Proposal: AmpleSense AMPL Grant

Ampleforth Governance
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Summary

The AmpleSense DAO is proposing that the FORTH DAO grant 275,000 AMPL to AmpleSense for deposit into the DAO’s Elastic Vault protocol. Currently, FORTH DAO has nearly 8.9 million AMPL in its Treasury. The sole purpose of this AMPL grant would be for deposit into the Elastic Vault. Once deposited AMPL provided via the grant will never be withdrawn.

This AMPL deposit into the Elastic Vault would help to further bootstrap and strengthen the protocol, deliver vault rewards (EEFI) to the FORTH DAO Treasury and support the use of EEFI as an additional Ampleforth ecosystem Incentivisation mechanism.

AmpleSense Introduction

Launched in 2020, the AmpleSense DAO is a community-led organization focused on accelerating the Elastic Finance ecosystem. Since its launch, the DAO has helped to improve understanding of the rebase via articles in major publications, such as the Defiant, and launched unique educational initiatives such as the Rebase Crew.

Most significantly, AmpleSense spent more than a year developing a major protocol, the Elastic Vault, that utilizes AMPL’s rebase mechanic to enable AMPL holders to hedge against negative rebases and earn yield during every stage of AMPL’s rebase cycle. The vault is also designed to incentivize AMPL purchases and utilization (such as borrowing) during negative and neutral rebase periods.

The Elastic Vault emits the Elastic Finance token (EEFI), a “yield asset” that provides exposure to AMPL. EEFI’s supply is dependent on AMPL’s rebase status. EEFI supply increases when AMPL is in negative and neutral rebase status, and declines when AMPL is in positive rebase (due to EEFI buys and burns facilitated by positive AMPL rebases; specifically, a portion of new AMPL supply generated by the positive rebase is used to buy and burn EEFI, and also generate ETH rewards for Elastic Vault users). The Elastic Vault underwent a four-phase audit by the noted blockchain security firm Omniscia. Learn more about the Elastic Vault at docs.eefi.finance.

AmpleSense’s core implementation team includes long-time Ampleforth community members (Discord usernames: davoice321 and kingsolomon).

Forth DAO Benefits

Funding this grant request would have the following benefits for FORTH DAO and the Ampleforth Elastic Finance ecosystem:

  1. Bolster the FORTH DAO’s Treasury: AmpleSense would allocate 30% of EEFI and ETH rewards generated by the 275,000 AMPL deposited into the Elastic Vault to the FORTH DAO Treasury. (EEFI and/or ETH rewards would be deposited into the FORTH DAO Treasury monthly.)

  2. Incentivize Ampleforth ecosystem expansion and utilization: 60% of EEFI rewards generated by the Elastic Vault from the 275,000 AMPL deposit will be utilized to incentivize uptake of other protocols utilizing AMPL, for example, the new ElasticSwap AMM platform and other applications.

Note: The 275,000 AMPL grant would never be withdrawn from the Elastic Vault guaranteeing delivery of generated EEFI rewards to the growing AMPL ecosystem and the FORTH DAO over the long-term.

  1. A strong signal that the Ampleforth community is supportive of third-party developers: Helping to bootstrap the growth of the Elastic Vault would be a strong signal to other third-party developers that there is willingness within the AMPL community to incentivize the use and growth of applications built on AMPL.

Purpose of Grant

The 275,000 AMPL grant would be deposited into the AmpleSense Elastic Vault protocol. Once deposited this AMPL will never be withdrawn.

The Elastic Vault will generate EEFI and ETH rewards from the AMPL deposited into the vault. A portion of EEFI/ETH rewards (30%) would be deposited into the FORTH DAO Treasury. 60% of generated EEFI would be used to provide token incentives to other protocols using AMPL.

Grant Breakdown

Proposed Grant amount: 275,000 AMPL

Deliverables

With the grant, we expect to deliver/engage in the following:

  • Deposit 275,000 AMPL into the Elastic Vault: Immediately
  • Deliver 30% of EEFI and ETH rewards generated by the deposit to the FORTH DAO: EEFI/ETH deposits to the FORTH Treasury will begin 30 days after the 275,000 AMPL deposit
  • Utilize EEFI generated by the AMPL deposit to incentivize the use of other ecosystem protocols: Timing TBD/TBA based on conversations/collaboration with other protocols (we have engaged in discussions prior to the submission of this proposal); AmpleSense will deliver regular reports to the FORTH DAO on EEFI provided to third-party protocols to incentivize AMPL utilization
  • Regular updates: The team will provide updates during Ampl-office hours + Amplitheaters regarding EEFI utilization (for external protocols) and FORTH DAO Treasury deposits

Distribution Mechanism

  • 275,000 AMPL delivered to AmpleSense DAO for deposit into the Elastic Vault immediately via the FORTH DAO multisig; The deposit will be managed as follows:
    • 275,000 AMPL deposited into the AmpleSense DAO multisig
    • AmpleSense multisig deposits 275,000 AMPL into Elastic Vault immediately
    • AmpleSense multisig will claim EEFI/ETH monthly for delivery to FORTH DAO Treasury
    • AmplSense multisig will deliver EEFI rewards regularly for protocol incentivization (via deposits into smart contracts, etc.)

