How Does AMPLEFORTH Work? DEFI Explained

How Does AMPLEFORTH Work? DEFI Explained

So, what is Ampleforth? How does it work under the hood and why do the number of my AMPL tokens keep changing every day? You'll find answers to these questions in this video.

Ampleforth, in essence, is a new cryptocurrency with a quite unique feature - its supply is elastic and can change every day while the ownership of the AMPL tokens is never diluted.

There are 3 states that the Ampleforth protocol can be in, these are expansion, contraction or equilibrium. Before we explain how they work let's introduce one more concept - price oracles.

Price oracles are used to provide external prices to smart contracts. There are two main functions of price oracles in Ampleforth. The first one is to provide a current exchange rate of AMPL/USD. The second one is to provide a Consumer Price Index value. The CPI is used to establish a "target price" which is a price of 1 AMPL that the Ampleforth protocol tries to aim for. The target price is currently at $1.009 and it represents the 2019 purchasing power of the US dollar as represented by CPI. The target price plays a very important part of the protocol as it is used in conjunction with the current price to determine if there should be a change in the total supply of AMPL.

The Ampleforth protocol is implemented as a set of smart contracts deployed to the Ethereum blockchain. The AMPL token implements the ERC-20 interface and can be easily exchanged on decentralized exchanges such as Uniswap.

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