The future looks like this…
A world where DeFi automation mechanisms are extended to traditional assets while remaining compliant with existing regulatory constraints. Building upon the existing system is the only way to increase adoption.
Interoperability.
One of the things that Ethereum has done best is its token standards.
A rich ecosystem of tools and platforms has emerged.
The most well-known token standard is ERC20, an interface for fungible tokens.
Its “transfer” and “balance” functions are now prerequisites to be compatible with wallets and key custody solutions, like MetaMask or Ledger hardware wallets.
Its “allowance” and “transferFrom” functions are important for interoperability with other smart contracts. For example, AirSwap’s p2p trading platform uses these functions to execute delivery-vs-payment operations.
Finally, an important aspect of interoperability is the possibility of escrow tokens. To escrow, a token means accepting a smart contract as the token’s owner (instead of a human person).
Many DeFi smart contracts use token escrow mechanisms:
- Lending contracts like Compound need escrows to store collateralized tokens.
- Decentralized exchanges like Uniswap, or derivatives platforms like Synthetix, need escrows to create liquidity pools.
In the end, an ERC20 interface and the possibility to escrow tokens are mandatory for Ethereum ecosystem compatibility.
Overview of the Universal Collateralization Token for Assets and Payments.
As a hybrid token, it benefits from both:
- The advantages of fungibility
- The advantages of non-fungibility
It combines all the requirements listed in this presentation:
- For control mechanisms, it offers a module for certificate checks, a module for allowlist checks, it offers the possibility to force transfers
- For reliability of the investor registry, it provides a module to create token holds
- For certainty of delivery-vs-payment execution, it includes token holds for atomic DvP and HTLC mechanisms for non-atomic DVPs
- For interoperability, it offers an ERC20 interface
Amp is an Ethereum-based token issued by the Flexa network, and Flexa is a payments platform aimed at solving all current problems associated with cryptocurrency transactions.
These include
- Merchant fee,
- Fraudulent card charges,
- Chargeback problem
- And the speed of transactions and security
How do Flexa and Amp Work?
The idea is to have the operator of a centralized payment combined with a decentralized network that makes it trustworthy and secure. Flexa acts as a centralized entity, and AMP is decentralized. Since Flexa is centralized, some aspects of its operations are proprietary.
Basic Plan Behind How Flexa Works.
When using Flexa, the variety of stablecoins, coins, and tokens framework has 22 options. When using the SPEDN app or Gemini Pay (Gemini leverages Flexa’s payments) at a store that supports Flexa, the merchant will scan a QR code on your app, and the funds will be sent.
In addition to not paying high fees (about 1%), the merchant has another excellent feature: they can choose a default currency to be paid in, including fiat currencies. The funds you send will automatically be exchanged for the money favored by the merchant using Coinbase or Gemini.
Card fraud is a big issue, and it can cost the merchant. Converting one crypto to fiat via Flexa is instant. Therefore, the merchant would risk not getting anything without collateral if the transaction didn’t go through. To solve this issue, AMP Token is used to collateralize each transaction. Those who Stake AMP in any payment providers leveraging Flexa payment protocol, SPEDN, and Gemini Pay.
Because of how the whole ecosystem around Flexa payments works, the success of Amp is securely tied to the achievement of Flexa. However, AMP is a universal token for collateralization, meaning others could also adopt Amp.
If Amp can establish itself as a genuinely universal collateralization token, it could split from Flexa and experience much more substantial growth compared to Flexa. There are already some DeFi projects which do this.
Staking Amp
The tokens are positioned in a larger pool with all the AMP currently staked when staking AMP. From there, it’s then put in smart contracts to collateralize individual transactions.
From Flexa Capacity, the amount currently staked at $1.35 billion or 28.5 billion AMP. The dollar amount naturally fluctuates when the price moves. That’s why the amount of Amp is more expansive. It also means that they limit how many transactions can be collateralized, the amount seen here.
On top of seeing how much AMP is currently staked, Flexa Capacity is also where people stake AMP. It is done by connecting your wallet. There are now five options, including MetaMask and Coinbase. When staking AMP, a cut of the fees paid by the merchant will be passed on to the consumer.
