1. The Core Concept: Elastic Supply

Most cryptocurrencies (like Bitcoin) have a fixed supply. If demand goes up, the price must go up. Fiat currency (like the US Dollar) has an elastic supply. If demand goes up, the central bank can print more money to keep the value stable. Ampleforth is a cryptocurrency that is Elastic like the Dollar, but Non-Dilutive like Bitcoin.

Link to the next concept: How can you print more money without making everyone poorer (dilution)? The answer is in the Distribution.

2. The Solution: Non-Dilutive Money

When the US Government prints dollars, they spend them. Your share of the total dollars in existence gets smaller (you get diluted). When Ampleforth "prints" money, it doesn't give it to a central bank. It gives it directly to you.

• The Magic: If the protocol increases supply by 5%, the balance in every single wallet increases by 5% automatically.
• The Result: You still own the exact same percentage of the total network as you did before. You just have more tokens.

Link to the next concept: But when does the protocol decide to change the supply? It watches the Price.

3. The Mechanism: Rebase

The protocol has a "Target Price" (currently around $1.01). Every day at 2 AM UTC, the protocol checks the current price of AMPL using Oracles (price feeds). This event is called a Rebase.

There are 3 possible states:

1. Expansion: If the price is High (above $1.06), the protocol prints more tokens and gives them to everyone. (More supply = Price goes down).
2. Contraction: If the price is Low (below $0.96), the protocol removes tokens from everyone's wallet. (Less supply = Price goes up).
3. Equilibrium: If the price is roughly $1.00, nothing happens.

Link to the next concept: This sounds volatile. To stop the system from crashing, they use a Smoothing Factor.

4. The Safety Net: Smoothing

If the price is very high, the math might say "Double the supply instantly!" This would be chaotic. To prevent panic, the protocol uses a Dampening Factor (currently set to 10 days).

• Example: If the math says "Increase supply by 50%," the protocol actually divides that by 10. So, today, you only get a 5% increase. It spreads the shock over time.

Summary