Proposal: AmpleSense Grant to Expand Elastic Vault Functionality

[davoice321]

Summary

The AmpleSense DAO is proposing the FORTH DAO support the development of expanded functionality for the AmpleSense Elastic Vault. AmpleSense will develop three new sub-vaults with the following functionality:

• Sub-Vault I: Automated EEFI to AMPL trading, using a new AMPL/ETH liquidity pool (EEFI deposits into vault incentivized with EEFI rewards)
• Sub-Vault II: EEFI/AMPL liquidity pool (liquidity providers incentivized with EEFI rewards)
• Sub-Vault III: FORTH single-sided staking ($FORTH stakers incentivized with EEFI rewards); deposits and rewards limited to FORTH stakers with deposits into the Elastic Vault

Note that the focus and scope of this proposal was influenced by feedback we received on our original grant request – specifically the request from FORTH DAO community members for the addition of an automated EEFI → AMPL trading capability for the Elastic Vault.

Motivation and Specification

The Elastic Vault, developed by the AmpleSense DAO, is an application that aligns well with the Ampleforth protocol’s goals and incentives.

During negative/neutral rebases, when additional demand is desired to push AMPL into an expansion phase, or maintain AMPL equilibrium (neutral rebases), the Elastic Vault incentivizes AMPL holders to buy or borrow AMPL to deposit into the vault. Deposited AMPL is locked for 90 days, which helps to reduce selling pressure on AMPL during these periods. In exchange for making these deposits, vault users receive rewards in the form of EEFI, an AMPL derivative.

Since the Elastic Vault’s launch, it has proven effective at incentivizing deposits during neutral/negative AMPL rebase periods. To date, the vault has attracted more than 169,000 AMPL (based on AMPL deposits prior to May’s series of negative rebases), much of it deposited during AMPL’s recent negative/neutral rebase phase in April. In fact, interest in the vault was so high, that it received AMPL deposits before the official Elastic Vault launch announcement.

During positive rebases, the vault helps promote AMPL stability (and increases the desirability of the EEFI token as a reward for vault depositors) by using a percentage of the AMPL rebase (generated from AMPL deposits) to buy and burn EEFI.

Boosting the Vault’s Ability to Drive Market Demand for AMPL During Negative/Neutral Rebase Periods

The Elastic Vault has demonstrated ability to incentivize AMPL deposits during negative/neutral rebase periods. In addition, vault users have reported that they were incentivized to borrow/buy AMPL — even selling EEFI rewards to buy AMPL for deposit into the Elastic Vault.

However, the vault’s ability to drive AMPL demand (and support AMPL’s counter-cyclical supply dynamics) would be improved if functionality were added that enables EEFI (deposited by Elastic Vault users) to be automatically sold for AMPL during lower-demand periods (neutral and negative rebase). Vault users would then have the option of depositing auto-purchased AMPL into the vault to generate additional EEFI rewards (which could then be automatically sold for AMPL over time (via new deposits into an auto-EEFI trading contract ).

Implementation/Financial Implications

We are requesting a grant from FORTH DAO to expand the Elastic Vault’s capabilities in this area. We would:

• Develop a new sub-vault that would automate AMPL purchases using EEFI deposited by Elastic Vault users. (See new functionality outlined in the image above and tables below.)
• AmpleSense would also pair EEFI with AMPL (provided by the FORTH DAO) into a new liquidity pool to facilitate AMPL purchases using EEFI (this pool would be incentivized using EEFI).
• Finally, AmpleSense would launch a new vault that would enable FORTH holders to earn EEFI rewards (with the requirement that FORTH depositors also deposit AMPL into the Elastic Vault).

