Geyser Refresh for July 13, 2022

The current wave of geysers are set to expire on July 13th, 2022. Now that the Forth DAO controls the Ecosystem Fund, this is the first time that the DAO will be in control of the geyser program. Let’s talk about how to handle the next round.

About the Geysers

The AMPL Geyser distributes AMPL tokens from the ecosystem fund to those who provide liquidity on decentralized exchanges.

The motivation of the geyser project is two-fold. First, it helps distribute the Ecosystem fund out into the world in a sensible, permissionless, and predictable way. And second, it distributes to those who contribute to the health of the AMPL ecosystem.

It was announced to be a 10 year program, with emissions roughly following Bitcoin’s emission curve. You can learn more here. However, it’s still within the DAO’s control to change or modify this program as it sees fit to keep up with the evolution of the marketplace.

Overall Thoughts

The recent Coinbase listing of WAMPL was an event that added liquidity to AMPL out into the marketplace. While not “on chain”, it does potentially decrease the protocol’s reliance on the Geyser programs for ensuring AMPL’s broad availability.

The bearish macro environment should also be mentioned as it may not be a great time to over deploy incentives. There’s also been a general sentiment in the community about focusing liquidity into a smaller number of pools, rather than spreading them out too widely. This may increase in priority after SPOT, in order to provide the best support.

Given all this, I think a good approach is to begin to move the geyser program into a smaller number of pools with deep liquidity rather than spreading the programs out too much.

Static vs Autocorrecting Pool Types

The original DEX pool like Uniswap are special in that, when a rebase occurs, the price automatically corrects back to the price target. (See this very old blog post from 2019).

Similarly, the coinbase market denominates trades in WAMPL, so if the WAMPL price stays constant during rebase (as it would naturally in a CLOB), it means the underlying AMPL implicitly followed the correcting pools.

The USDC Smart Pool was the first pool of the static type. When a rebase occurs, the DEX sides automatically get rebalanced to avoid impermanent loss. The side effect is that price remains unchanged.

Elastic Swap is also now live on Avalanche and Ethereum with incentivized AMPL pools (via $TIC). These pools have similar price behavior around rebase to the Balancer Smart Pool, where the price does not change in response to rebases.

The number of “non-correcting” pools has growned over the last cycle. There are now four:

  1. USDC Smart Pool on Balancer with $1MM of liquidity

  2. AMPL/USDC on Ethereum ($780K Liquidity)

  3. AMPL/USDC.e on Avalanche ($900K Liquidity)

  4. AMPL/TIC on Avalance ($650K Liquidity)

Having some number of static pools is appealing for LPs, because it decreases exposure to impermanent loss, however, it may impact the ease with which protocol corrects back to target. Therefore this balance between static and correcting pools is something to keep a close watch on.

Proposed Changes

  1. Retire the Old Faithful Geyser (Balancer Smart Pool AMPL/USDC)

Given the overlapping functionality with Elastic Swap, I propose discontinuing the Old Faithful geyser in order to reduce competition and fragmentation between pools. Elastic Swap is more general, more scalable, and fully invested in the Elastic Finance ecosystem. It’s also already incentivized.

  1. Move Trinity to Balancer v2 (WAMPL/ETH/WBTC)

When the Balancer Boosted Pools, and the Balancer router is updated, there will be auto-wrapping/unwrapping between AMPL and WAMPL. This will allow traders to denominate trades directly in AMPL, without any dependence on orchestrator callbacks. We can move the pool to the latest platform in advance of this.

Similarly, I expect we can move the aAMPL Splendid Geyser to an AMPL Boosted Pool when that time comes. (And move the aAMPL/AMPL liquidity from Mooniswap over at the same time).

Alternatives

Of course, if the community instead prefers other approaches to liquidity management, there are other possibilities. I think there’s also a strong case to be made from pivoting towards protocol (i.e. governance) owned liquidity with the AMPL instead of deploying the eco fund 100%.

The AMPL-backed SPOT Perpetual Note is on the horizon, and AMPL in the DAO could be held in reserve in order to interact with the SPOT ecosystem when it’s launched. This could include minting SPOT, maintenance of the system via rotation, targeting liquidity for SPOT, etc.

