Decentralized Finance (DeFi)

A 5-Minute Complete Guide to Ampleforth Rebase

Ampleforth is a digital asset protocol for smart commodity money.

They are created to use the “base – money”,  a form of collateral to be used as part of a centralized or decentralized banking system. 

This protocol itself is designed to be a synthetic commodity money.

They are called scare and synthetic because they are designed by humans but they aren’t raw materials like gold and silver which have immediate non-monetary use.

Synthetic commodities are incredibly valuable because – 

  • They are free from market distortions that arise from innovations in raw material extraction or non-monetary use;
  • Their monetary qualities make them tradable the way that we trade fiat currency or traditional assets like stocks, both of which largely drive the US economy;
  • They are free from politics and outside tampering like natural commodity-monies. 

The Ampleforth propagates price – information into supply, much like how thermal expansion propagates nearby kinetic energy into a material’s volume in the natural world.

Ampleforth Protocol

The protocol achieves this by seeking a price-supply equilibrium, and will always enter a state of unrest until it finds one.

As a result, the system alternates between two modes:

  • Dynamic: In which supply is changing
  • Equilibrium: In which supply remains static 

Ampleforth is a new protocol in which market changes due to the change in the supply of their token based on real-time nominal exchange rate information instead of the price. 

The supply-based expansion and contraction mechanism decorrelates the AMPL token’s movement pattern from the performance of Bitcoin, creating optionality, and opening up applications in portfolio construction. 

Understanding Ampleforth Rebase

AMPL is the first token that started it all and made rebase popular enough that new tokens are now copying and innovating on top of it.

It recently took crypto and Defi on the boom.

Its elastic supply function gets rebased every 24 hours and adjusts its maximum supply in order to achieve the $1 token price peg.

Following the success of Ampleforth, many new tokens have launched that are now experimenting with rebase functions that increase supply, decrease supply, rebates against the price of another token, and many more.

3 other tokens are – Antiample (XAMP), Tokens of Babel (TOB), and RMPL (RMPL). 

Let’s take a look into the rebase function and how it works in the Solidity smart contract. 

AMPL contract :  https://etherscan.io/address/0xd46ba6d942050d489dbd938a2c909a5d5039a161#code

Ampleforth

How does rebase work ?

The token of the Ampleforth project (AMPL) is supposed to hold the purchasing power of one US dollar in 2019, according to the Consumer Price Index (CPI).

It is allowed to fluctuate in a 5% area around this value.

Let us call the the target price P and a 5% deviation from it in any direction δ. 

If the price of the token goes over P + δ or under P – δ, the protocol begins to increase or lower the supply of the token, to allow it to again reach the target price.

This is done by proportionally distributing tokens to all token holders when the price is too high and proportionally removing tokens from all token holders when the price is low.

This process is called Rebasing and happens once every 24 hours.

AntiAmple (XAMP) :

The Anti Ample token also rebases, but it only allows burning of the supply.

Ampleforth

For AntiAmple, the rebase part of the code is almost similar to Ampleforth’s rebase.

How it works is that it only has a negative rebase.

The line _totalSupply = _totalSupply.sub(supplyDelta); shows that the supplyDelta is an unsigned integer, the total supply can only be reduced, never increased.

Tokens of Babel (TOB) :

Ampleforth

The code is similar to AntiAmple, similar onlyOwner modifier, but here’s a small difference.

At the point of writing, when you check the owner of the contract, it is actually still owned by the owner. 

RMPL

RMPL is a random base version of Ampleforth.

Ampleforth

The code is similar to Ampleforth, and they implemented only owner modifier

Conclusion : 

AntiAmple and Ampleforth had a rebase mechanism using an Oracle.

At the moment of writing, Holding TOB and RMPL will expose risk to the Owner key, where the owner key can call rebase with any amount of supplyDelta.

So instead of using an on-chain oracle to get the price, they use an off-chain method and update the contract via owner key.

Cryptic Ocean is a blockchain technology company that provides end-to-end blockchain development and blockchain consulting services to multiple business domains.

Our goal is to help companies adopt new technologies and simplify complicated issues that arise during technology evolution.

Contact us for the best solutions about the use of blockchain technology to solve the toughest challenges faced by the world today.

FAQ’s

How does Ampleforth rebase work?

Rebasing is a feature of the Ampleforth protocol that alters the availability of the tokens. this suggests that the quantity of AMPLs held in your wallet are changed every twenty-four hours based on the weighted average of the token value throughout this point.

What is Ampleforth geyser?

Ampleforth Geysers are smart faucets that incentivize on-chain liquidity.
Users receive AMPL for providing liquidity on machine-controlled market platforms (AMMs) like uni swap. The additional liquidity you give, and for extended, the larger share of the AMPL pool you receive.

Must read our other blocks on blockchain.

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