Ampleforth? How To Explain It To Children and Grandparents

Ampleforth? How To Explain It To Children and Grandparents

Ampleforth (AMPL) is a token with an elastic supply. Surely this is the main token of this type (there is also Base Protocol which modifies its supply based on the market capitalization of all crypto and Ditto on the Binance Smart Chain). It's a bit like having a 1 meter long spring with someone trying to lengthen or shorten it. If it is stretched too much, someone in the opposite direction tries to bring it back to 1 meter in length. If it is shortened, the same happens bringing it to the original size. The value of AMPL must remain around 1 dollar (Targer Price: 0.96-1.06$).


But how do I keep this at $ 1? The value of each cryptocurrency depends on the supply / demand. When an asset is in demand... it gains value. The value increases further if the supply is limited.

If I buy 6 Bitcoin (and I don't sell them) in 1 day, 2 days, 10 days I will always have 6 Bitcoin in my wallet. Obviously, what change will only be the dollar value. If I have 6 videogames, after months I will always have 6 (if I don't sell them and add others to my collection).

This is not the case with Ampleforth. If I buy 6 Ampleforth, every time the rebase happens I can have 6 Ampleforth but also 6.25 or 5.92 (example). The reason is that, based on the value of 1 single token, the supply is decreased or increased.
This is because AMPL must always have a value close to 1 dollar (the only way to lower / increase it is to modify the supply). Our Ampleforth balance is precisely how a spring can increase or decrease in length.


What happens then?
1) When its value EXCEEDS its target price ($ 1.06), the ecosystem increases the supply of AMPL by reducing its scarcity. This leads to the sale of the coin by decreasing its price

2) Conversely when the value goes DOWN (0.96$), the supply of AMPL decreases by increasing the demand (and this increases the value of the token). 

3) If the value stays on the dollar (0.96-1.06$), nothing happens. That's okay!

Let's take an example: if AMPL increases from $ 1 to $ 2, the bid is doubled and divided 10 times (in short, the bid increases by 10%).
Rebase: 10%
If I have 100 AMPL (example), when rebase occurs, I will receive 10% AMPL (I would have 100 AMPL + 10 AMPL). This is to keep the market capitalization and my share held unchanged.

I report what happened to my balance after I received the payment from Publish0x. I initially received 5.38 AMPL and after 5 days there was an increase of about 16% of my tokens (6.26 AMPL). 


Obviously the balance, based on the value of AMPL, can also decrease!
In fact it dropped from 6.26 AMPL (December 5th) to 5.81 AMPL (today) but still higher than the original transaction (5.38 AMPL):



But how does the Target Price work? The value is established by a network of oracles (Chainlink) which takes it from the Consume Price Index and then averages it with other markets (to avoid any manipulation). The decentralized oracle does the calculation and at 2 am the rebase takes place: difference between the price of AMPL and that calculated by the oracle (the confidence range is + / -5% on the price).


To learn more about Rebase: Ampleforth (Rebase)

To follow them on Twitter: Ampleforth (Twitter Page)


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