Ampleforth: everything you need to know

By Roberto D. | CryptoFarm | 25 Nov 2020

From today on Publish0x you can earn Amplefoth (AMPL) and it seemed right to explain what this currency is, how it works, the use cases and its vision. In short, sit comfortably because there is a lot to say, but let's not waste any more time and start right away!

Ampleforth is a revolutionary cryptocurrency project that aims to build an adaptive monetary base powered by the AMPL token, an ERC20 token running on Ethereum.

In general terms, AMPL provides diversification to your cryptocurrency investment portfolio due to its low correlation with other cryptocurrency assets.

AMPL aims to be used as collateral for DeFi's needs (when it obviously achieves lower price volatility).

In the long run, it aims to be a new type of algorithmically regulated stablecoin that focuses on targeting a stable price range based on US inflation.

AMPL is UNIQUE thanks to a daily adjustment mechanism of the offer based on the weighted average price of AMPL.

Unlike other cryptocurrencies where the price is the only variable to be taken into consideration to evaluate the token, in the case of AMPL, the metric to keep an eye on is the AMPL offer itself.

AMPL is also non-dilutive, which means that if you have purchased 1% of the supply today and keep it for 2 years, you will still have 1% of the supply.

How does it work?

To sum it up, AMPL is aiming for a price range between $ 0.96 and $ 1.06. If the price is not in this range, the protocol lowers or increases the offer, this procedure is called "rebase" (keep this in mind).
The rebase takes place every day at 02:00 UTC.

Every AMPL holder is affected by the rebase, there is no way to escape the rebase even if you hold the AMPL in a private wallet such as Metamask, Ledger or MyEtherWallet. Among the exchanges I point out KuCoin, the "big absentees" are Coinbase and Binance.

The protocol will (automatically) adjust your bid based on the daily weighted average price of AMPL over the last 24 hours, every day.

Exactly like that:

If the price is higher than $ 1.06, the AMPL offer increases, all AMPL owners automatically get extra AMPLs.
If the price is less than $ 0.96, the AMPL offer decreases, all AMPL holders lose some of their tokens.

Remember that even if your AMPL offer increases or decreases, keep the same % (percentage) of the offer. You will never be diluted with rebase.

Added value: inflation

The AMPL is adequate for inflation:

Today's $ 1 will also be worth $ 1 in two years in real terms, which means it takes inflation into account to make sure your purchasing power stays the same over time in REAL terms. Other Stablecoins point to nominal terms, do not take into account dollar inflation (Tether, USDC, etc.).
At the moment, the AMPL is not stable even if inflation in the United States is low for the moment but, with the monetary experiments currently in place, conducted by the Fed, the future could be different.

For a detailed explanation, we suggest you read "the AMPL Red Book", you will find the link in the resources of this article.

AMPL is not a Ponzi, and I'll tell you why.

There are hundreds of tweets from "noobs" circulating online who claim that Ampleforth is a Ponzi scheme because of the positive rebase and other nonsense.

But what is a Ponzi scheme?

By definition, a Ponzi scheme is:

A Ponzi scheme is a form of fraud that attracts investors and pays profits to previous investors with funds from newer investors.

Ponzi schemes share similar characteristics and promises such as:

High returns on investment with little or no risk: Cryptocurrency projects offer a high return but also carry a high risk. Ampleforth is no different. There is no mention of a high return on investment on their website. AMPL is a speculative token like BTC or ETH. So it's not a Ponzi.
Excessively consistent return: a very frequent phenomenon in the crypto sector in which economic returns are promised that are too high compared to the amount invested, and therefore unreal.
Secret or complex strategies: there are no such strategies. Everything is explained in the Whitepaper and on the Ampleforth website (the famous "red book" mentioned above at the end of the article). Perhaps the AMPL mechanism of daily supply adjustments is not familiar to many, but there is nothing secret about it.
Difficulty in receiving payments: AMPL is bought and sold like any other token on centralized or decentralized exchanges.

I also point out that there are several pools for AMPL, one of the largest is Uniswap's AMPL-ETH (in case anyone is interested).

Also, trying not to sound trivial, I would like to point out that Publish0x has introduced Ampleforth as a crypto that can be earned on the platform. Those from Publish0x are not stupid, and this is further confirmation that this is not a Ponzi scheme.

Ampleforth's use cases: Diversification and Speculative (and Usability)

The use case of Diversification

Currently, AMPL has a good value proposition and low correlation with other crypto assets.

