Inception: what is AMPLEFORTH?
Do you know what is a Stablecoin?
In two words: it is a coin with a stable value. Some well known examples are:
- FIAT-collaterized coins (1$ is deposited into a bank for every crypto USD "printed"): USDC, TUSD, PAX, BUSD, etc
- crypto-collaterized coins (some crypto coins are blocked as a collateral for every stable coin "printed"): DAI
- non-collaterized coins (or algorithmic, seigniorage shares): Nubits, Ampleforth, Basis, etc
Ethymology of Ampleforth:
The protocol was named after a character from George Orwell’s 1984 who is responsible for translating poetry into Newspeak, a language designed to limit freedom of thought. When tasked to replace the word “God” in a Kipling poem, Ampleforth refuses, not out of righteousness, or subversiveness, but rather, a simple love for language and respect for the truth. To Ampleforth, no other word makes sense in context and therefore no other word should replace it.
AMPL on visuals
It is better to see and hear than reading to understand something. So, I short video could make wonders instead of a long text.
For this, I studied several sources on web and this video below seemed very nice to digest.
- AMPL is a token with elastic supply trying to follow a target price. First goal was the purchasing power of 2019 USD - which means an actual 1.009 $.
Now, the target price is 1.022 $.
Knowing this, you will see that when the actual price is below the target, the number of tokens will decrease from all wallets to create a bigger demand and to gain the target price again. When the actual price si above the target, we should see the opposite.
If you enter on the Amplefort dashboard, you wil see this:
So, once at 24 hours, this recalculation take place and is named: REBASE. Pay attention to it and the moment when it is happening and it is possible to raise your portfolio.
What you need to know:
- the REBASE is happening for ALL wallets in trying to reach the target price
- if a big quantity is needed to be taken or given, this is divided in 10 parts, 1 for each consecutive day, for not becoming a disturbing factor. If in the next day, the price is recovering better than expectations, the algorithm is taking this in consideration and is reducing the supply needed to be injected in the market
- the DEMAND is created by different incentives of staking AMPL - from Liquidity Pooling to Staking Rewards
Past: Is AMPLEFORTH indeed the pioneer of elastic supply?
I remembered I was reading a whitepaper of a coin few months ago and I made my research and It seems to me that Ampleforth is not the first project of this type. Even from 2014, Nubits appeared as an innovative non-collaterized stablecoin. The concept was: if the demand is high, more coins are "printed" and released in the market and the opposite when the pressure to sell it is high - buy them and take it and diminish the circulating supply.
But there were flaws in the mechanism: when the sell pressure was very high because everybody wanted to buy Bitcoin, the peg to USD of Nubits was broken and remained that way for 3 months, from 26 of May 2016.
Than, since December of 2017 until January, 2018 - the marketcap increased 1500% because of Bitcoin falling and investor's fear of losing money. So, the process of 2016 was inverted and now the Nubits coin was going up to 1.3 $ because the speed of releasing new coins in the market was lower than the volumes needed.
After that, it came the reverse, because the investors noticed a price drop in Nubits and were trying to get away, so they sold as much they could. Again, the Nubits team was unable to absorb the whole quantity, so the price dumped. What was the reason? They just sold a lot of Nubits few weeks ago? The problem should be the BTC deposits, because Nubits didn't exchange it in FIAT, and they weren't able to rebuy what was offering on the market.
This is the price history of Nubits. Now it is traded for 0.3 $ on SouthExchange and that's all.
In contrast to Nubits (and the FIAT) mechanism - AMPLEFORT is not diluting the ownership proportion. This is a big and positive advantage for AMPL.
Present: Going to AMPL history, we could see the evolution until now
The Coinpaprika's AMPL chart is looking like this:
You can see the price evolution and also the marketcap and volumes, but it is not so obvious their mechanism of flexible supply, so I extracted the data from here using - Export - CSV and I made some magic in OpenOffice (something similar with Excel, but free and a little less complex) and I got this:
Now you cand see the price, the market cap and the circulating supply, all in one chart. Look how the supply raised exponentially from the middle of july until the end of the month!
This is the essence of AMPL mechanism: when the price is bigger than 1$, the supply is starting to increase to all AMPL holders. They are tempted to sell to mark the profit and in this way, the selling pressure is giving a decrease of price. If this is not happening, another round of supply growing is taken place in the next day at the same hour and so on until the price is going down and viceversa when the price is below 1 $.
With the DeFi buzz in the start of july, the AMPL took off and after the price, the supply was coming to grow, like the protocol was designed to do. Even if the price and the circulating supply had a high volatility at the start (which was also expected by the team and the experts) you can see a stable supply in the last weeks and it seems a fine tuning for getting the target price is currently under deployment.
Future: What's next for AMPL?
there are some directions where the project is developing:
- Multichain expansion - it means AMPL could be found soon on Tron, a Polkadot Blockchain (ACALA) and Near. This means it will not be only on Ethereum like now and is following what other stablecoins are doing already - multichaining
- increasing the demand of AMPL - by creating different mechanisms for getting to it
- increasing protection to volatility - this should be the next step, now, when the team noticed what happened in the past months - the preparations for acting for high pressure sells (especially this) or high demands should be done as soon as possible
- elastic supply with non-dilutive mechanism - everybody is keeping the percentage from the total supply
- censorship resistant coin, like Bitcoin - nobody could ever seize it from your wallet
- already widely adopted in crypto world
- still a new project - the mechanism is not yet well tested on stress - sell or buy pressures
- a black swan event could happen and the whole demand for the token could dissapear
- still volatile, could not replace a stable coin on near future
- not sure what could happen if the price is still above the target price and the max supply is reached OR a high pressure sell is starting. I'm worried about the ones who got AMPL as a stable coin for a short term. They could remain stuck in.
- AMPL is a non-collaterized stable coin, with a non-dilutive, but elastic supply mechanism
- AMPL has a target price for fitting with it, it will increase or reduce the number of tokens in everybody's wallet
- now is an ERC-20 token, but in few weeks will be found on Tron, Polkadot and Near blockchains
- when you trade it, you should consider the level of demand and the circulating supply as key factors in analyse