Ampleforth is software running on Ethereum that attempts to incentivize a network of users to maintain a crypto asset with a value equal to the U.S. dollar.

A type of cryptocurrency known as a stablecoin, there are a variety of ways these crypto-assets achieve price parity with other assets. DAI, for example, is backed by baskets of assets locked in the Maker protocol, while USDT is backed by dollar deposits in a traditional custodian.

Ampleforth, however, differs from other stablecoins in its method of maintaining price stability.

Instead of relying on deposits or issuing and redeeming debt, the software programmatically adjusts the supply of its AMPL cryptocurrency every 24 hours in a process called “rebasing.”

If demand for AMPL tokens is high, and each AMPL token exceeds $1, the supply will increase. If demand is low, supply will decrease.

In this way, AMPL is an example of a cryptocurrency that is elastic and non-dilutive, meaning that the supply can change, but that, as the supply changes, users retain the same proportion of the overall supply.

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.

How Does Ampleforth Work?

Ampleforth operates a stablecoin called AMPL, and it adjusts the supply of AMPL managed by the software daily to maintain price parity with the U.S. dollar.

In practice, this means that anyone who owns AMPL tokens will see the balance in their wallets change each day at 2:00 UTC. In order to adjust the AMPL supply correctly, the protocol must know the price of AMPL and whether it has diverged from the U.S. dollar.

As a result of AMPL’s design, the supply of coins will exist in three states:

• Expansion – The price of AMPL is greater than $1, and thus new tokens need to be introduced to the AMPL economy.
• Contraction – The price of AMPLE is less than $1, leading to the removal of tokens.
• Equilibrium – The price of 1 AMPL is exactly $1.

The Ampleforth software uses Chainlink, a data provider built on Ethereum to supply price data.

Who Created Ampleforth?

Originally named Fragments, Ampleforth was co-founded by entrepreneurs Evan Kuo and Brandon Iles in 2018.

Ampleforth was envisioned as a way to issue crypto-assets to gig economy workers, such as people who might deliver for Pythagoras Pizza, Kuo’s original venture.

The project raised $4.75 million from investors including Coinbase founder Brian Armstrong and noted venture firms True Ventures and Pantera Capital.

Why Does AMPL Have Value?

Like all stablecoins, AMPL tokens derive value from their ability to enable traders to reduce their exposure to the sometimes extreme volatility of many cryptocurrencies on the market.

However, the AMPL team believes users will ultimately come to favor a stablecoin option that is operated by software and not any central operator.

As AMPL grows in popularity, its team argues the degree of change to its supply should reduce, leading to longer periods where supply remains constant.

Source: https://www.kraken.com/en-us/learn/what-is-ampleforth-ampl