Benefits to FORTH DAO in supporting this activity include:

1. Drive additional AMPL demand during negative/neutral rebase periods via automated EEFI → AMPL sales; support AMPL’s counter-cyclical dynamics during expansion, contraction and equilibrium
2. Expand the breadth, impact and utility of an AMPL derivative (EEFI), which could be further integrated into the AMPL ecosystem in the future
3. Support additional utility for the FORTH token

Grant Purpose

The FORTH DAO grant would:

• Support the development (and auditing) of a vault that would extend the functionality of the Elastic Vault to enable automated EEFI to AMPL sales; we would also modify the Elastic Vault front end to facilitate EEFI deposits into this new sub-vault
• Help seed initial AMPL/EEFI liquidity, which would be used to conduct efficient EEFI to AMPL trades (this pool would be incentivized by AmpleSense using EEFI); FORTH DAO would provide AMPL for the pool, AmpleSense would provide EEFI; users would deposit AMPL/EEFI liquidty into a new sub-vault
• Support the development of a FORTH single-sided staking sub-vault, which would provide rewards to FORTH holders who also deposit AMPL into the Elastic Vault

See image below for an overview of project implementation and deliverables (click image to view a larger version).

Implementation Time Frame

Grant Request/Other Requests Breakdown and Distribution

Below is a breakdown of the grant request and distribution.

Grant Request

Funds Distribution

Note: After the Sub-Vaults and liquidity pool has been deployed, AmpleSense will submit a new proposal. This proposal will focus on a request that FORTH DAO deposit AMPL into the Elastic Vault.

About the Team

Founded in 2020, AmpleSense is a global independent, community-powered project focused on improving the understanding, adoption and acceleration of elastic finance products and services – specifically those in the Ampleforth ecosystem.

Poll

• I Support This Grant Request
• I Do Not Support This Grant Request

[tempusss]

Glad to see the community concerns being addressed on this second proposal. Would be great to see this happen, bringing utility to all AMPL and FORTH token holders.

[kbambridge]

Where does the yield come from? Minting and burning a token does not count as yield (we can easily see that with LUNA and other similar Ponzi schemes). I see negative yield with NFT tokens extracting value from the pool, and furthermore selling AMPL for ETH means there is more negative yield for the AMPL deposited.

Before this gets repeated, I would like to make it clear that locking up AMPL is not utility in itself as I have heard some people claim. I have read the docs a couple times and fail to see how this “vault” generates real yield. It looks like a value transfer from AMPL → ETH/EEFI with now a proposed optional buyback of AMPL feature.

[SolomonSollarsNSense]

Appreciate the support Tempusss! Its been a great back and FORTH with the community about the type of proxy contracts that could benefit both AMPL and FORTH holders. This is when it comes to EEFI. There’s even more that can be done to add utility to FORTH with the Elastic Vault but I think this is a great place to start.

[donald]

You ran out of a lunatic asylum, right? The whole AMPL ecosystem is dying. You are still worried that a project will suck the blood of AMPL. What profit does AMPL have for others to absorb? Everyone is giving up AMPL. There is a new project that wants to expand AMPL ，You’re still complaining here, you’re an idiot，F YOU!

[donald]

You better get out of this community, so that AMPL can develop better, don’t post your ignorant remarks here

[SolomonSollarsNSense]

As much as I disagree with some folks sentiments around this project we should all be able to express it. Let’s try to keep our comments on-target, stay positive, and constructive. Its been a pleasure working through this process! We learned a ton and are grateful for the continued and new support around these changes for the Elastic Vault.

[promiseland.crypto]

I understand where you are coming from Donald. It’s extremely difficult when criticism come with no valued input regarding things that could be improved just throw names at long-time ampl supporters.

I was of the opinion the project shouldn’t cower to slur’s without substance. I think the concerns have been addressed.
I look forward to Bambridge’s proposal to bring ‘utility’ to ampl where the community can vote!!!

[Degen_Autist]

It can be frustrating to read @kbambridge’s posts, but they are not completely invalid. Misinformed and incomplete, yes.

