The pioneer of algorithmic stablecoins is undoubtedly AMPL (Ampleforth), which is also the first-generation algorithmic stablecoin. After AMPL gained popularity, numerous copycat projects emerged, modifying the pegging target, adjusting the cycle, or making other minor innovations. Examples include RMPL, XMPL, TMPL, REBASE, xBTC, and sBTC.

Later, second-generation algorithmic stablecoins such as ESD and Basis Cash appeared. They drew inspiration from the renowned Basecoin design, incorporating lessons from liquidity mining and elastic stablecoins to create new stablecoin mechanisms.

AMPL Model

As a first-generation algorithmic stablecoin, the AMPL model is a relatively simple and direct elastic stablecoin: it adjusts the number of tokens held by users to maintain the target price around $1. This mechanism of stabilizing the token price by adjusting supply is called "rebase." AMPL's specific operation involves daily supply adjustments:

• If the trading price of AMPL is more than 5% above the target price, the wallet balance of AMPL increases after rebase (total supply increases).

• If the trading price of AMPL is within ±5% of the target price, no rebase occurs that day.

• If the trading price of AMPL is more than 5% below the target price, the wallet balance of AMPL decreases after rebase (total supply decreases).

In simple terms: when the stablecoin price is above $1, more stablecoins are airdropped to user addresses. When the stablecoin price is below $1, some stablecoins are automatically "burned." For example, if the stablecoin price drops to $0.5, all addresses holding the stablecoin will see their balance halved, creating scarcity until the price returns to $1.

However, this model also has drawbacks, as a single elastic mechanism is difficult to perfect. For example, suppose you initially bought 10 algorithmic stablecoins at $100 each, with the target price set at $10. However, the buying frenzy driven by investment hype could push the price even higher, while the algorithmic stablecoin mechanism increases the total supply to stabilize the price. As a result, users would end up holding more than 10 stablecoins at the inflated price, meaning their holdings would be worth more than $100 before the supply adjustment fully takes effect.

Similarly, losses can also be amplified. Under AMPL's rebase mechanism, when the token price falls below the pegged price, it creates significant psychological panic. Even though users know their proportional ownership remains unchanged, seeing both the price and quantity of tokens in their wallets decrease may prompt some to sell, further driving down the price and reducing the token balance in wallets.