Did she get it? AMPL explained to my 5-year old

I decided to gift my 5-year-old daughter some AMPL for Christmas. Here's a record of how the conversation went.

Me: Hey! sweetheart, come here.

Daughter: Daddy!

Me: Merry Christmas!

Daughter: Merry Christmas. Did you buy me more gifts?

Me: Of course sweetheart

Daughter: yeeeeeeeeah!

Me: I bought you the most special Christmas gift ever. Something you've never had before and that will become more and more valuable, long after now.

Daughter: What's that dad?

Me: AMPL

Daughter: Apple?

Me: No!... A M P L - AMPL

Daughter: Ok! What's AMPL?

Me: Seat down let me show you.

Daughter: (Jumps on my lap, looking intently at the AMPL tokens in my wallet)

Me: AMPL is an elastic cryptocurrency created by the Ampleforth organization.

Me: It aims to reduce inflation and preserve the purchasing power of money. As well as enable a sustainable economy.

Me: Simply put. It is a cryptocurrency like Bitcoin, but with unique and special features.

Daughter: Ok. But what is a cryptocurrency?

Me: Cryptocurrencies are digital money created, stored, and transacted on the blockchain. They don't have denominated physical note bills like the dollar or pound.

Daughter: So, this AMPL is another form of money, like the dollar?

Me: That's correct

Daughter: So, dad, you're saying you bought me money as a Christmas gift? You could just give me the cash. Why some internet money?

Me: Yes! But this form of money is kinda different. Remember I told you it has its own unique features which makes it special?

Daughter: Yes! Dad. You said it's a cryptocurrency. Based on the blockchain. And it does not have a physical version.

Me: Hi! 5. That's absolutely correct.

Me: But this is not some ordinary money. It's as an asset that can both increase or decrease in quantity.

Me: And the price or value can also both increase or decrease.

Me: So that this $1000 worth of it I bought for you could be worth $100,000 or if things go bad with it, $500 in the future.

Daughter: Really? How's that even possible dad?

Me: It's possible.

Daughter: How?

Me: I'll explain it to you. Please pay attention.

Daughter: Ok

Me: This is how it works.

Me: Cryptocurrencies generally are volatile.

Me: That means that their prices go up and down relative to the dollar.

Me: The same way the price of gas, clothes, toys, etc. changes in the market, relative to the dollar.

Daughter: Ok. So dad. Lemme get this straight (looking at me in the eye)

Daughter: Cryptocurrencies are both currencies for making payment for goods and services.

Daughter: And at the same time, they're also assets that can be bought and sold for cash.

Me: Hi! 5 again. That's my girl. You're absolutely correct.

Me: So generally, if you buy say 1 Bitcoin worth $25,000. It could be worth more or less in a few seconds, minutes, hours, days, weeks, month, or years later.

Me: But your 1 Bitcoin will always remain 1 Bitcoin.

Me: The quantity will not change. But the dollar value can change.

Daughter: Is Bitcoin a cryptocurrency?

Me: Yes! It was the first cryptocurrency ever created.

Daughter: Ok.

Daughter: So only the price of a cryptocurrency is supposed to be changing as people buy and sell it?

Me: That's right

Daughter: But you said earlier that the quantity of AMPL can also change along with the price.

Daughter: Is AMPL not a cryptocurrency? Why does the quantity not also remain the same?

Me: Good questions. Remember I said AMPL is a special type of cryptocurrency with an elastic supply.

Daughter: Yes

Me: What I haven't told you yet is that the cryptocurrency is designed to have a target price of roughly $1.

Daughter: Ok. So the price is originally supposed to be $1 constant.

Me: Yes. Actually, a dollar and some cents based on some technical shit you shouldn't worry too much about yet.

Daughter: So why is the price not stable at $1 as intended? And why does the amount of AMPL I have, keep changing with the price?

Me: In order to consistently maintain the target price the token requires a lot of money to be invested into it.

