An Ampleforth Primer
Source: Ampleforth

An Ampleforth Primer

By Cryptor Zeke | BlockNotes | 29 Dec 2020


Ampleforth is a cryptocurrency protocol launched in June 2019. The protocol’s digital currency is called AMPL and it runs as an ERC-20 token on the Ethereum blockchain.

Ampleforth is modeled on the work of famed Austrian economist and philosopher Friedrich Hayek. Notable among other cryptocurrencies, Ampleforth adjusts its supply of AMPLs on a daily basis. 

Ampleforth is aiming to create a better form of money. Its currency aspires to be a reliable building block for decentralized financial applications, and an alternative base-money for the global economy. 

Source: Ampleforth

Secret sauce

Ampleforth’s use of “countercyclical” economic policy, is one of the things that sets it apart. In practice, this means the supply of AMPL tokens is automatically adjusted in response to market demand. When the price of AMPL is high, wallet balances increase. When the price is low, they decrease, and when the price is steady, the balance doesn’t change. The goal is to offer protection from demand shocks and keep the price relatively stable.

These balance adjustments are based on exchange-rate information fed to the protocol by trusted oracles that act as a bridge to external data. This process is called “rebasing” and helps keep the price close to one dollar. It happens once per day without any human intervention as the rules are coded into smart contracts.

The adjustments are made directly to token holders’ digital wallets and do not change their share of the total pie. In this way, AMPL has an elastic supply without the corresponding inflation or deflation spikes. Further, it insulates holders from the price volatility common in other fixed-supply assets like gold or Bitcoin. 

Source: Ampleforth

Use cases

The core purpose of AMPL is to serve as a medium of exchange. Given its unique token dynamics, AMPL can separate from the price patterns of other digital and traditional assets. Due to this factor, AMPL provides a new option for investors to diversify their portfolios.

The ability to resist boom and bust cycles means it can also be used to denominate (mark the face value) of other financial instruments. Finally, AMPL has the potential to reduce systematic risk by adding diversity to a crypto ecosystem dependant on Bitcoin. 

The future

As Ampleforth’s market cap grows, its liquidity will increase, and the periods where AMPL is stable in both price and supply will lengthen. To this end, the Ampleforth team has launched liquidity initiatives to encourage the token to reach the scale needed to be used in other DeFi protocols.

This is the path to its broader goal: becoming an independent alternative to central bank money. 

 

Submission: ELI5AMPL

 

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Cryptor Zeke
Cryptor Zeke

DeFi curious. Follow me on Twitter: https://twitter.com/0x_zzz


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