Transcript of the Ampleforth AMA on Aave Discord on 09.11.2021
Thank you very much for hosting us for today’s AMA. AMPL on Aave is a very interesting development and we’re here to help answer any questions and discuss generally AMPL in the Aave ecosystem. I’m joined by Brandon Iles, Kuo, Aalavandhan and advisor Manuel Cruz, and we’re excited to begin conversation when you’re all ready
Also just took a pass at a pass on lending and borrowing AMPL, with special considerations for Aave.
I heard AMPL is generating the most fees of any other coin on Aave. Is this true?
Yes it is!
Here are stats from Aave for 8th of November:
- There is $3.61B worth of $USDC on Aave (v2) which generated $385,000 in revenue. 21.3% of total rev.
- There is $1.93B worth of $DAI on Aave (v2) which generated $222,000 in revenue. 12.3% of total rev.
- There is $1.09B worth of $USDT on Aave (v2) which generated $245,000 in revenue. 13.5% of total rev.
- There is $19.6M worth of $AMPL on Aave (v2) which generated $518,000 in revenue. 28.7% of total rev.
Source: Token Terminal: https://www.tokenterminal.com/terminal/projects/aave/composition
I honestly don’t feel people know about this pool, why the APY is so high and when it even existed. Will there be any marketing on this other than what’s been coming from the community?
Yes, have a look at the FAQ entry on lending / borrowing, hot off the press. We will likely be dripping this content out and adding to it in the coming weeks. I should also note that there’s about ~1200 lenders in the pool.
Would love to understand why smart people in this space are saying there will be 100% utilization during negative rebase periods?? What should the borrower do with the borrowed $AMPL to earn a profit during negative rebase?
While I can’t give financial advice, I can see a few reasons. For one, you can borrow AMPL for the same reason you would borrow any asset — put it to work, invest, leverage a position. It still borrows like a stablecoin if you borrow and repay at the same price. For more on price behavior, definitely check out https://faq.ampleforth.org/durability
This organic borrow activity is the long-term goal, but not necessarily what drives the behavior in the short term. In the more near-term timeframes people might well be speculating on AMPL itself, and this is ok for now.
If one is speculate on AMPL, you can still borrow AMPL to short the price. Expansion or Contraction states don’t really affect this as much as where you expect the price to go in the future. I can also see people borrowing in expectation of reentering an expansion phase before it arrives. We did see this play out in the previous cycle.
Ampl has been super exciting on Aave so far. Now it’s number onein revenue generation on the protocol. How is everyone feeling about using AMPL as collateral? It’s definitely a very sensitive topic that requires deliberation. Is there anything else teams want to see from the market before we can start that discussion?
Before AMPL can be seriously considered as a collateral asset, it has to stop being in 100% utilized states. This is a hard requirement, because when all the asset is lent out it means that liquidations are impossible. We’d all love to see this at some point, but the market needs mature some more first.
Until we get there, WAMPL (a non-rebasing wrapped version of AMPL) would be much more suitable. This does not exist on Aave though, and it would need liquidity built before it could be used. Alternatively AMPL LP tokens like the Balancer Trinity Pool (WBTC-ETH-AMPL) could be looked at. I know there has been some scrutiny around security of LP tokens on lending platforms though. All of this needs to be considered holistically.
Details on new asset listing:
Couldn’t you just flash loan ETH from Aave, buy AMPL with it, deposit AMPL into Aave lending pool to create the liquidity required to liquidate the undercollateralised borrow, do just that, withdraw the AMPL you deposited using the liquidity added from the liquidation, sell it back for ETH, repay the flash loan?
Oh yeah, you’re totally right.
Today AMPL managed to generate more revenue than USDC did on the Ethereum main chain and the Avalance chain combined. If the current trend continues, it is highly likely that we see AMPL flip USDC in the 7D daily cumulative revenue tomorrow.
Do you have any thoughts on the performance of the aAMPL pool so far? Have you been surprised that of the growth rate?
It’s funny you ask that, one of our academic advisors (Manny) actually predicted it would be the case in an early tweet thread: https://twitter.com/mrinconcruz/status/1419057689515073543
The short of it is, AMPL has this unique demand properties that are unlike stables and floating-price tokens.
Are there any plans for bring AMPL to both the Polygon and Avalanche versions of Aave?
AMPL is currently live on Avalance, with Matic (Polygon) hopefully coming soon. Adding an AMPL market on any Aave deployment is a function of Aave’s governance system.
