Editor's Note: This article comes fromZhikuang University (ID: gh_37c9e0eaf00a), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Zhikuang University (ID: gh_37c9e0eaf00a)

, reprinted by Odaily with authorization.

Last week, Kuang Kuang shared on Weibo what kind of experience it was like to “lose again and again, and add more losses on top of losses”. He told how after exchanging ETH for AMPL, a very popular DeFi token, the price of AMPL fell in half when ETH rose. And the "Davis Triple Kill" story of quantity deflation.

After seeing Weibo, many people sent private letters to Mining Mining, saying that the AMPL in their wallets has also decreased, and the number is changing every day, which is very strange.

In fact, there is no need to make a fuss at all, the number of AMPL changes every day. Today, Mining will focus on AMPL’s token base readjustment mechanism.

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AMPL is the token of Ampleforth, an Ethereum-based DeFi project. As the title of the white paper "Ampleforth: A New Synthetic Commodity Currency" puts it, AMPL wants to create a brand new cryptocurrency with prices anchored to the US dollar.

There are two main forms of cryptocurrencies anchored to the US dollar: one is to mortgage fiat currency, and then issued by a centralized institution, such as USDT, USDC; the other is to mortgage cryptocurrencies, such as mortgage ETH to Maker, to obtain And the stable currency DAI anchored 1:1 with the US dollar.

The way AMPL anchors the U.S. dollar is completely different from the above two. It does not have any collateral, it is completely native cryptocurrency, and there is no cap on the total amount. It affects the supply and demand relationship through the adjustment of supply every day, thus affecting the price, and finally realizes the USD anchor.

According to the introduction on the official website, the short-term goal of AMPL is to become an asset that is not highly correlated with other cryptocurrencies (such as BTC, ETH). is to become a better bitcoin.

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AMPL’s Token Rebasing Mechanism

The upper limit of Bitcoin is 21 million. If you have 21 Bitcoins, then you have one millionth of the total amount of Bitcoins. Because there is a limit on the total amount of Bitcoin, it pursues the scarcity of absolute quantity. 21 Bitcoins will always be 21 Bitcoins, which will neither increase nor decrease.

AMPL has no upper limit on the total amount, and unlike many DPoS tokens, it can be issued linearly after going online. AMPL adopts elastic supply. When the market demand is greater than the supply, the smart contract will issue additional AMPL to all currency-holding addresses in equal proportions; when the market demand is less than the supply, the smart contract will deflate the balance of AMPL in all currency-holding addresses in equal proportions. .

So, here comes the question, how to judge the market demand for AMPL? In which case is supply exceeding demand, and in which case is supply short of demand?

The answer given by AMPL is: price.

Behind this answer is actually the basis of technical analysis - "market behavior is inclusive and digests everything" as support. Market behavior is inclusive and digestible, which means that any factors that can affect the price of a certain commodity - fundamentals, policy factors, macro environment, investor's psychological factors or any other factors - are actually reflected in its price. middle.

The target price (Target Price) set by AMPL is $1 after the CPI (Consumer Price Index) adjustment in 2019 (converted to $1.011 now), and the floating threshold δ is 5%. That is to say, when the price is greater than $1.05, the AMPL balance in all wallets will increase; when the price is lower than $0.95, the AMPL balance in all wallets will decrease. This is AMPL's "Token Rebase" mechanism.

（1.5 - 1）/ 10 = 5%

The token base of AMPL is adjusted once a day, and the adjustment time is 10:00 am Beijing time (affected by the block generation time, there is a slight deviation every day).

In order to make changes in inflation and deflation less drastic, the AMPL protocol also sets a parameter K to suppress changes in supply. The current value of K is 10. Therefore, the readjustment formula of AMPL’s token base is:

(market price - target price) / 10

For example, suppose the mine bought 100 AMPL for $100 when the market price was $1. When I woke up the next day, the market price of AMPL had risen to $1.5, exceeding the threshold of $1.05. According to the above formula, the balance of AMPL in all addresses will increase by 5%, and the amount of AMPL in the mine wallet will increase from 100 becomes 105.

At this time, if the market price of AMPL has not fallen back and remains at $1.5, then the AMPL in the mining wallet is worth $157.5, which is a profit of 57.5% compared to the initial $100, although the currency price has only increased 50% off.

If the currency price continues to rise and is higher than the threshold value, the currency in the wallet will also increase every day, which is a typical "Davis double-click";

Of course, if the price continues to fall and is lower than the threshold, the coins in the wallet will decrease every day, and it will become a "Davis double kill".

Whether it is inflation or deflation, for an investor, as long as he does not sell after buying, the proportion of AMPL he holds in the total amount will remain unchanged. Therefore, what AMPL pursues is the scarcity of ownership.

Here is a brief mention of the market price in the AMPL token base readjustment formula. This price is precisely the price provided by the oracle machine. The median is calculated by the 24-hour volume-weighted average price of independent data providers in the whitelist. inferred.

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Five risks of AMPL

On August 6, the price of AMPL has fallen below the threshold and dropped to $0.852, but the data on the chain shows that AMPL still contributes 20% of the liquidity to the decentralized exchange Uniswap, and the trading volume is as high as 18.7%. AMPL-ETH There are still as many as 45,000 ETHs in the fund pool.

Although AMPL is very popular in the current cryptocurrency market, we also need to pay attention to the following five major risks:

1. The risk of hacking

Smart contracts have been hacked due to loopholes, and there are countless incidents of coin theft. The more popular the AMPL project is, the more hackers will stare at it to find code loopholes. If hackers steal coins, investors are likely to lose their money.

2. Regulatory risks

Although Ampleforth is a decentralized cryptocurrency project, the team behind it will still be bound by domestic laws and regulatory policies. The two founders, Evan Kuo and Brandon Iles, are both in the United States, and the US SEC has very strict judgments on whether cryptocurrency projects are securities, and the relevant penalties are also very severe. Therefore, potential risks from regulators must be guarded against.

3. Death Spiral

AMPL's token base readjustment mechanism allows AMPL to have its own leverage. When the market is good, "Davis double-clicks" and when the market is bad, "Davis double-kills", directly entering the death spiral.

Data from the Ethereum browser shows that AMPL has a total of 19,783 currency-holding addresses, of which the top 10 addresses hold 73% of the total tokens, which shows that AMPL has a high degree of chip concentration. If the giant whale hits the market, plus the impact of the token base readjustment mechanism, AMPL will be in a death spiral for a long time.

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5. Risk of project failure

The Ampleforth project was established in 2018, the white paper was released in May 2019, and the tokens entered the market in June. Although AMPL has been very popular recently, it does not mean that this project will survive for a long time. In fact, in the field of cryptocurrency, the number of dead projects is far higher than the number of surviving projects.