However, since the prices aren’t that lucrative, an additional one billion AMP is being issued yearly as staking rewards, but the design would be to survive on transaction fees alone.
Sadly, even with the additional AMP, the rewards are only 2%, which in crypto terms, isn’t competitive. However, for stakers, there isn’t any lockup time, and they’re free to withdraw. It would also mean that if there were a sudden outflow of AMP, the whole ecosystem would collapse due to a lack of AMP to collateralize transactions.
AMP Roadmap
Since Amp doesn’t have a roadmap, Flexa is mentioned multiple times in the Amp whitepaper without mentioning other potential users of AMP as collateral, which is why Flexa’s roadmap can also be assumed to be Amp’s roadmap. Poignantly Flexa hasn’t a clear roadmap or even a business plan, so the news on where Flexa is might be beheaded.
There have been a plethora of updates on Flexa. First, only two payment apps comply with the Flexa network, Flexa’s SPEDN and Gemini Pay, and 7 others are listed as coming soon, including BRD, Coin list, and Coinme. Many other cryptos are becoming available to take part in, and many are now available.
Another news/update is the integration with Shopify. Flexa’s website initially implies that they would already have a working partnership with Shopify, saying they are in beta test mode.
However, Flexa hasn’t been very busy updating its site since it will be available later this summer. There is no additional information surrounding this partnership, at least not from Shopify or other non-Flexa sources.
Flexa’s partnership with Shopify would be massive for adoption. Additionally, knowing details on future projects is vital for someone who may have invested or want to invest in the project. Not knowing makes it impossible to evaluate the investment.
However, the Shopify partnership isn’t the only one Flexa has worked on. Their latest collaboration is with GK Software, which has $425 billion annually. This means that if consumers using GK Software start paying with cryptocurrencies, it will be huge for Flexa and Amp.
Another upgrade Flexa has made is supporting fraud-proof payments through the lightning network. Now, exactly how they’re going to do this remains unclear, but it’s evident that they have big plans to make Flexa ubiquitous.
In interviews with Flexa, CO founder Tyler Spalding plans to tap into other forms of “digital payments,” like expected rewards programs. These are the types of partnerships Flexa is making; most likely, more is to come.
There is some Amp-specific news. Amp passed its first-ever governance proposal. The proposal makes it feasible to issue a 1 billion AMP community grant program. It will allow Amp to further increase its visibility in, for example, DeFi integrations and educational content.
There is a second governance proposal on whether those who failed to swap their Flexacoin to AMP, resulting in a loss, should be given the possibility to have another go at those AMP tokens.
Tokenomics
Holders of Flexacoin have the right to swap their Flexacoins to AMP in a 1:1 ratio, and no further AMP has been released. The maximum supply of AMP is 100 billion, the same as for Flexacoin.
However, not all have been swapped, which means that the supply for AMP will remain slightly below 100 billion until the remaining ones are exchanged. When it comes to the vesting schedule of AMP, it’s exceptionally long and will be done in 2045. As more and more people are clear to sell and take profits, it can (and will) provide selling pressure.
Three addresses currently hold a combined 75% of the total supply for token allocation. Gemini, Coinbase, and the staking smart contract are the three addresses. There was some uncertainty regarding the owners of those addresses. Now, a few months later, it’s clear that one was, in fact, Gemini and one the staking smart contract, and they can be verified by looking at Amp’s website where the addresses are listed.
However, the Coinbase custody wallet address is wrongly listed, but after tracking transactions, the now mysterious address should belong to Coinbase. However, it does not have the smart contract page symbol that the staking contract and Gemini address have.
Amp’s Potential
Looking at the price, there’s approximately a 2x left even to hit previous all-time highs (ATH) and to be accurate if the general market sentiment remains bullish. However, a price of $1 would mean that AMP’s market cap would be the same as Polkadot’s (roughly $40 billion). It isn’t possible to reach that price, but it likely won’t happen in the short term.
The market cap determines how far crypto can realistically rise.
