Why Ampleforth's Elastic Supply is Such a Big Deal?

Why Ampleforth's Elastic Supply is Such a Big Deal?

By DrBreakThru | PayAttention | 9 Nov 2020


On May 20, 2019, Ampleforth (AMPL) – a uniquely different cryptocurrency with an algorithmically adjusted circulating supply – was founded with the release of the Ampleforth whitepaper

Just 1 month later, the AMPL token launched through an Initial Exchange Offering (IEO) and began trading under the radar, that is until June of this year when Ampleforth launched Geyser – AMPL’s Liquidity Incentive Program.

During this time, Ampleforth caught the DeFi wave landing in the top 100 on CoinMarketCap and also became the number 1 pool on Uniswap – WETH:AMPL pool

Ampleforth was in the spotlight and for good reason. 

The AMPL token is a revolutionary new cryptocurrency that redefines decentralized money with its near-perfect supply elasticity built on sound economics – whereas the supply of AMPL is automatically adjusted in response to demand on a daily basis. 

The Problem with Infinite & Fixed Supplies

Let me first start with infinite money supplies.

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Money Printer go Brrrr meme (source)

The problem with infinite money supplies is that it leads to inflation. Period.

So what’s inflation and why is it a problem?

Have you seen the prices of a McDonald's menu from 1970?

1970's McDonalds Prices | ushanka.us

When you have an infinite supply of money and new money is being introduced into circulation, the purchasing power of everyone’s existing dollars goes down, hence why prices go up over time.  

To provide another example, say there’s a pie with 4 equal pieces, and 1 piece belongs to you. Now say the government decides to increase the number of pieces of pie to 8, but you still only get 1 piece of the pie. The pie itself does not grow larger, but your piece of the pie does get smaller. 

In a nutshell, this is inflation. 

Inflation caused by an infinite money supply is essentially theft or as some call it, a “hidden taxation”. And this is how our governments are devaluing our money. 

They’re constantly making that money printer go brrrr, in order to artificially prop asset prices up and to keep them from falling. 

So yeah, an asset class with an unlimited supply (ie. fiat currency) does not make good money, and the world will find this out soon enough. 

Now, what about money with a fixed supply?

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Bitcoin logo

A perfect example for this one is the one and only, revolutionary Bitcoin (BTC).

Bitcoin is a great store of value when everyone knows its supply is fixed at 21 million BTC, however, as stated on the Ampleforth website:

“In the case of fixed supply currencies like gold, silver, and Bitcoin, the volatility of demand translates into the price, [and only the price.]”

“For this reason, sudden shocks in demand can destabilize ecosystems supported by fixed supply assets. The greater the complexity of an ecosystem built on fixed supply assets, the greater the risk of cascading failure. ”

Said another way: 

The only way to accommodate the increase in demand for a fixed supply asset, like Bitcoin, is for the price to go up. This can be problematic because constant price changes make it incredibly difficult to denominate things like services, contracts, or debt.

That said, both infinite and fixed money supplies have serious problems when it comes to varying market conditions and economics. 

Why Ampleforth's Elastic Supply is a Breakthrough? 

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AMPL is not fixed like Bitcoin and it’s not infinite like fiat. It’s somewhere in the middle.

In an effort to address the shortcomings of infinite supply monies (fiat currency) and fixed supply monies (Bitcoin), the team behind Ampleforth developed an adaptive digital currency that adjusts supply daily based on market conditions. An asset with such mechanics is only possible just recently with the recent blockchain discoveries. 

The masterminds behind Ampleforth (AMPL) are two math heads, Evan Kuo and Brandon Iles who are accompanied by a team of 6 individuals with backgrounds in major tech companies like Google, Visa, and others. 

Kuo and Iles gave AMPL the ability to fairly and automatically adjust its supply in response to demand without any need for a centralized third party like a bank. It was designed this way to be the simplest direct solution to the supply inelasticity problem.

But what exactly is AMPL’s elastic supply?

The elastic supply aspect is what makes Ampleforth so different from other types of cryptocurrencies as the number of AMPL you own can change each day in response to demand based on market conditions. 

In other words, the total supply of AMPL is increased or decreased on a daily basis and this change in supply is based on demand. The supply is not fixed like Bitcoin and it’s not infinite like fiat. It’s somewhere in the middle and it’s possible only as a virtual asset.

Okay, but how does AMPL’s supply actually expand and contract? 

Ampleforth’s elastic supply is governed by a daily rebase mechanism that automatically and proportionally adjusts the supply of AMPL across all wallets in response to demand. 

The daily rebase occurs every day at 10 pm EST and is dependent on whether the Price of AMPL is above or below its oracle price of a 2019 1 USD peg. If above $1.06, the total supply of AMPL will expand. If below $0.96, it will decrease. You can preview the percentage of previous rebases here.

That said, the number of AMPL you own can change each day. Some days you’ll have more AMPL and somedays you’ll have less, but it’s important to remember that your ownership of % total supply is never diluted.

With this, Ampleforth introduces the second factor (aside from the price) investors constantly must pay attention to when investing. 

For example, even if the price of AMPL stays flat $1.20 for a couple of days then during that time, under the hood, holders are experiencing approx 2% more of tokens in their wallets at the end of the day. At the same time, for regular traders familiar only with price fluctuations, AMPL would go in a boring sideways movement.   

With that said, AMPL is adaptive money with a monetary policy built on sound economics. AMPL is not a stablecoin. It's just an asset that adapts to the demand.

How Community & Investors Reacted?  

For instance, Michael Arrington, the founder of TechCrunch and CrunchBase sent out a tweetstorm in July highlighting how intriguing and innovative Ampleforth is:

In addition to Arrington showing interest in Ampleforth, a multitude of other bright minds have shown tremendous interest and are even backing Ampleforth. 

Some of Ampleforth’s backers include Brian Armstrong from Coinbase, Joey Krug from Augur, Paul Veradittakit from Pantera Capital, and so many more. 

Overall, with backers like these, people will soon start taking notice of Ampleforth once again. In fact, just recently on November 2, 2020, Ampleforth broke 600,000 on-chain transfers: 

What's more, Ampleforth's tokenomics laid out the foundation for other famous Defi tokens such as Yam, Based, or OUSD. 


DrBreakThru
DrBreakThru

I'm a simple guy, I see a crypto breakthrough, I talk about it


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