What is AMP?

Qué es AMP
4 min read

AMP is a cryptocurrency developed by Flexa Network in collaboration with ConsenSys, a smart contract development company on Ethereum..

 

Flexa Network is a company focused on online retail payments, especially looking to reduce barriers between fiat money and cryptocurrencies. They had previously launched FlexaCoin but it has been depreciated by AMP. With the former currency AMP can be redeemed at a 1:1 ratio.

What is its function?

AMP is designed to serve as a payment collateralization token for cryptocurrency payments.

Before explaining what that means, let’s understand what the problem is that gives rise to AMP.


In blockchains payments are not instantaneous, it takes some time before they are included in a block. Even a confirmation (1 block with your transaction) might not be secure enough.

 

Let’s take Bitcoin as an example. In Bitcoin blocks take approximately 10 minutes to be produced. This means that, as a seller, if you receive a transaction you will have to wait at least 10 minutes. If the transaction has not been confirmed in a block, the buyer could undo it using RBF (Replace By Fee). With RBF the transaction is modified by paying more commission (so that miners are incentivized to mine the modified version) and that person could get their money back.

 

However, once a transaction is included in a block it is more difficult for double spending to occur because it would involve miners maliciously allying themselves, which is not at all profitable for low value transactions.

 

One solution for medium or low denomination transactions is Lightning Network, a decentralized payment network on Bitcoin. But the AMP paper considers it problematic because of the attacks that are currently possible on it, its difficulty in handling final fees (closing payment channels) and, therefore, its dubious guarantees of finality on the Bitcoin blockchain. The paper also dismisses Proof of Stake (PoS) as sufficiently secure for quick confirmations.

 

The solution Flexa proposes with AMP is to use this token as collateral for unconfirmed transactions. This way the seller instantly receives the amount of money (in AMP) and later the money from the original transaction. At that moment the collateral is released for use in other payments.

Then, if a payment takes too long or fails for any reason, that guarantee in AMP can be liquidated to cover the funds.

Qué es AMP

Contract

Both the contract and the coin are on Ethereum (it is an ERC-20 token). Therefore AMP has a fixed supply and allows to generate profitability (which is technically not staking). Meta staking is used to provide liquidity for the Flexa network collateralization system, which uses AMP.

 

An important feature of the contract is that there is no “back door” and it operates immutably. In many contracts there are trusted third parties that can alter the contract.

Qué es AMP

My review

One criticism I would have of AMP is that, for one thing, there is no point in seeking absolute security for medium or low denomination payments. Lightning Network is progressing rapidly and advances like BIP 118 are going to make it more effective. Also, for most miners to organize to perform a 51% attack to undo a retail transaction is not at all realistic, and a few Bitcoin confirmations are enough. 

 

On the other hand, if the concern is that miners could act maliciously, and they consider Proof of Stake insecure, why would they launch their contracts and currency on Ethereum that is on its way to PoS? The criticism that miners may be malicious also implies that they may censor transactions that would execute the contract, preventing the use of AMP.

 

And finally there would be no such thing as finality (irrevocable transaction) because the collateral is still on a blockchain subject to 51% attacks.