General Crypto


The topic of today’s post is the Ampleforth (AMPL) token, a very interesting algorithmic stablecoin. It uses an interesting elastic supply mechanic as it’s method of rebasing to maintain it’s peg. There is even community governance, so it’s a pretty interesting project.

For the usual disclosure, I am not a financial advisor, I don’t even work in finance at all. My day job is as a telecommunications software engineer. Treat everything you read here as some educational resources and not financial advice.

How Does It Work

The Ampleforth (AMPL) token uses an elastic supply to manage it pegged price, and it does it so that the supply is never diluted. To understand how it works, we need to first understand what an elastic supply means. An elastic supply means that new tokens can be created or destroyed, as needed, based on the demand for it.

It does this by having a target price, current set at $1.042 USD per AMPL token. If the demand for the token goes up, this will drive the price up from that point, which will cause the rebase function to want to bring the price back down towards that price. It will do that by increasing the supply, but it does it so that every holder has their balance adjusted so that they maintain their overall total of the supply.

Likewise, if the demand for the token goes down, the price will drop off, and the rebase function will work in reverse and the total balance in your wallet will go down. This may seem scary, but remember, it’s in response to the price going down, so as a holder of the token, you were getting those loses one way or the other.

The price does have some wiggle room it is allowed to move within, before it kicks into a rebase, 5% on either side of the target price. If the price is within that range when the rebase function is called, no changes to the supply will occur on that day.

The rebase function kicks in once per day, but it does not do the entire shift all at once. It will spread it out over a period of 10 days, so you only see a movement of about 10% towards the target price on any given day. It also does not keep track of the previous day’s changes or prices, so everyday it starts the calculation fresh and get’s a new amount to move.

Because the rebase maintains everyone’s ratio of the total supply, there is no dilution occurring when the supply expands, unlike say when a government prints more money to add to circulation. Since they are not equally distributing it out to everyone who holds any of their fiat currency, the supply become diluted, and that in turn generates additional inflation.

There are two price oracles in use by the system, the first keeps track of the current AMPL/USD exchange rate, and the other keeps track of what the target price should be, and both are fed into the rebase function where it does it’s magic to handle the rebasing. These are of course being handled by Chainlink, which I’ve done a whole article about here.

The Ampleforth (AMPL) token has a lot of community control through its Ampleforth Governance Token (FORTH), where the community can vote on proposed changes to the protocol. There is also a delegation mechanic where you can have someone else vote on your behalf. Protocol governance is something I am going to cover in a later article, but it’s always a good thing to see, when a project team lets the community have a say in how the protocol operates and grows.

You may ask yourself why it would want to go through all the hassle of rebasing everyone’s wallet every day, and the answer is just simply because then it lets AMPL be a pretty good stablecoin as far as being able to be used day to day to say pay for goods or services. It’s not a traditional stablecoin in that you can use it to store value and have it stay the same, but you could use it to have someone pay you for a service, and be reasonable sure that the price should be relatively stable as it goes, as looking at the price charts, it stays within the range pretty well.

An Example

Let’s walk through an example of how this works, to help lock down just how the supply rebasing works. We are going to pretend two things that are not true here to make the math and whole process easier. We’ll pretend that the target price is $1.00 even, and that the entire rebase happens in one go.

We’ll say you have purchased 10 AMPL for $1.00 a piece, so $10 in total. Now, the price has suddenly pumped up to $2.00 as their has been a big run on people wanting AMPL tokens. So you are sitting on 10 AMPL tokens now worth $20. The rebasing kicks in, doubles up the available supply, bringing the price down to $1.00. You now have 20 AMPL worth $1.00 a piece, so you still have $20 worth, you just have twice as many tokens.

Now, we’ll start back with 10 AMPL at $1.00 a piece giving us our $10 again. This time the price crashes down and we hit $0.50. Our 10 AMPL is now worth $5. The rebasing kicks in, realizes it needs to slash the supply in half, and now you have 5 AMPL worth $1.00 each, so you still have your $5, just with half as many tokens.

One thing to note, the price is not directly controlled by this rebase function, and it’s up to the market as a whole to realize the supply has changed, and react accordingly. This is why the whole protocol relies on having good price oracles, otherwise it would fall apart.


While not a standard stablecoin, Ampleforth (AMPL) is a pretty interesting project. I have a little exposure to it, as I get paid out in it from my posts over on Publish0x, and the small amount I have seems to be growing in value over time. While I don’t think it’s necessarily a great place to park some value like you would in a more normal stablecoin, but I can see some good use cases for it.

From an investment standpoint, it doesn’t seem any more risky than holding onto a lot of other cryptos, but I haven’t been watching it for long enough to really say anything about long term viability of it, but it is definitely an interesting project, and at least worth a look if you’re looking for something different to play around with.

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