Ampl on Aave: Let's Discuss How to Support This Governance Proposal

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  • Ampl on Aave: Let's Discuss How to Support This Governance Proposal

  • davoice321

    Organizer
    October 14, 2020 at 21:04

    I just received a note from @Brandon on the core team that they have just submitted a proposal on the Aave governance forum to have Ampl added to Aave.

    The proposal is here. Let’s discuss how best to aid Ample’s addition to Aave lending. From my perspective, there is a lot of negative energy in DeFi around Ample (not well deserved), so how can we carefully address concerns and strategize around helping people understand Ample’s potential as an asset for borrowing and lending?

    1. Take a look at the proposal here.

    2. Let’s discuss it.

  • Brandon

    Member
    October 14, 2020 at 21:22

    Hey Everyone!
    I’m happy to see all the excitement. Support on outside platforms can go a long way to develop the Ample ecosystem. I’d like to request a few guidelines though, for where and how we interact with other projects:
    – Be polite!

    – Highlight how supporting AMPL will benefit the platform (not just AMPL holders)

    – Avoid “Brigades” or Dogpiles, try to be thoughtful and constructive

    Overall, we should try to be good ambassadors who are trying to advance Crypto, Finance, and DeFi as a whole.

    Thanks so much!

    • FudBuster

      Member
      October 15, 2020 at 05:33

      Hi Brandon!

      Welcome to our humble community hub.

      I’m excited to see the first Ampleforth OG join our conversation and the prospect of having Ampl added to Aave excites me even further on so many levels, since Aave not only being the fastest growing lending platform with a wide range of high quality services, it also has it’s roots in my home country Finland.

      As a Finn I might be biased, but I believe adding Ampl to Aave can propel the platform past Maker and solidify its role as The Money Market Protocol. This would also allow Ampl to take a huge leap toward reaching its full potential utilizing its unique supply elasticity in a real world application.

      The guidelines you requested for interactions are perfectly aligned with my own natural ideals making them easy to cultivate in the community and I’m looking forward to future cooperation with both Ampleforth core developer team and other projects.

      Finally I would like to say in Finnish using the key words when being polite,

      “Kiitos ja tervetuloa!” meaning “Thank you and Welcome!”

  • DrKnugen

    Member
    October 14, 2020 at 21:23

    This is amazing!

    It would benefit alot and might change the “negative” view on AMPL.

  • davoice321

    Organizer
    October 14, 2020 at 21:28

    My Strategy: Let’s Proactively Bring Up Objections and Respond to Them

    Hi guys. I’ve had some experience participating in Aave governance conversations in the past.

    A strategy I’d like to pursue here is to proactively bring up objections that people may have about the proposal so that I can address them upfront rather than waiting for someone else to do it.

    Please post some objections or questions you’d like to see me bring up (and rebut) in my post (which is going to be somewhat in-depth.

    I will also identify myself as a co-founder of AmpleSense so that people understand I’m an interested party in the conversation.

    Stani and the Aave team know me also, and I’m in known in DeFi as an Ample advocate, so I think this post may capture some eyeballs.

    Please respond with any objections or critiques or points you think I should make in my post. I’ll incorporate them.

    My timeline for developing the post is in about 3-4 hours from now.

    I look forward to your responses.

    • SolomonSollarsNSense

      Member
      October 14, 2020 at 22:35

    • ScottS

      Member
      October 14, 2020 at 23:28

      I gave this some thought, and the below comment is just an attempt to play “devil’s advocate” to this proposal:

      __________________________________________________________________________________________________

      The longer term vision for Ampleforth as an elastic asset is one that is flexible, but reliably pegged to the value of 2019 USD (-/+ 5%). It is designed to be an asset that reliably oscillates between negative, neutral, and positive rebases with relative equilibrium. In this state, Ampleforth is truly a stable coin to be held by both a lender and a borrower.

      While the aforementioned descriptor is the ideal situation for Ampleforth, this has not been the protocol’s reality in practice for some months. Currently, Ampleforth could be characterized more as a volatile asset with large fluctuations in volume, market capitalization, and value. Throughout all of September and October thus far, Ampleforth has been below the 5% USD peg and subsequently been subject to a prolonged and consistent negative rebase function.

      Under the current circumstances for Ampleforth, one that is not characterized by equilibrium, AAVE might want to know what incentives Ampleforth lenders or borrowers would have to utilize the asset while it has consistently been unstable (i.e., under the intended 2019 USD peg) for months? Shouldn’t AAVE take a wait and see approach to this proposal until they can see a clear shift in the trend for Ampleforth protocol?

      _________________________________________________________________________________________________

      I know there is a fantastic upside to lending and borrowing Ampleforth within the defi space, especially when ampleforth reaches its intended function as a reliable stablecoin, but I can see AAVE looking at the current climate for Ampleforth and being a bit apprehensive.