Proposed Configuration

Background:

  • Original EcoFund carveout was 23.5% of network
  • Treasury owns 5,541,432 AMPL, so 46% of original EcoFund carveout is liquid
    (not counting the 411,861 AMPL and 289 ETH in Uni v2 and 125K AMPL in Mooniswap)

Following the Bitcoin Emmission schedule would give us a target for Y4Q1 to Y4Q4 of 1.75% of the original Eco Fund per quarter. (That’s 1.75% of 23.5% of total supply)

Geyser Platform Pair Chain % of Eco Fund
Splendid Aave aAMPL Ethereum 0.3 %
Trinity v3 Balancer v2 WAMPL/WETH/WBTC Ethereum 0.3 %
Beehive v4 Uniswap v2 ETH/AMPL Ethereum 0.6 %
Crystal Pangolin WAVAX/AMPL Avalanche 0.6 %
Total 1.8%

Steps and Timing

In order to avoid downtime which may impact liquidity providers, we should strive to deploy the next round before the current round ends. This will require some scheduling forethought.

The onchain vote can execute the payload that deposits the funds to the geysers with no intermediaries. This process takes 7 days (2 days delay + 3 day voting period + 2 day timelock).

The offchain signaling step takes 5 days (2 days delay + 3 day voting period).

So I propose aiming for the following schedule, provided there is enough agreement and sufficient delegation to proceed:

July 13th - Execute onchain proposal

June 6th - Latest time to post onchain proposal.

June 22nd - Aim to post offchain signal vote. This gives us enough time for 2 snapshots, if the first one is inconclusive. Alternatively, we could take the extra time for discussion if needed.

6 Likes

Don’t have too much to add, the plan as outlined sounds solid to me. Consolidating liquidity in the newer, more feature rich pools is a win.

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yeah, this all makes sense to me. keeping avalanche going and beehive v2 makes sense, especially with the higher percent allocated to them.

is there a lot of liquidity on bancor?

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Yeah, this is long overdue, and it makes sense.
image

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I don’t believe there’s any Ampleforth related liquidity on Bancor. I don’t think it supports AMPL (due to rebasing), and there’ve not been any whitelisted pools for FORTH or WAMPL either.

I’m on board with a WAmpl pool (WAmpl/ETH,WBTC) with a geyser.

It will give users that purchase WAmpl on coinbase some utility.

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my bad. mixing up balancer and bancor

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I’m in favor of this as we now have Elastic Swap pools that behave similar during rebases as the Smart pool.

Another positive point is that the Smart pool’s ratio adjustment could be removed from the orchestrator, making the rebase transaction cheaper and cleaner. This should, however, not be done directly after deprecating the Old Faithful Geyser to give folks some time to withdraw their liquidity.

So there would be no Geyser for an AMPL/USDC pool anymore?
I see the point that the current stablecoin pools “may impact the ease with which the protocol corrects back to target”, but I think it would be advisable to not solely depend on Elastic Swap’s liquidity mining campaign for providing AMPL/USDC liquidity.

Disclaimer

I’m utilizing the Old Faithful Geyser and may not be objective regarding AMPL/USDC liquidity.

I would propose adding a Geyser utilizing Elastic Swap’s Ethereum AMPL/USDC pool. This Geyser could receive less incentivized AMPL than others.

It could help explore how much such pools impact AMPL’s correction back to the price target.
After SPOT’s launch, there will probably be an AMPL/SPOT pool. The AMPL/USDC could liquidity could then easily be moved to the AMPL/SPOT pool without folks having to worry about market conditions as USDC/SPOT should be comparably stable.

I think it makes sense to phase out Old Faithful as ElasticSwap has essentially made it redundant, and will no longer require Ecosystem funds to attract liquidity. Consolidating liquidity with fewer geysers is a good way to reduce trading friction in a bearish market.

Great input, thanks Pascal.

I agree with just about everything you say. What makes me biased towards a smaller number of geysers at the moment, is that I don’t think we want to overfit to the current liquidity landscape. With SPOT on the horizon, and with Boosted Pools/Auto-wrapping on Balancer potentially coming up, we might want to make some larger changes in response. Maybe we want a deep AMPL/SPOT pool, for example. Keeping a smaller number now can help us react how we want to later without much churn.

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It seems like there’s enough support to move to a snapshot, so I’ve posted one here:
https://signal.ampleforth.org/#/proposal/0xbf72f6c8eba30169efdd039b5d5e9a83e098208bfbfad28b73cd9c3d6da23c7e

Voting begins in about one day!

1 Like