Ampleforth is a cryptocurrency that is trying to reinvent money. The protocol’s proprietary token, AMPL, is designed to be used as collateral for decentralized banking systems and as an alternative base currency for the crypto economy. AMPL functions as an ERC-20 token on top of the Ethereum blockchain.
The Ampleforth protocol differs from other DeFi protocols by introducing a ‘countercyclical’ economic policy. Simply put, this means that as the demand for AMPL increases, the supply of tokens also increases to compensate for the price changes. This countercyclical basis is very beneficial from an investment perspective as it gives AMPL a low correlation with products such as BTC and ETH.
Such a system is very good for achieving a stable price for the long term. Ampleforth’s goal is to bring in money from commodities without the strict restrictions imposed by commodities with supply and issuance caps, such as BTC and gold. This way there is greater scalability.
The unique AMPL token
What makes AMPL unique from other crypto is the supply and demand of the token. A so-called ‘primitive’ is a basis for building a complex system. Primitives are well-known low-level cryptographic algorithms used to build protocols for computer security systems.
Bitcoin is the primitive for a censorship-resistant payment trail; Ethereum has taken this primitive one step further by adding smart contract support to the network.
In economics, equilibrium is defined as a state in which supply and demand in a market are perfectly balanced. Ampleforth defines equilibrium as a state in which a change in demand results in a one-to-one change in supply.
For example, if there are 100,000 AMPLs and the price increases from $1 to $2 due to the increase in market demand, the network will set its target price at $1 and increase the supply by 100,000 AMPLs. The supply would increase from 100,000 AMPLs to 200,000 AMPLs in a process called ‘rebasing’.
Rebases do not dilute existing token holders. Think of it as owning a fixed percentage of the network rather than a fixed amount of tokens. Moreover, it is executed in a decentralized manner utilizing the unique capabilities of ERC-20 tokens.
So, without Ampleforth stealing the market share from token holders, those 300,000 AMPLs just created by the protocol will be distributed fairly among the addresses of existing AMPL token holders. This equilibrium is achieved when a twofold increase in supply is offset by a twofold decrease in price, leaving the market cap stable at $200,000.
We can make it much clearer by giving an example. Ampleforth sets up a financial incentive for users to help the network strike a balance. The network relies on for-profit users to restore balance on the demand side once the change in supply is over. As an asset whose price is determined by the open market, users can sell their newly purchased AMPLs for $2, putting pressure on the market and pushing the AMPL’s equilibrium price to $1.
But AMPL’s price target (market equilibrium) should not be confused with the concept of a stable coin . While stable coins have fixed prices and aim to eliminate volatility, AMPL simply aims for lower volatility than BTC and ETH using established rules.
In fact, the protocol provides the right incentives to ensure that users abide by the rules and strike a balance. By putting demand in the hands of the market, AMPL ensures that price formation is shaped by the free market, but it also jeopardizes equilibrium until the market capitalization increases.
When the market cap increases and thus AMPL becomes more liquid, trading activity increases and crypto traders fight to execute orders. AMPL’s algorithm ensures that in that case the price does not go up and down too quickly. This brings several advantages, which we will talk about later in this article.
What is AMPL used for?
AMPL is mainly used as a means of exchange and payment. Ampleforth can increase the supply to meet the demand of billions of users, but it can also outsource the supply if it only serves 1,000 users.
The flexible supply movements make AMPL ideal for building a digital economy around it. Therefore, it can become the perfect form of collateral for DeFi. It is also very advantageous for many crypto traders to have in the wallet, since there is a lot of potential in this project.
But the project has a different, broader objective: to provide an independent alternative to central bank money. This is a long-term goal, as Ampleforth must first gain the trust of the community and prove its usefulness as a reliable medium of exchange and store of value.
What is the purpose of Ampleforth?
In 1944 the face of money changed forever. At a conference in Bretton Woods, New Hampshire, the countries that make up the United Nations decided to abolish the gold standard, leading to the adoption of the exchange rate system that exists today.
The US dollar was chosen to become the reserve currency of the world. In this system, the dollar was pegged to a certain amount of gold, and other currencies were pegged to the dollar. This was done with a view to economic stability.
The implementation of the conference’s commitments marked the beginning of a 25-year process of dismantling gold’s role in the global economy. In 1971 gold was simply a commodity.
