Ampleforth Founder: Why We Are Issuing the Governance Token FORTH

Today, the algorithmic stablecoin project Ampleforth officially airdropped its governance token FORTH, with over 70,000 addresses receiving the airdrop, averaging over $7,000 in token value per address, making it the most talked-about event in the crypto market today. Meanwhile, Ampleforth founder Brandon Iles published a post on the project's official blog discussing why a governance token is being issued and some future plans. Chain Catcher translated and edited the article without altering its original meaning; the following is the main text:

Launching the FORTH governance token is a crucial step for Ampleforth on its path to decentralization. This article outlines some of the basics, but I want to elaborate on our current views on governance and our vision for its future direction.

Why FORTH? Why now?

In the summer of 2019, we published our first post on governance, but our philosophy has largely remained unchanged— the best form of governance requires no governance at all. When governance is necessary, the scope of governance should be kept as minimal as possible. This is why we removed the upgradability of the token smart contract and why we ultimately want to remove the upgradability of the governance contract.

Achieving a long-term vision for an ideal, decentralized, and effective governance system is no easy task. Given that the broader community is still experimenting with many different mechanisms, we have so far chosen a more conservative path: emphasizing system security while keeping options open. However, as the Ampleforth network evolves, its governance system must evolve as well, and now is the time to take the next step toward decentralization.

1. How FORTH Works

FORTH is an inflationary token that can be used directly or delegated to propose and vote on changes to the Ampleforth protocol. Its model is an extension of the Compound token COMP.

Additionally, you will be able to delegate your FORTH representation to "delegates," who will then be able to use your voting power to propose changes or vote on your behalf.

Initial Distribution Mechanism:

At genesis, 15 million FORTH tokens were minted, available for the community, participants, and key contributors to claim. The initial supply will circulate immediately, with a future inflation rate set at 2% per year. The distribution of FORTH tokens to the existing Ampleforth ecosystem is as follows:

67% allocated to the AMPL community

33% allocated to early supporters of FORTH (e.g., core development team, advisors, supporters, and the Ampleforth Foundation)

The community allocation will be determined by the following factors:

Past on-chain interactions with AMPL = 1 point (maximum)

Geyser project participation (daily) = 1 point

Negative Rebase holding (daily) = 1 point

While each of the above factors will receive an average score, the "on-chain interaction" factor is worth a maximum of 1 point in this equation. There is no cap on geysers and pools, so each can exceed one point. This will reward those who have long supported the network and have provided support under all market conditions with the most points, thus receiving the most tokens.

Over 75,000 users will be eligible to receive FORTH tokens and become founding members of the Ampleforth governance body.

Early supporters must adhere to the following lock-up schedule: 5% of the initial supporter token pool will be unlocked 7 days after release. The remaining 95% will have a one-year lock-up period, followed by a linear unlock over one year, until fully unlocked after two years.

One year later, the permanent inflation rate will be 2% per year, which will promote ongoing contributions to the Ampleforth community and support for the network.

2. Where FORTH Fits into Ample Governance

Ampleforth consists of a series of successive steps, each representing an increase in social consensus. Proposals and ideas will surface in Discord or public forums and be finalized when deployed on-chain.

FORTH itself is used in the latter half of the governance process, which is also the most critical part: off-chain signaling and corresponding on-chain voting.

On-chain voting is "binding," and its implementation leads to the actual execution of code without the need for intermediaries. This includes deploying new protocol rules or modifying the status of existing rules.

3. Why Use a Separate Governance Token?

We are generally symbolic minimalists, so since we already have AMPL, why create FORTH?

1. FORTH Keeps AMPL Pure

One of the best aspects of AMPL is its simplicity and purity. It is a base currency with a clear supply policy: its value is intrinsic, it is not collateral, nor is it derived from anything else.

If we add voting capabilities to AMPL, it will confuse what AMPL is and where its value comes from. The voting capability increases AMPL's non-monetary utility, leading to price distortions in non-monetary demand.

2. AMPL Wants to "Work"

If AMPL is also used as a governance token, there will be a persistent conflict between using AMPL on geysers, collateral, or lending platforms and its attributes for governance. In fact, a single token model would penalize those who use AMPL as originally intended, potentially leading to biased governance outcomes.

