This is a story about Eli. Eli is five years old. Five years and five months, to be exact. She is my cousin's daughter. And every now and then, I look after her while my cousin and his wife go on a weekend trip. I don't mind looking after her. She is a smart and very kind-hearted little girl. The time with her literally flies.

Yesterday was Saturday. And more importantly, yesterday was one of those days that Eli and I spent together.

"What would you like to do today?", I asked Eli.

"I want to get ice-cream! And later on I want to watch Frozen! That is my favorite movie!", Eli enthusiastically replied.

"Sounds good to me. Did you save up enough money to get some ice-cream?", I investigated.

"Of course, Piggy is really heavy!", she asserted.

My cousin takes pride in teaching his daughter about saving money and financial responsibility from an early age. Ever since Eli was four years old, she has received five Dollars of pocket money every week -- which she saves up. Whenever she wants a new toy or a sweet, she buys it with her own money. And she is very proud of herself when she does that.

So, our plan for the day was to get some ice-cream first and then watch a movie. We took three Dollars of her money out of Piggy -- her piggy bank. Three Dollars is the price of two scoops of ice-cream at Eli's favorite ice-cream place called "Ice Dreams". Eli always gets two scoops of ice cream, because strawberry and chocolate are her favorite flavors and she cannot decide which one she prefers. Therefore, she always needs to order both.

Yesterday was a surprisingly sunny and warm Saturday afternoon considering it is still the beginning of January. The past weeks have been quite cold and gray -- which made yesterday appear especially beautiful and sunny in contrast. Our spirits were high because of the nice weather and we even took a small detour through the city's park on our way to the ice-cream place.

Once we got to "Ice Dreams", we realized that we were not the only ones who had the brilliant idea of buying some ice-cream on that day. So, we patiently waited in line until it was our turn to order. Eli ordered one scoop of strawberry and one scoop of chocolate, of course.

"That will be four Dollars", the vendor said in a friendly voice to Eli. He is a middle-aged man who is lucky enough to still call a full head of dark hair his own.

"No, it should be three Dollars!", Eli asserted with a frown on her face.

"Unfortunately, we had to raise the price to two Dollars per scoop... Sorry!", the server whispered quietly so that the other customers could not hear what he said.

"Oh.", Eli sighed with a sad face.

"Here is another Dollar. I found it while we were walking through the park.", I said while holding out a coin which I fumbled out of my wallet the moment I heard the man say the number 'four' instead of 'three'.

"Oh!" Eli smiled at me when she saw the coin. "We are very lucky that you found it. Thank you!" Eli took the coin and then handed over the four Dollars to the man.

After we both received our ice-cream cones, Eli and I walked back to the park to sit down on a bench and enjoy our ice-cream in the warm sun rays.

"You know...", she started explaining, "when I bought ice-cream the last time, it was only three Dollars... Not four."

"Yes." I nodded in agreement. "It gets more and more expensive. 30 years ago, when I was your age, two scoops cost only one Dollar."

"One Dollar?! That is so cheap!" Eli had an astonished look on her face and I could tell that she was trying to figure something out in her head.

"Wow. The ice cream man must be very rich now.", she said slowly. "He sold the ice for one Dollar before and now he gets four Dollars."

"It is true that he charges four Dollars now for the same ice-cream that was one Dollar before, but everything gets more expensive.", I explained. "That means, he pays more for rent, for the ingredients, for electricity and so on. In the end, he makes a bit more money now than he used to before, but because everything is more expensive now, he cannot buy more with that money."

Eli looked with an expression of surprise at me.

"And what's even worse: If he has some money saved up like you do, his savings can buy less and less over time.", I added.

"That is stupid!", Eli decided. "Why?"

"That is a very good question, Eli. The government wants people to spend, not to save.", I explained.

"But I like saving!", Eli protested.

"And so do I.", I agreed.

Eli looked intently at her ice.

"If I had a time machine, I would take all my money from my piggy bank... and I would go back to when you were a child... And I would buy as much ice-cream as I could...", she said.

"Why would you do that?", I asked her with a chuckle -- even though I already knew the answer.

"Because then I would not need to buy the ice-cream for four Dollars... Because I have the ice-cream I bought earlier..."

"But the ice will melt.", I interjected.

"Hmm...", Eli was thinking hard. "Mama keeps ice in the freezer... I would need a freezer!"

"But buying a freezer costs money. And the freezer consumes energy to keep everything cold -- which also costs money.", I pointed out.

"Oh." The enthusiasm in her face faded and was replaced with an expression of sadness. "Then it's not worth it... There is no solution."

The sad expression on her little face was too hard to bear. I had to think of something to cheer her up. "What if I told you there actually is a solution?", I said when I remembered an article I had recently read on Publish0x.

"Really?", she looked at me skeptically. "I don't believe you."

"You better believe me!", I said with excitement in my voice. "There is a coin called AMPL. It preserves its purchasing power over time."

"Show me that coin!", she demanded.

"I cannot show you the coin. It is a crypto currency." I explained.

She looked puzzled. "What is that?"

"That means that the coin only exists on the internet. I cannot touch it, but I can use it to buy something. I can send it with my phone. Or my laptop. Or my tablet.", I said.

Her puzzled look gave way to an expression of hearing something familiar and she enthusiastically asked: "So it is like the coins in the game I play on daddy's phone sometimes?"

I needed more information to answer that question: "What do you do in that game?"

"You get coins for spinning a big wheel of fortune.", she explained.

"And what can you do with the coins?"

"You save them, of course...", she laughed at my ignorance. "And you buy something with the coins when you have saved enough."

"What can you buy with the coins?", I inquired.

"Haha..." She laughed again. "You really know nothing... You can buy a house... Or a pet... Or a car..."

