Reasons are Simple
Exhibiting capacity for empathy ❤️, Dog 🐶 is man's loyal best friend. Likewise, SPOT embodies Trust.
SPOT can be trusted to:
Resist Inflation
Avoid Liquidation
Store Value
Stabilize Price
The reasons for this are simple:
Resist Inflation - SPOT closely tracks the price target of AMPL, which follows the 2019 Inflation-Adjusted U.S. Dollar smoothed out over the long term.
Avoid Liquidation - Whereas conventional stablecoins like DAI or UST are minted from Collateralized Debt Positions (CDPs; see Zero Liquidations for more info), SPOT is minted from a rotating collateral set of AMPL Senior Tranches. Senior Tranches are protected from value loss; therefore, SPOT has immunity against liquidations. Recall that this rotating collateral set is like a conveyor belt:
Store Value & Stabilize Price - these two go together, as they result from market expectations. Because all transactions can be monitored on-chain, market participants are always aware of how many AMPL Senior Tranches are available for collateralizing SPOT. Information Asymmetry is minimized, as is the mismatch between expectations and reality for market participants. E.g., below; with a Collateralized Debt Ratio (CDR) of 384% expected to mature by 6/13/23, SPOT will be fully over-collateralized by AMPL Senior Tranches. Because SPOT can be redeemable for AMPL which always returns to its price target, SPOT trades at AMPL's price target on the free market.
Dynamic Equilibrium
Because SPOT's peg is maintained by free market driven forces, it is far more resilient in comparison to pegs defended internally by protocols.
SPOT bends, but does not break.
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