At first glance, the mechanism does appear to facilitate value extraction from AMPL → EEFI/ETH. But this is not value extraction, it is value transfer. The value is not leaving the ecosystem. Importantly, automated conversion of AMPL into EEFI/ETH during sustained expansions introduces a healthy degree of “sell pressure” that would otherwise exist from short-sellers anyways. Better for that to unfold within the ecosystem, rather than outside of it which would indeed result in value extraction.

The ecosystem benefits from this diversity of market dynamics. The new proposed features add more heterogeneity. Like energy, risk cannot be created or destroyed; it can be only transferred. So lets implement healthy risk (value) transfer mechanisms within the ecosystem and automate as much of it as possible.

Time to pass this proposal.

[kbambridge]

Still no one has answered my question where the yield comes from. If you don’t know where the yield comes from in DeFi, you are the yield.

[Degen_Autist]

Ctrl + F “yield” = 8 x all by one poster. “Yield” not mentioned or contained elsewhere, including within the proposal.

In web3, yield takes many forms. If you are the only one talking about yield, you are extracting yield.

What more is necessary to move this to a Snapshot vote? Concerns should be voiced, or the matter advanced in their absence.

[coldpress]

@davoice321

• Develop a new sub-vault that would automate AMPL purchases using EEFI deposited by Elastic Vault users. (See new functionality outlined in the image above and tables below.)
• AmpleSense would also pair EEFI with AMPL (provided by the FORTH DAO) into a new liquidity pool to facilitate AMPL purchases using EEFI (this pool would be incentivized using EEFI).

Although this proposal is a step in the right direction (from the previous proposal’s automated AMPL selling), this proposal does not guarantee the same volume of automated AMPL buying.

I believe the AMPL buying pressure is less than the AMPL selling pressure if:

1. The EEFI-AMPL vault is smaller than the AMPL-EEFI vault
2. The AMPL/EEFI pool is smaller than the AMPL/ETH pool

Feel free to correct me.

@davoice321

• Finally, AmpleSense would launch a new vault that would enable FORTH holders to earn EEFI rewards (with the requirement that FORTH depositors also deposit AMPL into the Elastic Vault).

Will Amplesense use the deposited FORTH to vote on Forth DAO proposals? Is it possible for Amplesense to have a significant percentage of Forth’s governance power?

[pascal-merkleplant]

Thanks for updating the proposal.

However, as none of my comments were answered in the last discussion, I’ll add them here again.

I do not see how the EEFI token is sustainable.

@pascal-merkleplant

As far as I understand, the elastic vault mints EEFI tokens when Ample is in negative or neutral rebase territory. If Ample rebases positively, the minted Ample is sold for ETH to buy and burn EEFI.

If we assume that the goal of having Ample most of the time in neutral rebase area is achieved, this would mean most of the time EEFI tokens are minted. The goal of the ForthDAO is, among others, to increase Ample market cap. Therefore the happy path is that EEFI gets continuously minted with short periods of positive rebases in which Amples get sold. By all means, this does not sound sustainable for me and definitely not beneficial for Ample, but please correct me if I’m wrong with my assumptions and/or understanding.

How could EEFI’s value not be diluted if Ample is most of the time in equilibrium?

@davoice321

vault users receive rewards in the form of EEFI, an AMPL derivative

Ampleforth’s docs state that derivates are “a specific type of financial asset whose value depends solely on an underlying financial asset.”, see here.

Considering this definition, the EEFI token is not a derivative of Ample. While there is an underlier for a certain amount of time (at least 90 days due to locking), the EEFI token will exist well after the Ample could be withdrawn again.

Introducing EEFI minting through FORTH deposits dilutes the Ample-EEFI correlation even more.

@davoice321

Support additional utility for the FORTH token

FORTH’s utility is governing the ForthDAO that is dedicated to the growth and adoption of AMPL.
Personally, I do not think there needs to be more utility.

@davoice321

Expand the breadth, impact and utility of an AMPL derivative (EEFI), which could be further integrated into the AMPL ecosystem in the future

This seems to have cyclical reasonings. “Help us make EEFI great, to have a great EEFI”.

