Today we gonne look at the features of Ampleforth and what it wants to accomplish. Ampleforth is a stablecoin but it’s not as simple as just saying it’s a stablecoin. It works in a way that could be revolutionary because it is not backed by fiat money, a asset, a cryptocurrency or any other commodity.
So why i’m writing this article? Because the technology in most projects are to hard to understand for most non-technical people ( like myself ). And thats why i want to explain what Ampleforth is, how it works and what we can expect. We gonne do this by just staying at the basics.
we gonne take a look at:
- What is a stablecoin
- What is Ampleforth
- The economics of Ampleforth
- The basics of Ampleforth
- The history of Ampleforth
- How does the future looks like?
- Final thoughts
what is a stable coin?
here's a quick reminder of what a stablecoin is and what kinda stablecoins there are. stable currency remains stable around a certain price. This is possible by, for example, the following techniques:
- You have stablecoins backed 1:1 by fiat money. These are for example: Tether (USDT), USD Coin (USDC) and Gemini USD (GUSD). These coins are issued by a central administration.
- You have stablecoins that are 1:1 supported by other types of crypto. You should think of Maker DAO - DAI for example. You can then, for example, give Ethereum as collateral for lending out DAI. DAI in turn is linked to the USD dollar.
- You also have coins that create stable coins by an algorithm. As a result, they are not linked to anything at all. So there is no collateral at all. Here Ampleforth comes in. We gonne talks about this later.
- And finnaly you also have stablecoins that are 1:1 backed by an asset like gold. For example one coin has the name digix. One Digix equals 1 gram of gold. And so it remains stable against the gold price. So other coins that are also backed by gold are PaxosGold and TetherGold.
If you want to know more about stablecoins read my article about stablecoins at: https://www.publish0x.com/liquidattic-crypto-blog/what-are-stablecoins-what-you-need-to-know-xomlxvw
What is Ampleforth?
Ampleforth (AMPL) is an ERC-20 token also known as a Ethereum based token. This means that Ampleforth is built on the Ethereum blockchain. Ampleforth uses an algorithm to stay stable. For example, the price will increase if the algorithm causes the number of AMPL supply to decrease and the price will decrease if the algorithm causes the AMPL supply to increase. In other wordt the coins in your wallet will increase en decrease. This sounds a bit strange when you read it the first time. But the idea of Ampleforth will be clear at the end of this article.
This means that AMPL relies on an algorithm that adjusts the supply. It also means that there is no collateral that AMPL relies on.
To make it even simpler, imagine that Ampleforth is a student that needs to as close as possible to $ 1 and hereby has to stay in class. And that smart contracts are its proffesors and they need to guide the student by pusing him back on track if he gets too high in price or too low in price. Ampleforh as the student is, as it were, put back in class by its professors where he needs to be.
The website of Amplefoth states the following:
The number of AMPL you own can change each day. The AMPL protocol automatically adjusts supply in response to demand. When price is high, wallet balances increase. When price is low, wallet balances decrease.
The economics of Ampleforth
Economic conditions can change every day. This has many different reasons that cannot be described in this article. You can think of economic recessions, wars, new laws and certain technology that ensures progress. You can think of Bitcoin, for example. These conditions ensure that the demand for assets and currencies can change. The value also changes.
In short, this means that suddenly major changes can occur in the economy. In other words, the more complex a certain ecosystem based on fixed liquid assets, the greater certain risks are.
AMPL that ensures that these shocks can be absorbed by adjusting the supply. This is done as fairly as possible. This is the solution that AMPL offers to combat the volatility that other cryptocurrencies, assets and currencies can suffer from.
Ampleforth therefore has the potential to turn the DEFI world upside down. Because Ampleforth can be a unique addition to make DEFI even more fair and decentralized.
The basics of Ampleforth
- In short, the number of AMPLs can change every day. This is because Ampleforth uses an algorithm to remain stable. For example, the price will increase if the algorithm causes the number of AMPL to decrease and the price will decrease if the algorithm causes the AMPL supply to increase.
- AMPL will not cause you to be hit badly by inflation. Because the protocol ensures that the price adjustments are applied proportionally. This happens the same in every wallet. This way it always remains the property of the user of the wallet.
- The problems that other cryptocurrencies have are that they are, for example, much too similar. Most of them have in common that they are very volatile. This can be very dangerous and annoying for traders. AMPL that ensures in a unique way that these price patterns are passed through.
- Due to the fixed supply that other cryptocurrencies have, these cryptocurrency are very sensitive to price decreases and increases. As a result, these cryptocurrencies are not used as stablecoin. For example, it is not possible to continue building towards an economy that runs on bitcoin, for example.
- Due to its unique character, AMPL can be used as a stablecoin and in the DEFI world as colleteral.
The history of Ampleforth
I would like to briefly reflect on the history of Ampleforth. AMPL was created by Evan Kuo. He has also been the CEO of Pythagoras Pizza.
Ampleforth was born from the idea that two things needed to be redesigned. These are today's money and the banking system. Kuo has clearly opted for this to want to reinvent money by making Ampleforth. This would be easier than reinventing the banking system.
The Ampleforth Foundation was founded in the months after the idea was conceived and this has been funded in part by Huobi, Brian Armstrong, CEO of Coinbase.
Ampleforth was created by Kuo and Iles. The Hoover Institute think tank helped write the white paper. Ampleforth was created in the image of a theoretical currency called Ducat. This ducat was invented by the economist and philosopher Fredrich Hayek. The idea behind the Ducat currency was that this currency would see its supply fall and rise in order to maintain purchasing power against certain commodities.
How does the future looks like?
I don't know much about the future yet. It is true that when coins are bought there is nothing to worry about, but when coins are dumped, not only the price but also the number of coins in your wallet changes. This is something to consider. This has made several people think it is a ponzi scheme. However, the project is really a real project with a strong team.
I also think that if the project succeeds in achieving their vision. Then it would do the financial market a lot of good, because it presents itself as a reliable and unique stablecoin. Stablecoins are therefore an integral part of the cryptocurrency world.
In the coming period, the project will have to prove that it is able to achieve stable market liquidity. It should not be the case that the price suddenly rises 30% due to large purchases. This would not benefit the function of the currency. This would only make it a traders coin and not the stable coin it wants to be.
Ampleforth is a unique project that still has a long way to go. But were they allowed to fulfill their mission. Then this can cause a shock wave in the world of stablecoins and DEFI.
The stability of the currency must be guaranteed. Because very large price fluctuations make the currency look more like Bitcoin than a stablecoin. Now I must honestly say that I first had my thoughts about the Ampleforth system. You can lose your coins if the price collapses completely. This is also something to keep in mind.
Nevertheless, I am curious about the further development of the project. And whether they can manage to stabilize liquidity and win the trust of more people. Then this could become a popular stable and DEFI coin.
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I'm not giving any financial advice, this is just a blog for more information. If you have any qeustions or feedback please feel free to address me in the comments.
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- Never give someone your 12 / 24 passphrase!
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- Not your keys not your coins!
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- Don't use centralized exchanges if this is not required!
- If you send your coins or tokens think twice before doing so!