"Okay, I see. But you can only buy items in the game, right?", I asked to make sure that I understood it correctly.

"Of course!", she exclaimed.

"See, crypto is different. You can buy goods and services in the real world with crypto.", I explained. "I could buy ice cream with it, for instance, by sending the coins from my phone to the ice-cream man."

"Wow, that is so cool.", she looked astonished.

"And as AMPL preserves its purchasing power over time, I will be able to buy about as much ice-cream with it in 100 years as I can buy with it today.", I added. She looked even more astonished after hearing that.

"So we don't need a time-machine?", she asked and smiled at me.

"No time machine needed.", I smiled back at her.

She giggled and asked "And no freezer?"

"That's right.", I said. "We can freeze our purchasing power instead of freezing the ice-cream. That is way cheaper and way more practical."

"Yes!", she said while nodding her head. "How does AMPL do that?"

"AMPL encourages the people who own the coins to sell some when the exchange rate gets too high. And they encourage people to buy more AMPL when its price is too low. That way, the price stays in a certain range most of the time. And that target price is chosen so that the coin keeps its purchasing power over time.", I explained.

"Why do people sell it... And then buy it again?", she wondered.

"Good question. The reason is that people can make money by buying AMPL for a cheap price and selling it for a higher price.", I answered.

"I see...", she had that concentrated look on her face again. Obviously, she was thinking hard about something. "It's just like buying ice-cream for one Dollar and selling it for four Dollars later!"

"Yes, that's exactly right!", I said being very proud of her. I added: "But it's even better than that: When the AMPL prices are too high, the number of AMPL coins everybody has, magically increases so that it's easier to sell some of them." 

I paused for a second or two, because Eli had an expression of astonishment on her face. Then I continued my explanation with an example: "It's like you bought a portion of ice-cream for one Dollar and then the price increases to four Dollars for one portion. But instead of one portion, you suddenly have two portions!"

She giggled as I paused again to give her time to process that information. After a brief moment I continued slowly: "And if you only need one portion of ice-cream, but suddenly you have two, you can sell one of them, right?" 

She nodded. 

"How much would you get for one portion of ice-cream if you sell it at that time?", I asked her. 

After the initial "I don't know!" followed by a giggle, we thought hard about it together and went over it once more:

"We bought one portion for one Dollar... But now one portion is worth four Dollars... If we sell one portion, then we get four Dollars!"

"Perfect.", I praised her. "And because your ice grew bigger, you still have one portion left! And that portion is also worth four Dollars!" 

"Wow.", she looked astonished. And I was astonished, too, when I realized how high the profit was in my example due to the algorithmic increase in supply when the price rises too high. With an increase in price of 300%, we actually had a profit of 700%, because the supply increased together with the price.

I wanted to cherish this realization by summarizing our example: "We paid one Dollar for one portion and then the price increased a lot to four Dollars. And because the price increased so much, our ice grew bigger and we had two portions.

We sold one of them for four Dollars. And we still have one portion left that is also worth four Dollars. Do you see now why people sell when the prices go up?"

Yes, that was obvious to her. She would sell, too. And I would, too. As we both understood the selling part, I proceeded with figuring out the buying part:

"And when the prices are low, magically everybody has less AMPL coins. That discourages people to sell them and it encourages them to buy more. Especially, because they can assume that the prices will rise soon.", I added slowly.

She agreed. She would also buy more when the price is low.

But then she wondered: "That happens with magic?"

"Well, not quite with magic.", I had to admit. "But it happens automatically. An algorithm does that every day."

Of course, she was curious to know what an algorithm is. Therefore, I told her that it pretty much is a computer program that does things automatically. 

"By the way, this process of increasing or decreasing the amount of AMPL coins everybody owns is called a 'rebase'.

And as I said, a rebase can happen once per day. But it will only happen if the price is too high or if it is too low. If it is about right, there is no need for a rebase.", I added.

She put on her thinking face once again.

"If I have AMPL coins... How do my coins know... How much they should become more or less?", she wondered.

"That is a very good question." I had to think about how to explain to her that a rebase does not change the percentage you own of all existing AMPL coins: If you owned 0.001% of all AMPL coins before the rebase, you will own 0.001% of all coins after the rebase, too. Even though the number of actual coins might change in a rebase. I finally had an idea:

"Imagine that all AMPL coins are a balloon filled with air. And you own a part of that balloon. We can mark the area of the balloon which is yours with your pink glitter pen. Okay?"

"Okay.", she agreed.

"And the rest of the balloon belongs to other people, okay?"

She nodded in agreement.

"Now if we blow more air into the balloon, the balloon gets bigger. And your part also gets bigger. So does everybody else's part."

"Yes.", she agreed.

"And that is how the rebase works. You have your part of the balloon and the rebase either pumps more air into the balloon making your part bigger. And everyone else's part also gets bigger at the same time.

Or the rebase lets air out of the balloon and your part becomes smaller. And everybody else's part becomes smaller, too.", I said.

She thought about that a bit more and then asked: "How does the balloon know if it should get bigger or smaller?"

"The AMPL price determines that.", I replied. "If the price is too high, we blow air into the balloon. Your part becomes bigger. And you might want to sell some of your part. If you sell, that lowers the price a bit. If many other people sell, too, the price is lowered a bit more.

If the price is too low, the balloon shrinks the next day and you might want to buy more AMPL. Especially, because you can sell it when the price goes back up.

People can make money by doing that, you know?"

"Even I could do that!", she said with confidence. "If daddy gives me his phone."

"I believe that you probably could.", I laughed. And she joined in.

After a short period of enjoying our ice-cream in silence, she smiled and said "I will tell daddy that he should give me my pocket money in AMPL from now on."