Me: This is called liquidity. The greater the liquidity, the less volatile the price will be.

Daughter: Ok

Me: Yes. And the less volatile the price, the lesser chances that the amount of the token you hold will change.

Daughter: I didn't get that.

Me: Ok. let me explain more.

Me: AMPL was designed to target

Me: AMPL is designed to target the price of $1 in 2019. Based on some mathematics, this target price is recalculated and adjusted daily to account for inflation.

Me: And as I said above, this price is usually about $1 and a few cents.

Me: If the price goes below or above the target price, the system will automatically adjust (increase or decrease) the supply of AMPL in everybody's account.

Me: This increase and decrease in the amount of AMPL people have is called rebasing.

Me: When the price of AMPL is below a range of this target price, the system automatically deducts AMPL tokens from everybody's account or wallet.

Me: This is known as a negative rebase

Me: And when the price is above a range of the target price, the system automatically adds more AMPL tokens into everybody's account or wallet.

Me: This is known as a positive rebase

Me: This is done, with the intention of manipulating the price towards the target price. And thus achieve some stability.

Daughter: I'm following you.

Me: Good.

Me: As people get more AMPL when the price is above the target price, they tend to sell in order to cash out their profits.

Me: This forces the price to go down, as selling pressure overpowers the number of buyers.

Me: When the price goes down and below the target price, smart investors find an opportunity to buy the token at the cheap price and hope to make a profit when the price goes back up towards and above the target price.

Me: All this supply adjustment is done with the aim of manipulating the price of AMPL towards the target price.

Daughter: wow

Daughter: This is amazing.

Daughter: But I can lose all my AMPL if the price does not go back up towards the target price

Me: You can certainly lose a lot of tokens due to rebasing if the price remains below the target for an extended period.

Me: But the price will eventually go back up towards and above the target price given sufficient time.

Daughter: This is so risky dad.

Me: Yes! It is. Just like everything else in life worth.

Daughter: But I could lose everything.

Me: No! You can't lose "everything".

Me: All these rebasing and price movements of AMPL is not really the most important thing for you t worry about.

Daughter: Then what is?

Me: The market cap

Daughter: What is marketcap?

Me: The total amount of money that's invested into the cryptocurrency

Daughter: Ok! So how's it the most important thing?

Me: Regardless of the changes in the price and supply of AMPL. Your share of the total marketcap remains the same at all times, except you sell or buy more.

Daughter: Really? How?

Me: If you buy $1000 worth of AMPL right now. Which gives you, for example, 1% of the total marketcap.

Me: Regardless of price changes and all the rebasing, you still have that same 1% of the marketcap.

Me: For example, if you own 1% when the marketcap is $1 million, you will still have 1% when the market cap goes to $50 million.

Me: So, as long as the market cap of AMPL is increasing, your investment will be worth more. Regardless of whether you have lost or gained more AMPL tokens.

Daughter: Really?

Me: Yes!

Me: For example, you bought 500 AMPL today at $2 each when the total supply is 500,000 and the market cap is $1 million.

Me: Clearly, you have 0.01% of the total supply.

Me: Fast-forward to 2 years and the market cap is $25 million but the price is now at $1.

Me: So many rebases must have happened within this period.

Me: So we can’t possibly project what your balance will be after 2 years but we know you have 0.01% of the market cap.

Me: So your investment should be worth 0.01% of $25 million now.

Me: Which is $2,500.

Me: The marketcap is the most impost important metrics for evaluating the performance of your AMPL investment.

Daughter: I think I understand now

Me: Yeah.

Me: If you want to know the real current worth of your AMPL investment, look at the marketcap.

Daughter: Thank you, dad. I'm gonna keep my AMPL until my 18th birthday.

Me: That would be sweet.

Me: Now let's go help your mom out in the kitchen

Daughter: Ok dad... (runs away)

Do you think she "gets it"? Let me know in the comments section below.