Geyser Refresh for Q2 2024

Ampleforth Governance
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The current round of geysers has ended, let’s talk about the next round.

Ecosystem State

The proposal to begin rollout of Spot v2 is live and so far showing solid support. This is a natural time to reexamine the structure of SPOT liquidity so we can ensure it’s serving the needs of the market and protocol.

@Togenkyo suggested here that the bands of the SPOT Arrakis vault are due to be updated. When the vault was first launched in January of 2023, the bands were set such that the AMPL price target was at the lower end. Now, the price target has approached nearly the top bound.

Demand for SPOT leading up to the rollout has exceeded these concentrated bands and, while the price has shown a remarkable ability to come down again towards the target, better liquidity provisioning could have reduced some of the unnecessary intermediary price action.

Another factor is that, provided the v2 rollout executes, we may expect more short term volatility of SPOT as the markets develop. So we should generally prefer wider bands in the near term, on top of moving them upwards.

Given the simplicity of the Arrakis v1 vault system, the best way to update bands is to migrate to a new vault. If so, this is also an opportunity to leverage new v2 architecture from Arrakis that can be more dynamic in its liquidity management. This could simultaneously increase LP efficiency (leading to more fees) and decrease the need for future migrations.

The DAO could consider future programs on satellite networks, such as Base. But it’s likely prudent to first ensure a healthy SPOT v2 ecosystem on Ethereum L1, before complicating the market and arbitrage structure with additional platforms. However, since these are open markets, anyone who would like to participate on the Base platform in the meantime can absolutely move forward as they desire. There is already $267k of SPOT liquidity on Aerodrome, and $557k of WAMPL liquidity on Base Uniswap v3.

DAO Owned Liquidity

The FORTH PALM Vault (dashboard) has been highly successful in delivering on the DAO’s goals of bootstrapping liquidity. The performance of the vault is +21% vs hodling. This performance is something we can double down on, by allocating more FORTH tokens to what is already in the vault.

The DAO currently owns ~$1M in FORTH/ETH liquidity, and ~$3.5M in AMPL/ETH liquidity. Additionally, the $500k USDC position can be used for future SPOT liquidity, if the DAO mints enough SPOT tokens to match.

Proposed Configuration

Geyser Platform Pair Chain FORTH Amount
Beehive v7 Uniswap v2 ETH/AMPL Ethereum 25,000 FORTH
Fly v2 (Superfly) Uniswap v3 SPOT/USDC Ethereum 25,000 FORTH
Total 50,000 FORTH

Proposed allocation to PALM liquidity: 700K FORTH, which would bring the vault back to the 90:10 FORTH:ETH ratio it started with.

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I agree with the points made about SPOT volatility expected to increase, that a adjustment of the range is needed and to first focus on a healthy Ethereum L1 ecosystem before incentivising other layers and networks. I’m also in support for migrating to the new v2 vault.

The point I’m hestitant to agree with is the part about allocating 700k FORTH to the FORTH/ETH palm vault. It’s not that I’m completely against it, but wondering why not support the SPOT ecosystem with a similar willingness?

I would rather see a bigger amount allocated to the SPOT ecosystem than increasing the position in FORTH/ETH by an amout that would essentialy quadruple the total liquidity in there.

Supporting the SPOT ecosystem

With the SPOT v2 vault launching, we are unlocking the opportunity for market players to arbitrage SPOT against AMPL in both directions. What arbitrageurs need once and foremost is liquidity to be able to perform the arbitrage operation.

As you mentioned, an increase in volatility is to be expected, which will require liquidity not only inside the price target range, but also in the outer areas. Adjusting the Arrakis vault setting for SPOT/USDC will mitigate some of the volatility, but it will also thin out liquidity as it is spread over a wider range.

The more liquidity there is in SPOT/USDC, the bigger the amount that can be arbitraged, the more fees are generated by the vault and the bigger the stabilizing effect on AMPL price. It’s all made possible with the liquidity.

Priority on increasing liquidity for SPOT

In my opinion, increasing liquidity for SPOT/USDC should be the highest priority for the DAO right now. Using the 500k USDC with newly minted SPOT for that is a step in the right direction, but I would like to see even more done.

I propose to also increase the geyser rewards by a substantial amount, for example 50k FORTH, and let the community communicate this over social media channels to attract new liquidity from market players outside of the Ampleforth ecosystem.

With vault v2 coming out, it is expected that more people than ever before will interact with SPOT, by buying or minting it.

What are they going to do with the SPOT? Just hold it? (Which is a perfectly fine use case)

Give them an incentive to use their SPOT by providing liquidity to the SPOT/USDC pool and receiving rewards for it, supporting the whole ecosystem while also benefitting from it.