About the AmpleSense Team

The AmpleSense DAO was founded in 2020 by long-time community members Davoice and Solomon. Our technical co-founder is Anton (Stalker on Discord). Davoice has extensive experience in blockchain application development, Web3, DAO operations and is an active participant/contributor to major communities including Axie Infinity, PHONON DAO (including as a Treasury multisig signer), and his other significant project, StoryPrima DAO. Davoice developed the Elastic Vault concept and its engineering specifications. Anton leads smart contract development and front/back-end implementation.

SolomonSollarsNSense (TheeKingSolomon) has been in the Bitcoin | Crypto space for a decade as a contributor, early Investor, and early Bitcoin Hater in favor of stability protocols i.e. centralized stablecoins, collateralized stablecoins, and now REBASE. He hails as one of the original 101 delegates from the first blockchain community that formulated the DAC | DAO model (Bitshares) which is also the community that jump started the decentralized stability alternatives (BitAssets, Makr/DAI). For AmpleSense he now focuses on Elastic Finance thought leadership, communications and culture building.

Contact Info

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It would be great to see this happen. The elastic vaults provide the community an extra incentive to borrow and buy AMPL during negative rebases. We need to keep building and push more and more utility for the whole elastic ecosystem. This would also serve as a great hedge for the FORTH DAO treasury. Seems like the whole community would benefit from this initiative.I will vote yes and hope more people see the potential.

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I would like to know how the Forth DAO would have benefit from receiving EEFI tokens, as opposed to just having the 275.000 AMPL.
Also how would incentivizing the ecosystem with EEFI have a bigger benefit than doing the same with AMPL?

I guess the questions that it comes down to for me is:
What is the utility/intrinsic value of EEFI? How would it have any value apart from the buybacks coming from the positive rebases that AMPL holders would have received anyways without interacting with EEFI? Maybe I’m missing something.

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Thanks for your question.

The main purpose of the grant would be to help to bolster the elastic vault protocol, which has knock-on effects on benefiting the overall ecosystem growing around AMPL.

This is within the FORTH’s DAO’s mandate, and, in my mind is a strong rationale for the grant.

As for having exposure to the EEFI token, EEFI has additional value as:

  1. An additional method of exposure to AMPL, given that EEFI’s supply is directly related to AMPL’s rebase mechanic – especially to the positive rebase

  2. Ability to utilize EEFI in hedging activities mechanism

  3. An additional means of bringing people into the AMPL ecosystem via utilizing EEFI as a rewards mechanism to incentivize people to utilize AMPL-powered protocols

EEFI is a means of further diversifying the FORTH DAO Treasury, benefiting from the expanding utilization of EEFI across the ecosystem (as an incentivizing mechanism, etc.) and other purposes, which will benefit the AMPL ecosystem over the short- medium- and long-term.

The value of a token is always a complicated subject, but we think the benefits of EEFI that are being established currently and will emerge in the near future, create a number of very positive use cases/value drivers for the token and more importantly – the Ampleforth ecosystem.

Why use EEFI to incent AMPL protocol use?

From an incentivization perspective, there’s benefit in utilizing EEFI for this purpose. In some cases we might be able to utilize EEFI generated via the grant more rapidly than FORTH and especially in cases where incentivized protocols may be less well-established, or not prepared to request grants from the FORTH DAO, or even in tandem to drive as much volume/usage to a important protocol as possible.

We feel acting synergistically to drive the AMPL ecosystem forward is a net win-win for the FORTH DAO.

This will open the door for additional collaborations around reward distribution, etc. that will likely emerge in the coming months, which is also a benefit.

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Disclaimer: I’m financially invested in the Amplesense project through the use of their vaults, owning kMPL, and their NFTs. I stand to profit from Forth DAO treasury investments in Amplesense.