@promiseland.crypto

criticism come with no valued input

To be honest, I really think that the criticism mentioned by @kbambridge, even if written in a rough tone, is valid.
How is the vault not a value transfer from AMPL → ETH/EEFI with an optional buyback of AMPL?

And to be clear, the ForthDAO is solely dedicated to the growth and adoption of AMPL, see here.

[davoice321]

We’ve received a few questions here and in other channels about the FORTH vault and voting.

Similar to currently deployed vaults, assets (in this case FORTH) deposited into the sub-vault remain under the control of the depositor.

Given this, only sub-vault users will have the ability to withdraw deposited FORTH from the vault to use for voting or other purposes. AS will not have any access/control over the FORTH users deposit into the vault, or have the ability to vote (on-chain/off-chain) using deposited FORTH.

[Degen_Autist]

ITT: People missing forest for the trees.

[EmwoN]

We do not want your shady Grant. We want to burn the Tokens!

[davoice321]

Thanks everyone for the great conversation around this proposal.

At this point, I believe the “targeted discussion” part of the proposal phase has been completed.

We’ll be moving this proposal to the next stage: off-chain signaling via Snapshot.

[promiseland.crypto]

lol, good luck with that!!!

[Degen_Autist]

How could EEFI’s value not be diluted if AMPL is most of the time in equilibrium?

The goal is to provide an avenue for yield (the generation of some expected return on investment) during negative rebases and equilibrium, which currently does not exist. Depositing AMPL on Aave does not save anyone during negative rebases. Selling remains the best option and contributes to sustained negative contractions.

We are not worried about EEFI’s value nor its dilution. How it accrues value is for the community, and broadly the market to decide. E.g., governance proposal to pair EEFI with fungible versions of A-tranches can be passed.

EEFI is not a derivative of AMPL.

Semantically, this is correct.

The AmpleSense DAO deposits AMPL into the Elastic Vault in order to mint EEFI tokens, so EEFI is understood as a “derivative” of AMPL - at least empirically by a group of people, in this case.

FORTH’s utility is governing the ForthDAO that is dedicated to the growth and adoption of AMPL. Personally, I do not think there needs to be more utility.

This is why you, personally, have a say in the matter through your vote.

This seems to have cyclical reasonings. “Help us make EEFI great, to have a great EEFI.”

Taken out of context.

How is the vault not a value transfer from AMPL → ETH/EEFI with an optional buyback of AMPL?

The innovation of AMPL is not one of value transfer from price into supply, but rather one of volatility transfer. Therefore, timing matters. As you’re aware, this volatility is registered as a change in price for non-rebasing assets and a change in supply for rebasing assets like AMPL.

During the previous AMPL cycle, the absence of any scaffolds or ecosystem structures resulted in 70+% loss of value for AMPLers. Tremendous volatility was released in a short period of time. People lost fortunes and it could’ve drawn intense scrutiny were the bubble anywhere near as big as LUNA-UST. In addition to the giga-brain energy behind SPOT and its perpetual note, it does not hurt to have another channel for containing/transferring volatility via EEFI - especially, because this volatility will be transferred during the most violent times historically: negative rebases.

It’s either that or flight to USD, ETH, or other perceived SoV (FORTH, SPOT, tranches), which again enhances sell pressure on AMPL and non-linearly promotes contraction because these systems are reflexive with feedback loops. Depositing AMPL into the Elastic Vault removes it from circulation for 90 days. Through EEFI, volatility (or value) remains within the ecosystem under our governance. It can be redirected towards SPOT, public goods, or exclusively AMPL as the sub-vault already will automate some selling of EEFI for AMPL.

This is synergistic and symbiotic.

[ducc]

@Degen_Autist

At first glance, the mechanism does appear to facilitate value extraction from AMPL → EEFI/ETH. But this is not value extraction , it is value transfer .

All I wanted to say to this was “LOL” but there’s a 20 character minimum.