More than enough funds

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With the DAO holding 2.665m FORTH there is more than enough funds to support the SPOT ecosystem in a bigger way. Even if 700k of it was used to increase the FORTH/ETH liquidity, there would still be 1.965m left.
(Not to mention the addition tokens from the 2% inflation should the DAO decide to mint them)

I suggest to increase the geyser rewards for SPOT/USDC by a substantial amount.

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The next big release (in a couple of months or so) is probably going to be the BillBroker (working name). A custom spot-usd vault which buys spot below the AMPL target and sells above, and basically pockets the difference in yield. This is quite different from an AMM pool, it actually brings countercyclical demand to spot and by extension AMPL.

Eventually, we want to get as many ecosystem participants as possible (and others outside) to contribute {SPOT,USD} to the BillBroker. By doing so they earn a yield by allowing their assets to be traded counter-cyclically and also contribute to lowering the volatility of AMPL.

I agree with you @Togenkyo directionally, that we should increase geyser emissions toward productive utilization of SPOT. However, I think we should reserve substantial increases (in the order of ~3x or more) for after the next release. We could even consider emissions for the BillBroker out of band (before the next geyser quarterly update as soon as it’s live later this summer).

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That’s interesting! I’ve had a similar idea of building an arbitrage bot myself based on a GRID strategy for SPOT around the AMPL target price myself.

Just from the brief description you provided, it seems that the BillBroker vault will bring supply and demand on the areas outside of the neutral price range, but not liquidity in itself. That would make it another arbitrage player that will require actual liquidity in the SPOT/USDC pool. The more there is, the better it will perform.

The last increase in geyser rewards from 15k to 25k FORTH (~66%) resulted in a similar increase in liquidity locked inside the arrakis vault from around $390k to around $615k (~57%) as of yesterday. This is out of my memory, maybe there is something like a graph to be found somewhere.
(Edit: It seems some people have withdrawn their liquidity today, maybe in anticipation of the new arrakis v2 vault?)

I don’t see the downside of keeping the momentum going and at least increase the reward by a smaller amount. There is no harm in building liquidty +20%/+30%/+40% over a couple months leading up to BillBroker, as opposed to all at once at a later stage, a couple months later, when it’s released.

Especially when there is most likely an increase in demand to be expected short-term right now with the vault v2 launch. I think it would be better to anticipate and preemptively act, than having to react later.

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Hey @Togenkyo , I appreciate the well-reasoned perspective. Directionally, I do very much agree with you.

I almost left the PALM allocation for a separate proposal, because I conceptually separate this deployment from a geyser deployment. A geyser reward can be viewed as an expenditure for the DAO. This expenditure provides immediate short term value of course, and hopefully leads to long term growth. The assets deployed into PALM, however, continue to be held within the DAO’s ownership and are in service of DAO-owned forever liquidity (for any asset the DAO choose – AMPL, SPOT, FORTH, …).

On the geyser front, I think you’re right. The potential long term impacts of a geyser investment could be larger now than any previous point in the project lifecycle. So I would be in favor of increasing the SPOT geyser by upwards of 40%.

Other points to be mindful of–I already expect some growth due to non-incentivized sources:

  1. At the current DR, SPOT would be enriching at nearly 20% /yr in the beginning. We’ve seen the power of 20% yearly returns in previous cycles, and we shouldn’t take this too lightly.
  2. The introduction of swaps should remove a lot of friction in SPOT creation as a result of normal market price fluctuations of AMPL. Because of the DR bounds on swaps, SPOT supply would only be able to increase through swaps until we enter the upper part of the DR band [proposed @1.25].

We would be relying on the per-tranche mint caps to smooth this out over a few weeks, and could see some market choppiness until that settles. I think that’s ok, though.

Would there be community support for increasing the SPOT geyser 40% from 25,000 to 35,000 for this cycle?

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I am in favor of more rewards for the Spot pool for reasons meentioned above thanks

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Eth/ampl geyser is important for liquidity and long term holders. I’d propose to continue supporting that and not offering a drastic increase to spot pool, unless we can keep Eth pool at same rate as prior geyser.

It says beehive v5 in proposal. Do you mean a new one at v8?!

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That was intended to be a refresh of the existing Beehive geyser, so v7. Fixed, thanks.

The increase to the Spot geyser would be independent of the Beehive rate. So Beehive would remain the same as last rounds, at 25k FORTH.

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An onchain vote has been posted, with the most up-to-date values:

Voting begins in about 2 days.

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The geysers are funded, thanks everyone. They are at the usual location: https://geyser.ampleforth.org/

Note that the Beehive v7 was refreshed, so if you’re a depositor there, there’s no need to unstake or restake.

There’s a new vault for the SPOT geyser, on top of the Charm platform. This vault dynamically manages Uniswap bands to increase LP efficiency and maximize returns. You can find that vault here:

https://alpha.charm.fi/vault/0x2dcaff0f75765d7867887fc402b71c841b3a4bfb-1

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