OK, my bias aside, I’ll take a stab at how this proposal affects the whole Ampleforth community. Assuming that AMPL’s market cap rises over the long run (as all of us here probably anticipate), here’s what this proposal would accomplish for AMPL community members who are not engaged with Amplesense:

  1. As the vault sells excess rebase AMPL, this will result in net sales up to a maximum of 0.33% of the total AMPL supply (3.1% of the AMPL treasury) into ETH and EEFI. A maximum of 30% of this will ever be returned in the form of ETH and EEFI to the treasury.
  2. Up to 60% of the AMPL sold for ETH and EEFI will be at the discretion of Amplesense to distribute at their choosing. Forth holders would have no control except assurances of good will and regular updates from Amplesense.
  3. 10% is unaccounted for. I assume this remainder accrues as rewards to Amplesense vault users?

As it stands, I don’t see how this is a good trade for AMPL holders who aren’t invested in the Amplesense project. Assuming AMPL expands over the long run, it results in net downward pressure on AMPL price in return for appreciation of EEFI and ETH, to which they can only access 30% of the value accrual. One could argue that this serves to diversify the Forth DAO treasury, but only if 100% of the yield was returned to the treasury. This is not something like subsidizing a geyser where all AMPL holders benefit from increased liquidity. Instead, it locks away community-owned AMPL to selectively benefit a specific subset of people who are interested in using vaults to generate yield (myself included). I think this proposal should be redesigned in a way that benefits all AMPL holders.

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Thanks for your comment. Let me reply to your major pionts.

Your main concern is that the proposal does not benefit all AMPL holders. We would argue that:

  1. Driving utilization and the growth of AMPL-based ecosystem initiatives benefits the overall AMPL ecosystem and AMPL holders due to the diversity of assets – based on and utilizing AMPL, such as EEFI, serving to grow and diversify the ecosystem. I view it very much like the value that accrues to the underlying ETH protocol by leveraging the asset and network to create a diverse array of ecosystem and network effects.

  2. Regarding the vault’s mechanics:

  • The FORTH DAO benefits from emission of EEFI, distributed to the Treasury via the monthly deposits

  • We’ve set up an accountability mechanism where FORTH stakeholders would have regular reports on how the EEFI generated by the deposited AMPL is being disbursed. In fact we’ve engaged in preliminary conversations (with other third-party protocols) regarding this area of support and this approach is being viewed favorably.

If necessary, we can provide additional accountability measures regarding the disbursement of funds. We’re also engaged on an ongoing basis with FORTH DAO stakeholders so this is not an issue.

I think the main question here is whether supporting the expansion of this particular use case would benefit AMPL stakeholders, or simply a sub-set. I would argue that it does benefit the full community, across a variety of parameters. The Elastic Vault was designed to assist the ecosystem in a range of ways, and utilizing the asset to further drive the ecosystem forward is a net win for the AMPL community and growing ecosystem.

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An interesting proposal, but there’s a particular aspect I’m not clear on:

Wouldn’t it make more sense for the FORTH DAO to receive 100%, and any subsequent token incentives to other protocols be handled as separate, independent grant proposals submitted to the FORTH DAO?

I’m also curious what the leftover 10% is intended for, the proposal doesn’t cover that part.

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Thanks for your question.

-The 10% of EEFI would be deposited into the DAO Treasury. Those funds could be utilized to fund DAO operations (most importantly, the rebase call), etc.

-Providing AmpleSense with the ability to disperse the funds provides another mechanism to drive ecosystem incentives via a potentially more flexible, fast-acting process versus official FORTH governance.

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Are we talking about the FORTH DAO, or a separate AmpleSense DAO? (I confess I’m not particularly well read on the specifics of AmpleSense, so unclear whether there’s a dedicated DAO for it or not)

Does this refer to AMPL’s daily rebase call, or does AmpleSense have its own daily calls that it needs to make too?

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Sorry, that would be the AmpleSense DAO Treasury.

Yes, to clarify, the Elastic Vault requires a daily “rebase” call to run vault operations (mint EEFI, distribute rewards, conduct buy/burn activities).

It’s called a “rebase call” because the function checks the AMPL rebase to determine the rebase status, which then determines how the Elastic Vault functions
.

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Thank you for clarifying. What are the typical gas costs for these daily calls? Could you link me some example transactions on Etherscan please?

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Gas costs have been pretty low as of late, so we’ve benefited from that. They’ve ranged from .006 to .0147 per call over the last month.

Here is a link to the wallet performing the “Rebase” calls. View the Txn Fee column: Address 0x77a9357e6f9f7e76922feac51356218a766af734 | Etherscan

Based on an average rebase call cost of .012 ETH, we’d spend an average of 4.38 ETH on rebase calls annually. This is a low-end estimate, as it also depends on whether ETH experiences a significant spike in gas costs over the next year.

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Happy to see our Grant Proposal up and getting some great responses, feedback and critiques! One aspect of what this grant will certainly do outside of what @davoice321 has already expressed in the OP (and responses) is acceleration towards external utilities for the $EEFI token (ex. Borrowing and Lending, EEFI Bonds, and self replaying loans). Appreciate all the early support for the AMPLEFORTH Utilities Era.

