As blockchain technology grows in popularity across the globe, many online vendors are looking for a way to accept cryptocurrencies as payment.
However slow transaction times means many are hesitant to take on the risk of cryptocurrencies. Amp seeks to change this by providing a secure collateral to online payments.
What is Amp?
Amp is an open source, merchant-focused network built on the Ethereum blockchain. Amp aims to provide collateral for payments on the Flexa network to allow instant and secure transactions.
Two of the main barriers to mass adoption of cryptocurrencies is the delay in processing transactions and the high costs these transactions can entail. Transactions can take several hours and cost up to $100 in fees. This is unsustainable for smaller payments and many merchants will not conduct business with these limitations.
What is the AMP token?
Amp uses the ERC-20 token, AMP, to provide collateral for payments carried out in other cryptocurrencies on the Flexa platform. If a transaction fails due to delays, AMP can be liquidated to cover the transaction and the merchant will receive fiat currency instead. This means that merchants can securely settle transactions instantly without a worry of losing profit.
Amp can be traded for fiat currencies or cryptocurrencies. It is built with the ERC-20 standard for tokens on the Ethereum network providing more security to the network. Amp has a maximum supply of 100 billion AMP tokens.
Amp was developed by Flexa in 2020. Flexa is a payment platform that is used at over 41,336 locations in North America. Merchants can use it to accept cryptocurrencies as payment for their goods and services.
Amp was created as a successor to the Flexacoin (FXC) blockchain created by Flexa. FXC holders can swap their FXC for AMP at a 1:1 rate at any time.
Amp has been audited by several security research companies to ensure trust in the Network. This includes ConsenSys, TrailOfBits and Diligence. Having many companies measure and validate the security claims of Amp is a major step in its adoption by mainstream vendors.
Amp Use Case: Instant Payments Using AMP
One major drawback of most popular cryptocurrencies is the time it takes for transactions to clear. Ethereum transactions can take days on the network due to congestion and Bitcoin transactions are inherently slow due to the Proof-of-Work consensus mechanism used.
There are also very high fees to most transactions and fees can be as high as $100 to have a single transaction go through quickly. Many businesses and individuals will not conduct business with these delays and costs.
The Amp network is able to ensure quick transactions by using a large pool of AMP tokens to provide collateral to transactions. So any delays can be covered by this pool until the transaction goes through.
Amp Use Case: Staking AMP on Flexa
The AMP token is designed to provide collateral for the Flexa payment network. Flexa needs to have a large supply of AMP tokens to provide this security so merchants can settle payments quickly. AMP token holders can stake their tokens on the network to provide this collateral and earn rewards.
Flexa provides security to merchants by ensuring that even if the BTC or ETH payment fails due to long transaction times or network issues, Flexa will use AMP tokens to cover the loss and these tokens will be liquidated to provide fiat currency to the merchant.
Transactions can often take days on blockchain networks due to congestion which is not viable for most online merchants as they want their payment to be settled instantly. Having the payment insured by AMP tokens means merchants can assume their transactions will be finalized and proceed as such.
Flexa and Staking
To do this, Flexa sets aside the amount of AMP tokens needed to insure the transaction until the transaction is complete. As there can be a huge volume of transactions on the network at any time, Flexa needs a large pool of AMP tokens readily available. Then the network can set aside the tokens needed for any transaction. Once the transaction is complete, the tokens can be returned to the pool.
The Amp network lets users stake their AMP tokens to create this pool. This provides a decentralized risk to the platform. Users who stake their AMP tokens receive rewards of AMP tokens that are generated from the transaction and merchant fees. This allows users to passively generate income by providing AMP tokens as collateral to the network.
Amp Use Case: Governance
Amp uses an off-chain governance system where AMP holders can stake AMP and vote on changes to the network. Off-chain governance in Amp means that once a proposal is approved it has to be finalized by the Amp team. Proposals, discussions and voting are all carried out on a separate platform, Snapshot.
Proposals can be suggested by AMP token holders who have the necessary amount of tokens. Users who have at least 1,000,000,000 AMP (1% of total AMP) can submit proposals.
A user who does not have 1 million AMP coins can introduce their proposal to the community forum in the hopes that another user may agree and submit it on their behalf. This provides an option to the average user.
Any AMP holder can stake tokens and vote on the submitted proposals and once there is a minimum amount of AMP staked in the vote (5 billion AMP) and 48 hours have passed the vote is considered complete. Consensus is reached by majority.
Amp as a Viable Option for Merchants
Amp (and the Flexa network) has become a credible option for cryptocurrency payments providing the speed and assurance that many blockchains lack. The AMP token is used as a staking token to provide collateral to payments.
Flexa is merchant-focused and has been adopted by many different vendors due to the security it provides. The AMP token can be used outside of the AMP network but its primary uses are staking and governance.
Flexa, and as such Amp, look set to grow as they are adopted by more platforms including Shopify. The AMP token value will increase in tandem to this, however, it will most likely remain a token to provide collateral to other cryptocurrency payments.