Unlike the hundreds of shitcoins on the marketcap, which more or less explicitly follow Bitcoin's price movements, AMPL works differently thanks to its supply regulation mechanism.

The diversification use case is nice but not enough to become a multi-billion dollar token.

The case of Speculative use (and Usability)

Ampleforth introduces with its AMPL token, an important innovation in the cryptographic space; a DYNAMICALLY regulated offer, which aims to be used as a long-term stablecoin.

There are three cryptographic innovations for now:

Cryptographic innovation began with Bitcoin and scarcity is the alternative to the collapse of the traditional financial system proposal.
So the second big innovation came with Ethereum and the release of smart contracts.
The third major innovation was the creation of stablecoins.
And the fourth? Ampleforth brings the fourth major innovation: a dynamically adapting offering token that keeps its speculative aspect intact and at the same time aims to provide the same usability as stablecoins.

Crypto: speculation and usability.

On the one hand, Bitcoin and Ethereum are good vehicles for speculating but not useful for paying for goods due to their speculative nature and such high volatility. They will never be stable even in the long term. Stability is not their ultimate goal and that's okay.

On the other hand, stablecoins are useful as they should be worth a US dollar at all times, which means they can be used to pay for goods and services quite easily. But they do NOT have a speculative use case.

So what's the point? AMPL combines both speculation and usability.

In fact, the price can fluctuate freely based on supply and demand like other unstable cryptocurrencies. Even if the offer is adjusted daily with a positive or negative rebase, the price can move outside the target range.

It means that if there is a huge demand for AMPL, the price will remain above $ 1.06 leading to an expansion of the supply (more AMPL will be coined). When people speculate that AMPL will be worth more in the future, market cap expands on positive declines.

What if it was successful as a long-term stablecoin?

You have to imagine that AMPL is currently still small (referring to market capitalization) and experiences high volatility due to short-term traders who buy and sell to profit from inefficiencies by exploiting rebase events. As a result, AMPL is highly volatile.

But as AMPL grows, we expect to see less volatility in the future as the AMPL system will become more resilient and stronger whenever the system "doesn't break".

Arbitrage traders will also emerge and contribute to lower volatility in the future. As a result, the negative and positive discounts will get smaller and smaller, which will lead AMPL to stay in the price range of its target. The foundation could also put in place incentives to reduce price volatility.

To achieve stability, liquidity is a very important factor in its success. In fact, greater liquidity and a lower spread result in lower price discrepancies, supporting the stability of the AMPL.

Once relative stability is achieved by staying within the defined range, AMPL could be used effectively for payments.

Possible risks

AMPL, by its nature, is very risky and is in uncharted territory and could fail.

In fact, if the protocol cannot bootstrap on its own thanks to the high demand for speculation, it will remain useful only as a diversification asset for those with a crypto portfolio, and that's it. In this case it would not be useful for collateral and will never reach stablecoin status (if it remains as small as capitalization).

Recently, in the United States, a document emerged saying that stablecoins should be stopped because they threaten the stability of the traditional financial system. AMPL could also be affected if relevant regulations come into effect. In this case, AMPL would be forced to follow the rules imposed by the US authorities.

Of course, it's worth remembering that AMPL is based on smart contracts, so a hack is always possible even if the code has been verified by well-known auditors.

But the risk of a hack must ALWAYS be considered when investing in DeFi protocols.

Conclusions and key points

Ampleforth is definitely a project to keep an eye on and for more risk-loving investors (in light of all that said here), a token to have in their wallet.

AMPL offers a revolutionary non-dilutive token that automatically adjusts its offer, aims to combine the speculative aspect of Bitcoin and the usability of stablecoins.

It already has a proven use case: providing portfolio diversification for crypto funds due to its low correlation (or non-correlation) with other crypto assets.

The wait is to see it used as a guarantee for the DeFi ecosystem.

In the long run, AMPL could be worth billions of USD if it reaches stablecoin status when the price becomes relatively stable.

In the short term, it is reasonable to expect AMPL to be listed more and more on major exchanges as KuCoin, also waiting for Binance and Coinbase.

As a final information, it is good to report the capitalization of Ampleforth and its price (see the box below)

With this article I would like to start a kind of series by talking a little about all those crypto that FOR ME is good to keep an eye on. The articles will always have this structure and the title will always specify that, within the article, there will be "everything you need to know".

I hope you like the idea and that you liked the article, anyway I would like to know yours about Ampleforth, what do you think? Do you foresee a bright future for this currency or is it doomed to failure? In short, let me know yours.

As always, thank you for making it this far, and see you next time!

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