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Thanks, so very roughly speaking, 10% of 275k = 27k, which would cover gas costs for about 2 years? I’m not familiar enough with the EEFI mechanics to comment precisely, but does its relation to ETH mean that any spikes in ETH price would be at least partially matched by a rise in EEFI value? Or would it be more appropriate to set aside a raw ETH lump sum to more reliably cover expected gas costs instead?

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I apologize in advance, but I have to be blunt about this.

I strongly oppose this proposal. Under no circumstances should we give AMPL to a protocol that systematically sells AMPL without buying it back.

What this vault does is transfer market cap from AMPL to EEFI. During expansion it sells AMPL and burns EEFI, and during contraction it mints EEFI.

As far as I’m concerned this protocol design is simply leeching market cap from AMPL and under no circumstances should we take resources from ForthDAO and provide it to something that will simply sell them for other tokens.

I hope the community and the community looks critically at this protocol design and sees what I’m seeing. There is no reason for ForthDAO to hold EEFI. The ForthDAO benefits by promoting products that grow the AMPL market cap, not leech from it.

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The amount of EEFI emitted by the vault depends on a number of factors, mainly AMPL’s rebase status.

The vault only emits EEFI during neutral/negative rebases (and a lower amount during negative rebases). It does not emit EEFI during positive rebases.

The value of the EEFI in the vault also plays a role.

So the calculation isn’t 10% of 275k, but 10% of EEFI emitted from the vault based on the AMPL deposit, and AMPL’s rebase status.

Put simply, the amount wouldn’t be $27k, likely a lower value depending on EEFI emissions, EEFI’s value, etc.

We don’t anticipate that ALL gas costs would be covered by the grant. However, the 10% would help to off-set them for the DAO. So it’s a net benefit in this context.

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Thanks.

We’ve received this comment in the past regarding the protocol “leeching from AMPL.”

The Elastic Vault is designed to take advantage of AMPL’s rebase mechanic to do two things:

  1. For depositors in the vault during neutral and negative rebases, it provides yield in the form of the EEFI token. For example, currently the vault is emitting a higher amount of EEFI because AMPL is in the neutral rebase stage.

  2. During positive rebases, the vault, using the AMPL deposited by stakers, sells a portion of the AMPL deposit to buy and burn a percentage of EEFI on the market.

The vault does this to seek a balance between EEFI emissions provided to stakers to allow them to hedge their AMPL positions and, to prevent over-inflation of EEFI supply.

The vault also plays a valuable role in the ecosystem, by responding to AMPL’s mechanics – as designed. Meaning that when AMPL is above its current target price, selling a portion of the new supply to keep AMPL in balance.

So overall, the vault does not take away from AMPL by selling a portion of the AMPL supply. Instead it contributes to AMPL’s stability.

In fact, the vault could be viewed as playing a similar role in the ecosystem as “fast traders” who respond to AMPL’s market incentives, by selling AMPL when it is above peg.

Regarding buying AMPL:

  • The vault provides AMPL holders with an additional incentive to buy AMPL (or borrow it), when AMPL is in negative/neutral rebase to deposit this AMPL into the vault to generate yield. Any additional economic incentives provided to generate AMPL buying and/or borrowing during lower activity phases (neutral and negative rebase) is a net positive for the protocol and the ecosystem.

So to sum up:

  1. The Elastic Vault incentivizes buying of AMPL during neutral and negative rebase periods – as holder look to generate yield for holders

  2. The vault, during positive rebases, contributes to the overall stability of the protocol.

Some community members have asked us to consider creating streamlined methods for them to buy AMPL during neutral/negative rebases and we are looking into how to achieve this currently.

This is a common critique of the Elastic Vault and I’m happy to have an opportunity to address it in an open forum like this.

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Where is the rest of that value expected to go if the emissions don’t reflect it? AMPL value in that doesn’t wind up in EEFI out is used to hedge against negative rebases… I think…? (Sorry, I really need to read up on how this works properly)

I think it would make more sense to split the proposed gas funds off from the proposed AMPL deposit, to simplify reasoning about it.

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Yes, i can see how the additional 10% is confusing people.

It’s possible to allocate that 10% of EEFI back to FORTH, or to ecosystem incentive activity, if that’s desired.

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Look here is the reality, if you sell AMPL, and never buy it, you are leeching from AMPL market cap. There are no “if”, “ands”, or “buts” here. For the same expansion and contraction period, ForthDAO will have less AMPL that it would have if it held it. Instead EEFI market cap will grow. It is in the ForthDAO’s best interest to maximize the market cap of AMPL, and not EEFI. It’s really simple.

2 Likes