- Ampleforth is not exactly a stablecoin, but due to its flexible supply management, it acts as a stablecoin by maintaining AMPL’s price around $1.
- To enhance the utility of AMPL, the Ampleforth team is creating tools like DEXs, lending protocols, and more.
What is Ampleforth?
Ampleforth was founded by Evan Kuo and Brandon Iles in 2018 and was originally called Fragments. The motive behind developing Ampleforth was to give access to crypto assets to gig economy workers, such as delivery personnel for Pythagoras Pizza, a pizza company founded by Evan Kuo.
Ampleforth operates a stablecoin called AMPL. But it’s not exactly a stablecoin, Ampleforth is software that operates on Ethereum, and it aims to incentivize a set of users to maintain the price of a crypto asset equal to the US Dollar.
These types of crypto assets are known as stablecoins. There are multiple ways through which these coins achieve price parity. For example, DAI is backed by assets locked in the Maker protocol, and USDT is backed by USD deposits in a traditional custodian.
Ampleforth, on the other hand, follows a different approach to attaining price stability compared to most stablecoins. Rather than issuing or redeeming debt or relying on deposits, the platform achieves price stability by remodeling the supply of its AMPL every 24 hours. This process is called ‘Rebasing.’
If the demand for AMPL is high and it leads to the price going beyond $1, then the supply will also be increased, and if the demand is low, the supply will correspondingly be reduced.
This is how AMPL sets an example of an elastic and non-dilutive cryptocurrency, meaning that even if the supply changes, the holders of the coin continue to hold the same proportion of the overall supply of AMPL. In simpler terms, if a person holds 1% of AMPL before a rebasing event, then after the rebasing event they will still hold 1% of AMPL.
The platform has raised nearly $4.75 Million from various investors, such as Brian Armstrong, Founder of Coinbase, and other venture capital firms like True Ventures and Pantera Capital.
What are the Three States of Ampleforth?
While algorithmic stablecoins employ supply-regulating mechanisms, Ampleforth is different as its supply remains flexible, and due to this, the ownership of AMPL is never diluted. This leads to the supply of AMPL in three states:
- Expanding Supply
This means that, when the price of AMPL exceeds $1 due to increased demand, more AMPL tokens are supplied into the market to lower the prices and maintain them around $1.
- Contracting Supply
This means that when the price of AMPL falls below $1 due to diminished demand, the supply of AMPL is retracted from the market in order to increase the price and maintain it at around $1.
- Equilibrium
As the name suggests, in this case, there is no change in the price of AMPL, which remains at exactly $1.
AMPL tokenholders witness a change in their wallet balance every day at 2:00 pm Coordinated Universal Time (UTC) due to Ampleforth’s token price and its economics. To find out if there is a need for token supply adjustments, the platform uses Chainlink, a blockchain oracle developed on Ethereum, to get price data.
