This article is a collection of common non-technical questions on $AMPL and my honest answers to them.
1. Why would you want to buy $AMPL in the first place?
This one is probably the most asked one on $AMPL Discord.
People are familiar with buying tokens that appreciate in price like $BTC or $LINK… because it’s easy to understand — you put money in, the price goes up, and in simple terms — you end up having more money than you put in…or less.
This is how we are taught when it comes to investing.
Can’t blame anyone. No doubt that pretty much no one understands why anyone on earth would buy into a cryptocurrency that hovers around $1.00 BUT is not a stablecoin and neither appreciates in value in the long run.
Only a mad man would put his money into such a thing.
What experienced $AMPL investors understand is — when they buy $AMPL they’re actually capturing a % of the $AMPL network.
You see, with increasing $AMPL demand its supply grows along with it. The rebase algorithm of $AMPL adjusts the supply universally and proportionately across all $AMPL wallets. Your $AMPL balance literally grows and shrinks, according to the demand.
And since still very few people talk about $AMPL these days and its far from being used across #DeFi platforms, it’s fair to say that it’s still cheap to buy yourself a portion of the $AMPL network.
People who buy $AMPL believe it will:
- Be widely used as a composable DeFi building block.
- Be widely used to denominate stable contracts.
- Become the preferred, uncorrelated collateral asset.
- Be used in derivatives that enable more and more complex products in DeFi.
- Be used as a relatively stable store of value that’s resistant to inflation and black swan events.
- Become a multi-chain asset used across the entire blockchain ecosystem.
- The list goes on…
If $AMPL succeeds at just one of the above-mentioned things, its supply will grow significantly from where it is today (May 14, 2021).
2. Is Negative Rebase Really That Scary?
When a negative rebase occurs, the $AMPL supply decreases, thus your $AMPL wallet balance decreases.
Remember, $AMPL supply adjustments are applied universally and proportionately across every wallet's balance.
Indeed, new people into $AMPL panic when they see less $AMPL in their wallet than the day before but don’t worry, your percentage of the network always stays the same, regardless of the price and rebase.
Say you have 1000 $AMPL and a negative rebase of -1.14% occurs, the next day you’ll wake up with 11.4 less $AMPL, bringing your balance to 988.6 $AMPL.
But don’t worry, there’s no need to panic. A negative rebase does not decrease your % share of the total $AMPL network. Your percentage of the network always stays the same.
It is much more difficult for people to hodl $AMPL as it hurts more to see not only the USD value of AMPL to go down but also the amount that you hold.
But all that is temporary.
3. If $AMPL is not a stablecoin and not an asset that appreciates in price, then what is it really?
Does that look like a stablecoin or an asset that appreciates to you?
None of these.
$AMPL is a unique cryptocurrency and the first of its kind, so forget about comparing it to anything you know so far, be it $BTC,$ETH, or a typical stablecoin like $DAI.
$AMPL is not a stablecoin because its price is not stable. Instead, it fluctuates frequently around the target price of USD 1.00 and can extend far above or beyond that during periods of network growth or contraction.
$AMPL is not an asset that appreciates in value in the long run. Its rebasing mechanism incentivizes market participants to sell $AMPL when its price goes way above $1.
For example, if $AMPL is valued at $2 at the time of the rebase, everyone holding $AMPL will end up with around 9–10% more tokens in their wallet shortly after.
Will people hold it the next 24 hours and enjoy the incredible effect of a daily compound that rebase offers? Maybe. Or one of them might pull the trigger and sell earlier and pocket the profits, bringing the market price of $AMPL lower.
$AMPL offers a trading game on a double axis level (unlike say $BTC where the only axis people can speculate on is its price).
$AMPL is what’s called a Multi-Variable Asset (MVA) — it has two fluctuating variables, Price and Supply.
This is different from traditional crypto assets like $BTC or $ETH which have just one moving axis — the price, which goes up and down based on supply and demand.
$AMPL transforms price changes into supply changes. It’s kind of that simple.
4. Does $AMPL really need $FORTH?
Yes, $AMPL really does need $FORTH.
$FORTH is a governance token and is the mechanism that oversees Ampleforth’s evolution. Just like how the decentralized stablecoin $DAI has the $MKR governance token, $AMPL has the $FORTH governance token.
$FORTH was airdropped on April 21, 2021, to anyone who had interacted with $AMPL on-chain and will be used by the community to vote on parameter changes to the core $AMPL protocol and as a tool to steer the continued evolution of the Ampleforth ecosystem.
The reason $FORTH launched almost 2 years after $AMPL is because until recently, $AMPL was in the hands of the team, but they have now got rid of pausability and upgradeability — two emergency switches as options of last resort.
The Ampleforth team is now confident enough to step away from their centralized role in the protocol and see it transition into a decentralized and censorship-resistant protocol that cannot be changed without the community’s approval.