I’m for using AMPL as the reward token instead of SPOT!
One of the cool things about having had AMPL as the reward token was that the rewards were increasing together with supply expansions.
This didn’t have such a big impact for the AMPL-x geysers so far since the AMPL in those pools were rebasing too and because of that the %reward didn’t change much.
With SPOT-USDC however, we would have a stablecoin pool earning AMPL, which means that if we would have supply expansion the percentage rewards for LP providers would expand with it too.
This in my opinion has the potential for a positive feedback loop where people mint SPOT and provide LP to get the rewards. And when supply expands due to the increased demand, the rewards get bigger and with it the incentive to mint even more SPOT.
This potential phenomenon has been on my mind for a while and I actually did an interesting thought experiment on this a couple months ago:
If we remember Luna, they managed to draw in huge capital by offering a 20% APY on stablecoins. Luna eventually collapsed, but it’s important to remember how attractive 20% were for stablecoin farmers.
If the entire AMPL supply was used to mint SPOT and we were aiming for a 20% APY for the SPOT supply, that would cost 4% of the entire AMPL supply per year. The DAO currently holds around 9.5% of the entire AMPL supply.
What this means is, if we would use 4% of the supply as rewards we would create a situation where the APY never drops below 20%, even if the entire AMPL supply was used to mint SPOT. 4% per year is obviously too much and a 100% minting ratio too.
But what if we would aim for 10% of the AMPL supply being utilized to mint SPOT? Now we only need 0.4% of the entire supply per year and this is definitely affordable by the DAO with a 10 year horizon!
By using 0.4% of the supply per year(currently 221k AMPL), we can offer > 20%APY for a SPOT-USDC pool, until 10% of the entire AMPL supply have been utilized to mint SPOT. At which point, the APY would be exactly 20%.
The APY would still be > 10% until 20% of the AMPL supply are being utilized for SPOT.
This is only possible because of the rebase dynamics of AMPL.
If we use SPOT as the reward token, rewards would just decrease as more people join the pools and not grow with the expansion of AMPL supply.
I get the benefit of having SPOT as the reward token. It provides stable reward for stable liquidity which is also a good thing to have. However it also requires 5 times the amount of that in AMPL to lock into Tranches.
This is an opportunity to bet big on SPOT and incentivise the minting of SPOT properly. I think aiming for 10% utilization of the AMPL supply for SPOT is a good goal to have and it can be achieved with just 55,000 AMPL for this geyser
(0.1% of supply = 55k AMPL, 0.4% per year)
And even if we would not use AMPL, 10,000 SPOT is way too little in my opinion.
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I’m in favour of using AMPL as the reward token for the potential positive feedback loop that it might bring as I explained above.