even changes in dominant government systems.
At Ampleforth, we’re innovating and creating, and we’re doing it with strong base principles in place. When it comes to economics we’ve sought out a team of advisors with the expertise and experience to not only avoid pitfalls, but truly innovate. Among the group of top level minds we're lucky to consult with are the Hoover Institution’s Niall Feguson and Manuel Rincon Cruz. We’ve also brought in the guidance of experts from Pantera Capital such as Paul Veradittakit and Joey Krug. Joey’s insights from his work at Pantera and Augur help us bridge the blockchain world with the business world in a way that few can. Our team takes a responsible and balanced approach to the creation of our technology by leveraging decades of experience in several fields and the result is a protocol that is proving to be one of the most unique projects created to date.
Reliable and established principles in economics and technology are the foundation of what we are building at Ampleforth. For more detail on the Ampleforth protocol and the innovations we’re making with synthetic commodities and ideal money, please check out our website and whitepaper, and stay up to date by following our Twitter!
Milton Friedman was called "the most influential economist of the second half of the 20th century ... possibly of all of it" by The Economist. This is for very good reasons, as he challenged many of the policies that our nation held dear and made us question exactly what we were doing. Often times he would hold public seminars and challenged people’s beliefs. He had a knack for breaking things down to their simplest elements so that everyone could understand. His ability to be understood by people from all walks of life made him loved, respected and admired by many.
Among Milton Friedman’s many accomplishments he was awarded a Nobel Prize in Economics for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. Friedman also helped shape the future of the nation by mentoring renowned economists such as Gary Becker, Robert Fogel, Thomas Sowell and Robert Lucas Jr. Friedman taught at the University of Chicago where he was able to educate and shape the lives of thousands of students.
Milton often promoted an alternative macroeconomic viewpoint known as "monetarism" and argued that a steady, small expansion of the money supply was the preferred policy. As a result of his works on monetary policy, taxation, privatization, and deregulation the 1980’s saw an economic boom. During that time Friedman was advising global policy makers Ronald Reagan and Margaret Thatcher. Friedman’s positive influence didn’t end in the 1980’s. Immediately following the global financial crisis in 2008 the Federal Reserve was influenced by his monetary theory to achieve recovery.
Over his lifetime Friedman wrote many books, papers, and columns. He also appeared in many lectures across the country and open debates. Perhaps most of all, Milton is remembered for his engaging televised lectures where he advocated for responsible monetary policy. Those lectures and television broadcasts still live on today, as you can see in this video where Milton Friedman discusses inflation (click image above to view video).
Time tested and proven principles such as those discussed by great economists such as Milton Friedman are what shaped our technology at Ampleforth. For more detail on the Ampleforth protocol please check out our website and whitepaper, and stay up to date by following our Twitter!