Amp can be described as a digital collateral token, offering instant and verifiable assurances for any kind of value transfer. Using Amp, networks can quickly and irreversibly secure transactions for a wide variety of asset-related use cases. The AMP cryptocurrency is then used as collateral for stablecoin payments.
Amp is designed to decentralize the risk in a payment transaction, dramatically reducing the assurance cost from existing counterparty networks. Also, within distributed tokenized financial networks, Amp serves as a medium for accruing value while aligning the incentives of all participants.
In essence, Amp aims to greatly reduce transaction costs while improving the cost efficiency and accessibility of financial markets with apps built on Ethereum. These key benefits appeal to global merchants who wish to transact with cryptocurrencies, since Amp helps eliminate the long wait for transaction confirmations.
These lofty goals are achieved through a series of collateral partitions, which pretty much anyone can access. This may all be a bit overwhelming at first, so let’s dive into Amp and see what it’s all about.
Amp Token On The Flexa Network
There are basically two key parts to the AMP project. You should have a grasp of both in order to fully understand how the project works. The first is the AMP ERC-20 token, and the second is the Flexa network. You should have a grasp of both in order to understand how the project works. The simplest way to think about Flexa and AMP is as insurance for transactions.
Let’s start with the ERC-20 AMP token. Amp is an open-source collateral token standard that enables instant and irreversible collateralization of any form of value transfer. AMP has a fixed supply of 99,228,307,917 tokens, whose value, according to the whitepaper, comes entirely from the utility of the token in collateralizing transactions. The fixed supply helps reduce price volatility.
The token avoids complicated synthetic or derivative instruments, rebasing mechanisms, multi-asset algorithmic models, and artificial constraints that are overly complex to users. Economically, Amp also serves as a vehicle for accruing value within a collateralized network via incentivized staking.
Amp claims to be the first project to enable participants to stake collateral while maintaining custody of the underlying assets. That collateral is denominated in AMP tokens. This suggests that the value of the AMP token rises and falls proportionally to the number of users utilizing the platform.
The simplicity of the AMP token’s use case is part of the sophistication of the AMP project’s design. If there were other uses for it, the ecosystem would become too complicated and possibly fail to serve the purpose it was intended for.
Amp transactions are fast and simple, so actions that depend on a transfer can go ahead without any delay. Moreover, when Amp is used as collateral, users benefit from the security, transparency, and efficiency of an immutable ledger.
The Flexa Network
With cryptocurrency solutions like Bitcoin, tokens are sent instantly, but confirmation and transaction finality can take much longer, depending on how many confirmations the receiver requires. The Flexa network, as part of the Amp ecosystem, acts as a decentralized payments broker with lower fees and faster speeds than other options - basically creating finality-as-a-service.
Flexa is a payments network that enables fast and fraud-proof payments for merchants all over the world. In short, Flexa facilitates the movement of value, with AMP as collateral, so that users can get paid. The underlying principle is that decentralized collateral serves to remove expensive intermediaries, and efficiently distributes risk.
By requiring each transaction to be fully collateralized, the predominant costs associated with the challenges of funds verification and payment fraud are eliminated.
The Flexa network supports many different digital assets, and users stake AMP tokens as collateral for payments. To enable payment functionality, applications and communities can collectively stake Amp tokens on behalf of users. As an incentive for supplying collateral, the entirety of network transaction revenue funds the continuous open-market purchase of Amp tokens for redistribution as network rewards.
The network includes various exchanges and financial institutions in order to provide compliant settlement across multiple jurisdictions. Flexa integrates natively with existing point of sale (POS) systems and online platforms to enable payment in a typical checkout experience.
Collateral And Partitions
Amp incorporates a novel partition interface within an original framework of partition strategies to facilitate the interoperability of staking contracts for any surety mechanism. This enables Amp tokens to be conditionally allocated as collateral without requiring transfers to another smart contract.
Partition strategies are the core innovation from Amp. Partition strategies can be used to systematically grant controller-like permissions to various actors in the ecosystem. This enables the Amp contract to execute common use situations for collateral managers, creating a more efficient developer experience and increasing the level of trust in the contract itself.
Collateral partitions are isolated batches of AMP tokens used for various specific purposes. All collateral partitions can have unique sets of rules that allow for special functions and capabilities. This facilitates collateral models where token staking can occur without users needing to relinquish custody of their tokens.
Partitioning off collateral pools helps merchants specifically to protect their funds from fraud and negative effects. Each partition can be programmed to execute a transaction - or spend collateral from its pool of tokens - under very specific conditions that perhaps only the merchant may be able to create. This may go beyond swiping a card upon point-of-sale.
In addition to facilitating the transfer of funds across collateral partitions on the platform, Flexa also serves as the main collateral manager on Amp. Amp uses smart contracts as on-chain collateral managers that manage the transfer of AMP tokens for collateralization applications to “lock, release, and reward collateral”.
Collateral managers work in conjunction with collateral partitions for transfer value activities and permissions. The Flexa collateral manager manages AMP tokens staked via the Flexa network to secure payments. It incentivizes AMP token staking using collateral partitions as pools, whereby a percentage of successful transfers is rewarded to contributors.
Amp offers a great benefit to merchants who wish to accept cryptocurrency payments, or who wish to pay in crypto themselves. The smart contract-based collateral system in Amp ensures that no transaction fails, making sure that business runs as expected at the point of sale. This means no more waiting for costly transaction confirmations.
As demand rises for such a service in the real world, the rewards to AMP stakers increase as the fees on the platform increase proportionally. The market has also responded positively to Amp, with early listings on major exchanges Coinbase and Binance.