Elastic Supply For Dummies!

NOTE: This article is purely about understanding the concept, we are not looking into any technical details.

The concept of elastic supply became famous with Ampleforth (AMPL) and its countless forks.

Let’s start off with the basics!

We are used to two different types of supply:
- limited supply (like Bitcoin)
- unlimited supply (like Ethereum)

So what could elastic supply be? Exactly! A supply that is neither limited nor unlimited, but flexible/elastic.

This means that the supply can change — it can increase, it can decrease and it can stay the same.

Each elastic supply coin has a price target.
It can be any fixed price or a price range. This is up to the respective devs.
It could be 0.33 or 100$, 0.96–1.06$, or even 0.01BTC.
Usually, it is 1$.

Make sure to always check the price target before you invest in elastic supply projects!!! This will ensure that you do not get rekt immediately. [Please hold a moment of silence for all the degens that invested at 4$ when the price target was 1$.]

The supply changes if the price target is not met. This event is called Rebase! It can be either negative or positive.
At the example of 1$:
if the price is below 1$ the supply will decrease → negative rebase.
if the price is above 1$ the supply will increase → positive rebase.

All supply changes apply equally to every owner/wallet. So yes the amount of tokens in your wallet will change.
Positive rebase → you have more tokens in your wallet.
Negative rebase → you have fewer tokens in your wallet.

You will always own the same % of the total supply.

The % change depends on the difference between price and price target. The larger, the stronger the rebase. The exact formula is again up to the respective devs.

A rebase can happen once, twice, or even multiple times a day.
It varies from project to project. Once again the devs decide.

The supply remains unchanged if the price target is met → no rebase needed.

A slightly more sophisticated part follows. Feel free to skip it.

Let’s apply the concept of supply and demand.
Price target 1$ and 1 Rebase per day.

Scenario A:
Demand > Supply
Price is above target → positive rebase → supply increases
More supply with same/constant demand → price will drop → price will eventually reach target

Scenario B:
Demand < Supply
Price is below target → negative rebase → supply decreases
Less supply with same/constant demand → price will increase → price will eventually reach target

Applies to both scenarios: if the price target is not met, another rebase is required.

Scenario C:
Demand > Supply
Price is above target → positive rebase → supply increases
Demand still outweighs additional supply → price will remain above price target [THIS IS WHAT WE WANT]

Vice versa = the scenario that causes sleepless nights

And last but not least the answer to the question you have all been waiting for: “How do I make money?”

“Positive rebases and a growing market capitalization!!!”

Do not expect the price of an elastic supply coin to make 100x. Because it won’t. You make money with constant positive rebases and a growing mcap. So keep an eye out for solid projects with a low mcap (low mcap = good entry point) and a price close to the price target.

We will serve you one right away on a silver tray. Check out the first elastic supply project on Binance Smart Chain 👉 ditto.money

Now off into some telegram groups and show everyone that you are not completely lost!