With the goal of this article (and competition) to focused explaining Ampleforth as simply as possible I decided to take a bit of a step back before getting started. The first question it is important to address was how is it best to communicate information. The Ampleforth project has a reputation for being a little complex. So in order to explain the basic concepts simple I decided to approach the article from a few different angles. Indeed, we all have similar capacity for learning, it is just that the methods we need to engage with are different from one person to the next. With that in mind I decided to consider different learning techniques and apply these to the basics of the Ampleforth Protocol. The goal being to increase the chances everyone can get something from it.
Please consider this an educator's tool kit, have a go at the the different things yourself and please provide feedback in the comments if one method or another really stood out as being helpful for you.
For these materials we'll go through 4 main learning types:
- Visual - Preferring a pictorial approach
- Auditory/Vocal - Listen/speak and learn
- Reading/Writing - A text driven approach to learning
- Kinesthetic - Learn by doing, an interactive approach
When we think about visual learning it is the association of images with words that is important. Also, as the old saying goes:
"A picture is worth a thousand words"
EDIT: @TomatoSoup was asking how the algorithm adds or removes tokens from your wallet without executing any transactions and without running up a gas bill like no other (a valid question!). The answer is this, the global 'exchange rate' is set by the protocol to alter the public view of the number of tokens in your wallet.
If you are a vocal/auditory learns it can often be useful to build things into a rhyme or song. Try reading the rhyme about the mechanics of AMPL aloud.
Next up we can create a limerick to help remember that our proportion of funds are not diluted by the changes in supply.
Finally, we can go through the the letters of "Ampleforth" in an alphabetic fashion, this will help us to remember key information from a simple anchor word.
For some folks the best way by reading the written word and/or writing repeating or testing ourselves. So using a questions and answers format as well as completing the blanks can be useful. Read the statements below and answer the questions in the comments with the format (A1, A2 ... An). The first 5 people to complete this task and add their Banano address will get some BAN as a reward.
AMPL is an ERC-20 token that is exists on the Ethereum blockchain. The goal of the Ampleforth Protocol is to reach price equilibrium by aiming for a target price equal to the 2019 purchasing power of $1 (+/- 5%). It does this by increasing or decreasing the supply of tokens in order to encourage the market to sell or buy as a means of adjusting the price. These increasing or decreasing supplies are the end productions of two main protocol states: Expansion and Contraction, respectively.
The protocol is prompted to make adjustments to supply (known as rebasing) by using Oracles that monitor the price action over the previous 24 hours. The protocol then calculates the amount of supply increase or decrease needed before executing it the rebases at 2am UTC the following morning. Rather than changing the supply all in one go the protocol actually staggers the increase or decrease over 10 days. This gives a smoothing effect and allows for the market to adjust fluidly along with the supply.
Despite the supply potentially changing on a daily bases the protocol is non-dilutive. That means that the relative proportion of the total supply held by each wallet will not change as a result of a rebase alone. For example; if you have 100 AMPL in your wallet and the current total supply is 100,000,000 AMPL this means you have 0.0001% of the total supply. If then there is a positive rebase and the supply increases by 2% you will have 102 AMPL in your wallet, but the overall total supply will also have adjusted to 102,000,000 AMPL. So, on the surface it looks like you have more money (great!) but when you look closely you still have 0.0001% of the total supply.
When your total number of AMPL increases but the market price doesn't drop substantially this creates a market opportunity. Where on Day 0 you may have had ~$100 of AMPL you may end up, on Day 2/3 of rebasing, closer to ~$110 of AMPL. When you see this opportunity it creates an incentive for you to sell and potentially make 10% profit on your investment. This in turn puts downward pressure on the price and helps move it back towards equilibrium. In effect the price is controlled by managing the supply rather than by the value of underlying collateral (as is the case with DAI for example).
- 1) When there is a positive rebase this means we're in the ___________ phase. Similarly, a negative rebase is indicative of a ___________ phase.
- 2) What is an Oracle?
- 3) How many days does the protocol aim to adjust the supply over?
- 4) What is meant by the term non-dilutive?
- 5) What is the target price for the AMPL protocol?
For this last group it can be a bit more involved, personally I fit more with this learning type (which is why I often write how-to guides). In order to create a way for someone to learn while having a go I wrote a small game and published it on the website below. Here is a basic explanation of the way it works, but if you're like me you've probably skipped ahead already to the link, hope you enjoy it!
The aim of the game is to use the BUY/HODL/SELL buttons to try and keep the current price of AMPL in the target range. The markets will randomly fluctuate on their own and behave more erratically the further you get from the target. The game score increases while you are in the range and, while outside of the range the supply will adjust based on the distance from the target. Click on the image or link below to get started.
I really enjoyed putting the pieces of this article together and I hope you, as the reader, got something from it as well. Please feel free to provide any additional feedback you have about the different learning techniques.
Thanks for reading, Happy New Year!