What is Ampleforth? (AMPL)
Ampleforth is software running on Ethereum that attempts to motivate a network of users to maintain a cryptoasset worth the equivalent of the US dollar.
A type of cryptocurrency known as a stablecoin. There are different ways for these cryptoassets to achieve price parity with other assets. DAI, for example, is hedged by baskets of assets locked in the maker protocol, while USDT is hedged by dollar deposits with a traditional custodian bank.
Ampleforth, however, differs from other stablecoins in its method of maintaining price stability.
Instead of relying on deposits or issuing and collecting debt, the software adjusts the supply of its AMPL cryptocurrency every 24 hours through a programmatically controlled process called “rebasing.”
When the demand for AMPL tokens is high and each AMPL token exceeds 1 USD, the supply increases. If demand is low, supply decreases.
In this way, AMPL is an example of an elastic, non-dilutive cryptocurrency, meaning that the supply can change, but users keep the same share of the total supply when the supply changes.
This means that if you held 1% of all AMPL tokens before a rebasing event, you would still hold the same percentage of coins after the rebasing.
Who created Ampleforth?
Ampleforth, originally called Fragments, was co-founded in 2018 by entrepreneurs Evan Kuo and Brandon Iles.
Ampleforth was designed as a way to distribute cryptoassets to gig economy workers, such as people who might deliver pizzas for Pythagoras, Kuo's original company.
The project raised $4.75 million from investors including Coinbase founder Brian Armstrong and renowned venture firms True Ventures and Pantera Capital.
How does Ampleforth work?
Ampleforth operates a stablecoin called AMPL and adjusts the software-managed supply of AMPL daily to maintain price parity with the US dollar.
In practice, this means that anyone who owns AMPL tokens sees their wallet balances change every day at 2:00 UTC. To be able to correctly adjust the AMPL supply, the protocol must know the price of AMPL and whether it is different from that of the US dollar.
Following the design of AMPL, the parts offering will exist in three states:
- Expansion – AMPL price is above 1 USD, and therefore new tokens need to be introduced into the AMPL economy.
- Contraction – AMPLE price is below $1, leading to withdrawal of tokens.
- Balance – The price of 1 AMPL is exactly 1 USD.
Ampleforth software uses Chainlink, an Ethereum-based data provider, to provide price data.
Why does AMPL have value?
Like all stablecoins, AMPL tokens derive their value from their ability to allow traders to reduce their exposure to the sometimes extreme volatility of many cryptocurrencies in the market.
The AMPL team, however, believes that users will eventually prefer a software-managed stablecoin option rather than a central operator.
As AMPL becomes increasingly popular, his team argues that the degree of modification of its supply should decrease, leading to longer periods of constant supply.