Ampleforth – the algorithmic stablecoin with elastic supply – has been introduced in Aave’s lending ecosystem.
While most stablecoins have a stable peg, Ampleforth (AMPL) is doing things differently. It’s designed in a way where the algorithm chases a target price and readjusts the overall supply.
If the price is above the target, the total supply would increase and vice-versa: if the current price is below the target, the supply will shrink.
The way this impacts holders is also interesting – AMPL addresses see the overall amount of tokens they have change based on the current rebase, which takes place once every 24 hours. In other words, the number of AMPL they hold can be different every 24 hours, depending on the current price of the cryptocurrency.
In an announcement made hours ago, Ampleforth revealed that AMPL is now part of AAVE’s lending platform.
Users are now able to lend and borrow AMPL on Aave. This has an interesting implication given AMPL’s dynamic supply change.
Because of AMPL’s technicalities and AAVE’s lending pools, CryptoPotato reached out to Ampleforth’s team for some clarifications.
“The main take away is whoever holds the AMPL during rebase is technically the wallet with the AMPL, and since all wallets that hold AMPL experience rebases equally, the wallet that holds the rebase is the one who will get the rebase.
So if someone loans you AMPL, you’re then holding the AMPL you borrowed and you get the rebase on those borrowed AMPL.
In AAVE, there are pools. These pools are made up of people who lend their AMPLs to the pool to be borrowed. Borrowers take the AMPL from the pool and get the rebase. This is the ‘utilization’ of AMPL in the pool. If there is unutilized AMPL, which means lenders still hold some AMPL in the pool and borrowers hold some, lenders and borrowers will get the rebase according to the amount of AMPL they hold at the time of the rebase.
The lenders are part of a pool, and if any AMPL isn’t borrowed (isn’t utilized) that left over AMPL in the pool rebases, and it goes to the people who lent their AMPL to the pool.”
The team also said that this is good for both AMPL and AAVE, as well as for the DeFi industry in general because there’s a voracious demand for borrowing AMPL.
In the days leading to AMPL being included in AAVE, the price surged by over 70%. It was trading at around $1.08 two days ago and peaked at $1.87 today, for a total increase of about 74%.