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.
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?
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Most crypto investors want to buy a coin that will increase in value. Why should I buy a coin which per default will never increase in value? As a safe haven compared to the $? But why it should be better than Gold and Bitcoin?
You would usually buy it to preserve your purchasing power.
You can hold Bitcoin , but it can decrease in price, so what do you do to not lose money? You buy USDT or sell for other USD stable coins. But those coins are coupled to the USD, which loses value due to inflation. Here AMPL enters the spotlight. By fixing its target price to the purchasing of one USD in 2019 you theoretically won't lose money. AMPL is a coin that should be valued by it's market cap, not it's per coin value. When the market cap grows you are making money.
Currently what drives many investors is that the price of AMPL is 3$. That means the supply needs to triple in the next weeks to achieve the target price. You can buy AMPL and by holding it you get a huge ROI as long as the price stays more or less around 3$ and the buy pressure continues, which is probably will for some time, since the market cap is still "only" around 100M.
For example I received around 20% of the tokens that I held additionally yesterday. (E.g. you hold 10 AMPL and received 2 AMPL from the rebase)
As long as you sell at the correct time you can make huge profits.
Oh, now I see, interesting. I thought the rebasing would happen by just lowering the value. If the holders get additional tokens, then this is indeed a good opportunity.
To get the tokens, you have to hold your AMPLs on a certain wallet?
Thanks, it was a good tip, bought some yesterday and they went up a lot plus got some extra. Wondering how this can be sustainable.
It's only sustainable because of the high demand and the still relatively low market cap. I think we can go to 1B market cap, so that's approximately 4x from here. After that I'm not sure that this can still grow, depends on some factors, whether it will be added to DeFi apps etc.
I'd be very cautios with the token at this point. The price is still high, but it may drop any day now. The supply is increasing by 20+% daily, so this probably won't keep rising for much longer.
So then spread it in all your networks - let the pump continue :)
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Hey, sorry for hijacking your thread but I see you use the leofinance tag :)
Did you know here are certains benefits and reasons to publish your crypto/finance related posts through the native leointerface;
First, there is now a 10 % tax for posts not through leofinace
Also, it helps a lot with the seo of leofinance. Which means more traffic, which means more ad revenue for leo burns, which means a higher token price, which means more money for you, lel. Please see the following for more info:
Also, me and to my knowledge the other leo whales show a preference when voting for posts through the leo interface. Personally, it's the only ones I check when curating.
So, tldr. You get more leo. Leo gets more expensive and more leo are burned. We all get a lambo.
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Hi, thanks for the tip. I don't really like the (modified) condenser frontend, that's why I prefer posting from PeakD. But I'll try to post from leofinance in the future :).