The fact that gold had disappeared from view was the main reason why growth continued at a rapid pace. The supply of gold was limited and could not match the issuance of gold with the pace of growth. For that reason alone, it was a poor world reserve currency.
However, the separation of gold and money gave governments the power to inflate the money supply as they saw fit, rather than increasing and decreasing it based on market demand.
AMPL eliminates supply control
This is where Ampleforth comes into the picture. AMPL takes the flexible supply concept of fiat currencies and eliminates totalitarian control over that supply.
It is gold that increases and decreases the supply based on the market and how the market dictates. The core point of Ampleforth is that the market, not the founders or a government, determines what form the offer should take.
Imagine if the world had never been taken off the gold standard. The limited issuance of gold per year would have limited growth because its price cannot fluctuate. Now imagine gold as a digital commodity whose supply increases during periods of high demand and decreases during periods of low demand. And all based on data and sentiment rather than the opinion of the experts who form a ‘board of directors’. That, in a nutshell, is what Ampleforth is about.
Where can I buy AMPL?
AMPL coins are very popular, and can be purchased from various cryptocurrency exchanges. Think, for example, of Bittrex, Coinmerce and Binance . We recommend that you buy AMPL from Binance or Bitvavo , as these are safe exchanges with high liquidity. In addition, you also pay low transaction costs at these crypto exchanges.
When you use Bitvavo or Binance, you have bought AMPL within a few clicks with iDeal or credit card. This is a much faster, safer and more reliable way than using a decentralized exchange like Uniswap . The chance that a transaction on a DEX will go wrong is quite high.
How can I save AMPL?
Fortunately, AMPL is an ERC-20 token, you can keep it in almost any wallet. It does not matter whether this is an online wallet or a hardware wallet . Most wallets support ERC-20 tokens, because this is the most commonly used protocol for tokens (after all, most crypto projects run on the Ethereum blockchain).
However, if you have a lot of AMPL in your possession, we recommend that you store it in a hardware wallet. This is generally a lot safer than an online wallet, because a cold wallet is not continuously connected to the internet. This ensures that hackers cannot access the wallet once it is not connected to a device. You must of course store the cold wallet in a safe way.
Before you buy a hardware wallet, it is wise to always check whether it supports AMPL tokens. That way you won’t be faced with any surprises.
Is AMPL a wise investment?
The most important question you are probably asking yourself is whether AMPL is a wise investment. By researching the token, you can determine if it is a good time to buy AMPL. After all, you want to do this for the best price. Therefore, do not buy AMPL when the price is in a peak. It is best to buy AMPL when the price has come down.
Because AMPL’s team is made up of experts and has a well thought out plan, there is a good chance that AMPL will increase in value in the future. However, don’t expect strong peaks and troughs in a short period of time; after all, the project has a technique that prevents this. AMPL can therefore be a wise investment for the long term. However, it is again important to mention that you should always do good research yourself into the tokens you want to invest in.
The advantage of AMPL
Bitcoin was once created to serve as a means of payment. However, that is not happening at the moment. And for the following reason: the price fluctuates too much. If you pay something with 1 Bitcoin today, the value of that Bitcoin can already rise by $5,000 the next day. As a result, you have in principle made a loss on your purchase.
It is also not convenient for the recipient. When they receive Bitcoin, the value of this Bitcoin could have already fallen by $10,000 the following week, making a loss on the sale.
This is precisely the reason why it is still possible to pay with Bitcoin in so few places. AMPL uses their technology to ensure that the price of the token remains stable. This suddenly makes AMPL very attractive for making payments, as the payer and recipient can be sure that the value will not rise or fall quickly in the days after the transaction. It removes the risks Bitcoin suffers from when it comes to making payments.
Ampleforth (AMPL) Price
AMPL is thus a cryptocurrency whose value goes against the traditional cycles of supply and demand. In this way, AMPL tries to ensure that it is not subject to severe volatility. This is an advantage for many crypto traders when they want to use crypto as a means of payment.
However, it is important to note that AMPL is still an experiment. It is a new idea that still needs to be tested on a large scale. Until it has already done so, it is difficult to determine whether this project will actually succeed. The future will show what happens to AMPL when it attracts more users.
However, the idea of AMPL is very strong. Many people do not get into Bitcoin or Ethereum because the price rises too much and falls in a short period of time. As a result, it is actually not usable as a means of payment, while it is intended for that in the first place. AMPL tackles this problem at the roots by applying a technique that counteracts the strong price movements.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com