The worst-case scenario is that significant governance events could lead to massive market volatility. This is a fatal weakness for an asset that aims to be a base currency and collateral.

While it is possible to design AMPL as both a circulating and voting token, this greatly increases the complexity and dependencies of the governance system. Given the risks of governance failures, we want this component to be a simple and predictable mechanism that does not cause market distortions.

3. Freedom of Issuance

Through retrospective airdrops, over 75,000 addresses will be eligible to receive FORTH and become founding members of Ampleforth. These members have long supported the network under all market conditions. Importantly, the point weight (used for token distribution) is accumulated based on time and behavior, not by balance.

The purpose of this governance token distribution is to achieve a balance between decentralization on day one, system security, and agility. In the future, a 2% inflation rate will be allocated to those who continue to support the ecosystem.

4. Freedom of Future Incentives

The characteristics of AMPL lie in its supply policy and non-dilutive nature. Changing these fundamental characteristics means AMPL will no longer be AMPL.

However, the use of different tokens may lead to inflation. For example, when the ecosystem distributes at the end of a 10-year period, the protocol can still operate and incentivize geysers. Alternatively, if needed, this can be used to pay for oracles or other infrastructure costs.

5. Technical Efficiency

AMPL is a monetary asset dedicated to enhancing liquidity. There is no need to track authorizations or wallet snapshots, making AMPL transfers streamlined and low-cost.

4. Governance Actions

Broadly speaking, there are three main types of risks in decentralized systems: market, technical, and governance. It makes sense to categorize each action, such as economic governance, technical governance, and the design of the governance system itself.

Market risk refers to the risk that market incentives will not lead to the expected equilibrium before listing. A prominent example here is the Bank of England's Black Wednesday.

Technical risk is the risk of software bugs leading to unintended and destructive behavior. Famous examples include The DAO attack and the Parity Multisig attack.

Governance risk is the risk that the governance system fails to adequately protect the ecosystem's long-term stability. This could be due to unfair distribution, minority shareholders extracting benefits, or misalignment of incentives between managers and the network's success.

You will notice that governance, in addition to having its own risks, also affects the other two risks. A poor governance decision could introduce technical vulnerabilities or misalign supply policies, making it the foundation of all issues.

Economic Governance

While the project does aspire to be a rules-based system, we are unlikely to achieve this completely. We believe that Ampleforth's economic parameters will evolve with its use. These changes will occur slowly over the years, rather than shifting week by week. It can be expected that the task load of economic governance will be small but valuable.

Technical Governance

The demand for technical upgrades reflects a significant amount of governance action. To keep Ample relevant, the system needs to be able to upgrade alongside the surrounding ecosystem, which includes:

1) Configuration, such as the list of oracle providers

2) Logic, such as the characteristics of supply policy, programmer characteristics, and oracle middleware characteristics

5. Governance Structure

FORTH holders can vote directly with their tokens or delegate other addresses to vote on their behalf. FORTH is an extension of the composite governance system and is rapidly becoming a benchmark in the DeFi space. Additionally, FORTH has an annual inflation rate of 2%.

This is the V1 version of governance. If the community decides they want a different form, it can be achieved through governance. However, this first system is simple and understandable. Off-chain signaling through Snapshot requires no gas fees and also considers delegation capabilities. On-chain voting is completed through Compound's governance and time locks, which are two widely supported and familiar testing mechanisms.

The front end will be launched within this year, while the existing multi-signaling governance will continue to be used but will be significantly influenced by the new off-chain signaling platform. This period ensures that the Ampleforth community has enough time to familiarize themselves with the governance system before testing.

Governance contracts and the front end will be launched this year and will gain ownership of the protocol contract. Meanwhile, the existing multi-signaling governance will continue to be used but will be greatly influenced by the new off-chain signaling platform. This phase ensures that the Ampleforth community has enough time to familiarize themselves with the governance system before testing.
In the future, the Ampleforth community may also introduce governance mechanisms such as locking AMPL liquidity to increase voting power and continuous voting to determine inflation rewards.

Finally

While decentralized governance may seem daunting, it is also the first step toward empowering a broader community. Welcome to the 75,000 new members of the Ampleforth governance body! This is a huge responsibility, but also an incredibly exciting one. Let’s work together to make AMPL as great as it should be—standing the test of time.