What would be the most advantageous action if I wanted to let my portion of AMPL ownership grow and grow and grow? If I wanted to walk away for 1–2 years and come back to find a treasure chest?
In that case, holding naked AMPL would be the simplest strategy in that the asset is non-dilutive. The supply changes are universal and proportional. For this reason, if you own X% of the network you will forever own X% unless you buy or sell more. (not investment advice etc etc …).
What can we expect future of AMPL?
Right now AMPL is transitioning from the idea of a building block to an actual building block. It’s a fully-algorithmic unit of account that allows for stable long-run contract denomination.
The first (and simplest) use case is debt-denomination. We see this happening on AAVE today.
The next use case stands on the creation of on-chain derivatives (derivatives are just a special type of financial contract that connect with an underlying asset). Manny can comment on this 😉.
Following from that you can use derivatives to resegment the underlying volatility of AMPL into senior and junior tranches. The former of which can be used as safe-asset collateral by the issuer of a crypto-collateralized stablecoin.
Sorry if that was a bit much, I’ve written in depth about it here: https://faq.ampleforth.org/durability
I would say if there’s one thing people ought to know, it’s that AMPL has a mean-reverting price volatility distribution, but a fat-tailed stock volatility distribution.
This means you can use it to denominate stable contracts without underlying collateral or reliance on custodians.
Broadly, when you denominate contracts using AMPL, the act separates exposure to price volatility from stock volatility.
I think what you are saying that further into the future it will be trading so efficiently at or close to target without the need for anyone to manage movement of “real money”. True stability. right?
What I mean is that AMPL has a long-run stable price and therefore contracts denominated in AMPL will also be long-run stable, even in the face of extreme swings in demand.
Supply changes (from the Ampleforth protocol) serve as an outflow for these extreme swings.
A key property of AMPL’s durability is that it transfers the volatility of demand to supply, rather than seeking to eliminate volatility altogether. As a result it can survive both secular increases and decreases in demand. Unlike other approaches, AMPL can’t be “broken” by free-market forces.
In positive rebase periods, all investors will want to borrow AMPL. When rebase more them max rate. because the price change will not affect them but they will continue to receive rebases. It will be a risk-free investment. during this period. Why would people want to be a liquidity provider?
Depositing AMPL for lending reduces exposure to rebase in exchange for income from interest. Another way to think about it is that depositing and lending is taking an income position, as opposed to an equity position. At 100% utilization, AMPL is essentially a non-rebasing coin with extremely high APR and an associated lockup period. This is closer to lending something like USDC (though precisely the same!).
So in the scenario you describe, lending does not match the appetite of someone trying to maximize their %-ownership. But it may for someone who’s looking to hedge or looking for something closer to an income stream.
DeFi 2.0 is the new trend. Do you have any projects to catch this trend?
DeFi 2.0 is often characterized by the verticalization of functions in a stack, expanding the function of a token to that of a decentralized central-bank.
I think it’s likely the case that the next phase of evolution of actually be more modular and flexible. Where use cases (like being a unit of account) will be leveraged in a number of more complex applications.
Rather than bloating the base-level building-block, we’ll see these simple, durable, building-blocks reconfigured into complex applications as needed. It’s just more robust that way.
My vision of the new financial stack is closer to the UNIX philosophy of small, light modules that can be strung together to make anything you want. I worry that DeFi 2.0 taken to too much of an extreme makes protocol fat again. But I love to see experimentation and new ideas being tried
My concern with current ideas of protocol-owned liquidity is that you’re basically funding an asset management fund with a token. OHM is supposed to be supported by cash flows from its treasuries…
For example, we’re (at PRL) building a number of contracts to increase value for existing assets — but we ourselves are NOT aiming to be a platform or “ecosystem” player. We think that is a web 2.0 mindset. Everything we build is super small, light, composable, extensible, so that any other project can just take it and use it.
Can the Aave team answer as to what Aave is doing with profits in AMPL they got from borrowers?
Hey, fees collected are under control of governance
Just saw Emilio mention this on Twitter: https://twitter.com/The3D_/status/1458142599554895873?s=20
When Aave will share stkAAVE with AMPL lenders?
There is a discussion on the new LM program happening now: https://governance.aave.com/t/arc-aave-v2-liquidity-mining-program-90-days-at-30-reduced-rate/5946