Thanks for the proposal @Loki_VT !
I can add some context as well.
Someone from ElasticSwap can correct me, but ES pools should be free from almost all IL you’d see in an AMM like Uniswap. Elastic Swap accounts for AMPL’s rebase and automatically rebalances accordingly. @Loki_VT do you have any docs that describe the IL exposure?
Yes, this is true-- we would end up trading some AMPL (which has upside and downside) for SPOT which is mostly stable. This could diversity the treasury in the short term… but I don’t view this as a diversity play because there is still correlated risk between AMPL and SPOT.
Here’s where I see some upside, though:
Providing liquidity for SPOT creates direct value for the SPOT ecosystem. The early days of SPOT will be primarily about seeding deep liquidity to increase availability and allow the protocol to set a track record of performance. AMPL / SPOT liquidity is essentially “free” to create for an AMPL holder, because the hardest part of seeding liquidity is finding the pair token (USDC, ETH, etc.) SPOT and AMPL both come from the treasury and the treasury would still own all the assets in the pools.
The LP position could earn trading fees for the treasury, depending on how the pool is configured. However, I can see a compelling argument for a no-fee pool for the most efficient market possible at launch, when we care most about growth.
Assume also that this isn’t the only SPOT pool. I also think it’s prudent to encourage a deep pool of SPOT/${stablecoin} on Uniswap v3 through other means where we could leverage concentrated liquidity. So SPOT/AMPL is just one piece of a puzzle.
A higher level perspective about using AMPL in the DAO treasury for liquidity is that this represents a slight shift away from liquidity mining and towards DAO-owned liquidity. The AMPL owned by the DAO was originally earmarked for liquidity purposes. If nothing else changes and we continue with the current approach, then all of the AMPL will be given away through geysers over the remainder of the 10 year program.
This seems like an easy opportunity for the DAO to provide long term liquidity for AMPL/SPOT while maintaining complete ownership. So I think this proposal has significant upside, and the DAO could always unwind the LP positions, if it ever decided it needed to.