The AMP’s vesting schedule will likely hold its price back for a long time. It’s easy to understand since those sitting on 10-1000x gains will likely want to take home all their profit. Since there is no lockup when staking Amp, it’s easy for people to take profits when the incentive to stake Amp isn’t enormous. The no lockup should hold back any significant pumps while fuel dumps.
Those staking are usually seen as hodlers since they have to go through the trouble of staking in the first place and are often subjected to lockup periods.
However, Amp does not have this, and if a significant dump were to happen, it might scare off stakers, too, since it’s easy to cash out. It will further create a potential downside since the use case of Flexa will fall when Amp as collateral decreases.
It’s mentioned that AMP is only backed by its utility which currently lies in the Flexa network. It means that if Flexa can secure the partnership with Shopify and if cryptocurrencies become more widely used as an alternative payment method, Flexa and Amp are in an excellent position.
Also, Amp’s leadership has some high growth plans, and becoming a leader in cryptocurrency payments would be substantial. A partnership that big would be a huge growth driver. However, the potential Amazon partnership is pure speculation and should not be considered when making any decision.
Lastly, Amp is separated from the rest of the crypto markets because the utility only backs it. There’s no denying that more significant trends in cryptocurrency markets affect almost all cryptos, and Amp isn’t an exception. AMP’s price chart can examine it compared to Bitcoin’s.
Now, while they might not move hand in hand, they certainly aren’t far from each other either. Almost all tops and bottoms are correlated, and that’s just how it is in cryptocurrency. In the long term, when crypto markets mature, it wouldn’t be surprising if Amp starts following its utility more than the general markets.
Concerns For AMP
Because Flexacoin was likely migrated to Amp, Amp is not being decentralized. Flexacoin would never have been listed on Coinbase since it would have been considered a security. Therefore, Flexa wanted to separate the token and the payments network by creating an open-source token.
The utility is ultimately the same, and while the token theoretically is decentralized, it’s 100% reliant on the success of a centralized entity, Flexa.
Flexa and Amp did dodge a bullet of regulations last year. However, since it’s so apparent how tied Flexa and Amp are and that rules around cryptocurrencies are getting tighter, Amp has a tremendous regulatory risk.
Another potential issue is the lack of information surrounding Flexa’s early history. Although there were very few details about the project, they have secured significant partnerships, which generally seem impossible if the project isn’t good. It could imply that someone in Flexa has good connections to take them where they need to be, but that’s pure speculation.
In addition, this lack of information is pointed out in updates around the Shopify partnership. The fact that they haven’t updated their website regarding the topic.
Finally, Spalding speaks of Flexa being completely groundbreaking and not by any means the same as what payment companies like Visa, Mastercard, and PayPal are doing. When first listening to Spalding’s interviews and afterward an interview with Visa’s Head of Crypto, there are similarities in their plans.
Visa might involve themselves in what Flexa’s doing if it were successful. The competition in the crypto payment ecosystem will be hard-hitting, and Flexa isn’t alone in this.
Conclusion
Crypto payments are coming, and the current infrastructure needs upgrades to ubiquitous crypto payments. Flexa has had a great start with key partnerships, with more to come. The founders of Flexa are determined, and at least looking at past partnerships, they seem to know what they’re doing.
Nevertheless, there are loads of uncertainties regarding both Flexa and Amp. As for being a safe investment. Relying on the hopes that everything is okay under the hood isn’t anything to go by.
Keeping an eye on the project is recommended. Not in an investment way but rather to look at the development of crypto payments. Flexa is, without a doubt, a key player for crypto payments, and it’s interesting to see where they’re headed. Then from an investment perspective, when (and if) all of the mysteries surrounding Flexa are untangled, it might be worthwhile to have a fresh look.
Remember that the vesting schedule and the possibility to withdraw from staking at any time will likely hold back Amp’s price from any powerful pumps.
https://consensys.net/blog/codefi/understanding-the-universal-token-for-assets-and-payments/
https://www.coinbureau.com/review/amp-token-digital-payments/
Disclaimer
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