Coinbase Ventures invests in Ampleforth's flatcoin technology, SPOT launches on Base

Coinbase Ventures, the corporate venture capital arm of crypto exchange Coinbase, has invested $1 million in a strategic funding round for Ampleforth Foundation’s decentralized low-volatility commodity money, SPOT.

Fragments, the development company behind the Ampleforth protocol, announced the news on Monday.

“SPOT is the culmination of five years of research and development by our team, and it fulfills our vision for using blockchain technologies to create a ‘better money’ rather than replicating dollars onchain,” Fragments CEO Evan Kuo said in a statement shared with The Block. “While the latter served the market’s immediate needs, some of the smartest people in the industry have begun to realize the significance of what we’ve been working to solve: inflation, durable value storage, and reliance on centralized intermediaries.” 

Currently available on Ethereum, the SPOT flatcoin is also set to launch on the Coinbase-incubated Layer 2 Network Base as part of the deal. New markets on the Base decentralized exchange Aerodrome Finance will go live on Monday.

What are flatcoins?

Fiat-backed tokens like USDT and USDC dominate the $170 billion stablecoin market. Alternatively, flatcoin technologies like SPOT are designed to track the cost of living rather than be pegged to a fiat currency like stablecoins. 

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The term “flatcoin” was coined by former Coinbase CTO Balaji Srinivasan and Frax Finance founder Sam Kazemian in 2021 when discussing Frax Price Index. Flatcoins optimize for price “flatness” using an “onchain basket of goods,” according to Srinivasan’s definition, noting that in contrast, if a particular fiat currency devalues because of inflation, the stablecoins pegged to that fiat currency will also suffer the same fate.

What is SPOT?

SPOT is designed to combine the characteristics of fiat money like the U.S. dollar and hard commodities such as gold or bitcoin to create a “fully decentralized” and “significantly less volatile” asset that can be used in the onchain economy, the team said. It does not aim to stay stable in the way that stablecoins do.

Alongside its “inflation-resistant” store of value protocol SPOT, Fragment also develops the unit of account protocol AMPL and DAO governance protocol FORTH.

AMPL is a rebasing cryptocurrency with no specific asset backing, relying on an elastic supply mechanism to stabilize its price, typically ranging between $1 and $2. 

SPOT is a low-volatility derivative of AMPL, designed to move less dramatically in price. When AMPL's price changes significantly, SPOT's price adjusts slightly. SPOT is created by reorganizing AMPL's volatility into two perpetual derivative assets: SPOT, which is less volatile and designed as a safer asset to hold, and stAMPL, which is more volatile and designed to offer magnified exposure. This transparent process aims to produce decentralized, low-volatility commodity money rather than digitized dollars.

‘The next iteration of stablecoins’

In a September 2023 interview with Yahoo Finance, Coinbase CEO Brian Armstrong called flatcoins “the next iteration of stablecoins.” Armstrong described the idea as “a better form of money in the crypto space” compared to currently available cryptocurrencies and stablecoins, adding that while Coinbase itself wasn’t working on flatcoin development, it was interested in it.

A month prior, Armstrong highlighted the concept of flatcoins among 10 ideas in crypto he was “most excited about,” hinting that the company’s venture investments might “go into things like that.” Other ideas that interest him include on-chain reputation, ads, capital formation, games, privacy for Layer 2 chains and tokenizing real-world assets.