Understanding Ampleforth Rebases

Understanding Ampleforth Rebases

By okean123 | Get-Crypto | 11 Jul 2020


 

Ampleforth is an adaptive money built on sound economics. This is how Ampleforth describes itself. It tries to create a stable coin, not stable in USD value, but stable in purchasing power. Most cryptocurrencies are heavily correlated to Bitcoin, AMPL tries to solve this problem,by decoupling from Bitcoin using a system that automatically adjusts the supply of the token.

In this post I try to explain what an Ampleforth Rebase is and how it works as short and easy as possbile, while still giving some technical details.


Ampleforth How does Ampleforth work?


Reaching the AMPL target price


The token of the Ampleforth project (AMPL) is supposed to hold the purchasing power of one US dollar in 2019, according to the Consumer Price Index (CPI). It is allowed to fluctuate in a 5% area around this value.

Let us call the the target price P and a 5% deviation from it in any direction δ.

If the price of the token goes over P + δ or under P - δ, the protocol begins to increase or lower the supply of the token, to allow it to again reach the target price. This is done by proportionally distributing tokens to all token holders when the price is too high and proportionally removing tokens from all token holders when the price is the low.

This process is called Rebasing and happens once every 24 hours.


Smooth supply adjustment

Obviously it wouldn't be very smart to try to correct the price in one day. That's why the protocol assumes that that the supply adjustment will occur evenly distributed over the course of 10 days.

An example: Let's assume the target price is 1$ (it's 1.009$ currently) and the current AMPL price is 2$ per AMPL.

The price difference can be corrected by increasing the supply by 100%. This means that the suppy will be increased by 100%/10 = 10% on the next day. So for every AMPL that you hold you will receive another 0.1 AMPL .

Note that the protocol assumes that the supply adjusting will happen in 10 days and changes the supply accordingly, but every day a new supply target is computed.


Market and CPI oracles

Of course the Ampleforth protocol needs to somehow acquire knowledge about the current AMPL price and the current dollar value in regard to the CPI. This could be done in a centralized way, for example by fetching the price data from Coingecko or CMC. Instead Ampleforth uses decentralized oracles: Their own Ampleforth oracle and a Chainlink oracle.


You can find the relevant data, regarding supply, current price, CPI target price etc on the Dashboard on https://www.ampleforth.org/dashboard.

Do you have any other questions about Ampleforth? What do you think about the project?


Read this article on PeakD: https://peakd.com/ampleforth/@okean123/understanding-ampleforth-rebases



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