The Forth DAO is currently holding 12M unused AMPL. The historical barrier to putting these assets to use has been that it required matching pair tokens for DEX pools. Now with the SPOT system, we can consider the Rotation Vault (stAMPL) a form of liquidity that can help growth, and this can be done single sidedly. The DAO is well positioned to contribute to the ecosystem in this way.
The DAO currently holds some stAMPL, but not much: 144.5 stAMPL, representing ~4.3% of deposits or 517k AMPL collateral.
Most outside users will be attracted to the rewards of Bootstrap or the Geysers, but the DAO’s participation would hamper the intent to grow awareness. However, the DAO can still enable those programs by supporting the vault. Vault deposits enable SPOT supply growth for Bootstrap, and this can help fuel the evergreen cycle.
Execution
I propose allocating up to 5.5M AMPL for depositing into the vault.
This can be done by embedding an ERC-20 approval operation into a governance action. Another option, if we want to fast-track assets into the vault, is to arrange for an AMPL -to- stAMPL trade with the Foundation. I.e. Provided there is general support, the Foundation can deposit first, then sell the stAMPL position to the DAO 1 for 1 with respect to the underlying AMPL as the proposal executes.
Could this be conditional on running out of flash mint liquidity? A deposit of that size will throw enrichment up very high, not only diluting the upside for existing stAMPL holders for bootstrap but at the same time raising enrichment so the existing holders are paying a fee to SPOT holders. If this was proposed earlier I’m sure some existing stAMPL holders would have opted instead of putting more money into stAMPL but perhaps shifting more into bootstrap liquidity.
There also isn’t a way for the DAO to borrow against stAMPL, but with USDaf coming out the DAO will have ways to borrow against SPOT, allowing the capital to be used for funding initiatives through the DAO without putting sell pressure on AMPL. When AMPL is locked in the stAMPL vault, it likely doesn’t want to be withdrawn for a while because of the 5% fee.
In summary, I think it makes sense in the long run for ForthDAO to have exposure to the vault, but letting the capital trickle in during bootstrap to help fund flash mints seems fairer to existing stAMPL holders while also leaving capital that could eventually be borrowed against to fund initiatives.
You’re right @kbambridge. This next point probably should have been in the original text but wasn’t–
The underlying intention is to keep the Rotation Vault from being a bottleneck for any SPOT growth that may happen during Bootstrap. So I think the right policy would be to use this allocation whenever the DR drops below 1.0, to raise it back to that level. But not to raise it any higher than 1.0.
This would avoid any sudden jolt to the system related to enrichment/debasement, and avoid unnecessarily diluting existing stakers. If there’s enough organic demand for stakers into the Rotation Vault and this allocation isn’t needed, then so much the better! We could revisit at the end of the Bootstrap phase and reset back to 0, if needed. But I think it would be nice for the DAO to be prepared for this situation, if it was needed.
This has clear benefits, it will enhance vault capacity, flash mint liquidity, but there are a few potential drawbacks, including diluting current vault participants and reducing our reserve for future initiatives, so we probably want to proceed with caution and set somewhat strict guardrails and metrics to monitor. For example, how was the 5.5M was chosen? It’s less than have, but it is a large chunk, we don’t want to be deploying assets too aggressively, only to find the DAO short on reserves at critical moments or capitalize on juicy opportunities.
I also agree with the fact that a single large deposit could sharply increase the deviation ratio (DR), abruptly changing enrichment mechanics and potentially undermining existing stAMPL holders’ upside (it might entice people to mint more SPOT because of juicy returns on the other hand).
Conditional Increases
Only commit further AMPL in small increments if a predetermined DR floor (for example <0.95) is breached or if on-chain data shows flash mint capacity is becoming a genuine bottleneck. We also want to avoid trying to commit too much liquidity when DR is very low.
@Brandon
Is there any way to determine if the DR needs to be adjusted and whether there is genuine demand for SPOT? I assume that when there is a negative rebase, the DR will decrease, prompting people to seek refuge in SPOT, which in turn will reduce the available AMPL, etc., etc. What if the DR falls below 0.75 or lower? Is there a point at which deploying more capital no longer makes sense?
What if the DR falls below 0.75 or lower? Is there a point at which deploying more capital no longer makes sense?
I’d say, crucially, this is not a bailout fund. So the sign I’d look for is–does the broader ecosystem view the stAMPL vault as unsustainable? If that’s the case, and capital is taking flight out of the system, I’d recommend pausing any deposits in order to let the core market dynamics and incentives play out as needed.