      Rebut 🙂

      • Jag

        Organizer
        October 15, 2020 at 01:11

        I wonder if knowledge of the other instruments like kMPL can better inform their understanding of AMPL and elastic finance.

        The rebase function is leveraged differently with kMPL in comparison to AMPL. This might seem attractive to a team like Aave once they fully understand the implications.

        • davoice321

          Organizer
          October 15, 2020 at 01:22

          Thanks @Jag. kMPL does not rebase. But the kGeyser is sensitive to the rebase.

          So, for this discussion it’s less relevant, unfortunately.

          • Jag

            Organizer
            October 15, 2020 at 03:07

            The distinction between kMPL and kGeyser characteristics is an important one. I had assumed otherwise.

      • davoice321

        Organizer
        October 15, 2020 at 02:31

        I think these are great questions about Ample from a lending perspective. I’ll break these down into a few areas related to lending and borrowing on Aave, that I’d like to bring up in my comments (along with a few of my own thoughts) for discussion. I’ll wait to hear back from @Brandon @SolomonSollarsNSense and @ScottS on these before I put together my post for the Aave forum.

        Increased Borrower Liquidation Risk Due to Negative Rebases (When Ample is Used As Collateral)

        Aave allows users to borrow assets based on the “value [they] have deposited and the available liquidity.” The users’ health factor (or liquidation risk) depends on the value of their collateral at any time.

        During positive rebases, the borrower using Ampl as collateral, will see his/her health factor increase significantly.

        However, during negative rebases, the borrower would see a significant decline in their health factor. For a normal asset during price declines, the stable token amount mitigates the price losses. But in the case of Ample, negative rebases combined with significant price decline could cause users’ health factor to decline very rapidly (over a period of days).

        Because of this, Ample may make a less attractive asset from a collateral perspective (more on this below).

        Risk Factor Analysis: Ample would score well on all factors, except Volatility (with some concerns about counterparty risk)

        Aave uses a rating system to determine if an asset can be used as collateral (see attached document) with the following types of types of risk:

        – Smart contract risk
        – Counterparty Risk (Centralization, Trust)
        – Market Risk (Market Cap, Liquidity, Volatility)

        Looking at all of these factors:

        Smart contract risk: Low, given that the contract has been online since 2019

        Counterparty risk: There may be concerns about the oracle used to drive Ample’s rebase function.

        There are also bound to be conversations about the Ampleforth team’s ability to freeze wallets. But this should be less of a concern to Aave given that USDC and USDT are available as collateral on the platform. Nevertheless people may want to see this discussed – Moderate Risk

        Market Risk (Liquidity): Ampl because of its liquidity programs has deep liquidity, and is committed to continuing to improve it over time. – Low Risk

        Market Risk (Market Cap): Ample’s market cap has reduced, but the trading volume is significant – Low Risk

        Volatility: That was discussed above. Ample is a highly volatile asset and would score poorly on this factor. The score may be low enough to prevent Ample from being used as collateral

        On the other hand, using Ample as a collateral that others could borrow using other assets (such as USDT, etc. pose little risk from a liquidation or collateralization perspective). In fact, it makes a lot of sense for borrowers to borrow Ampl during positive rebases and pay back loans during negative, due to the lower token price.

        My plan with this proposal response is to discuss the counterparty and volatility risks of Ample in the context of the risk analysis. However, I’m not sure how to credibly address the volatility issue because the collateral is not denominated in Ample, but rather in USD.

        My questions for the group:

        How to handle the volatility risk factor. Do negative rebases make Ample a less suitable collateral? (@Brandon question.)

        Are there any counter party risks that I haven’t mentioned here, related to the fact that the contract can be upgraded by the team?

        Once we discuss these issues, I can respond to the proposal by going through the risk analysis I outlined above (which I think Aave voters will appreciate) with answers to the volatility question.

  • SolomonSollarsNSense

    Member
    October 14, 2020 at 22:36

    Good to see @Brandon and everyone else here. Since its suggestion and brief conversation a few months ago, I’ve been in favor of seeing AmpleForth used as a “Smart” Collateral on Aave. I believe its a natural and synergistic relationship.

    During those early conversations, the only real objection I paid attention to was a technical one. It described the way Aave would implement AmpleForth as an ‘aAMPL’ asset. Since Aave now uses a “Pooled” asset model, instead of a “Singular” model (where borrowers are borrowing directly from individuals instead of a pool) I believe it was mentioned its harder to scale? Would potentially breakdown in the way some important parameters are calculated the larger the pool got?

    Unfortunately I do not remember the full description of the objection but I’m sure as this proposal gains traction it might be revisited. If Brandon has heard it before, could help to talk a little bit about why Aave’s Pooled model with aAMPL would scale as it gained traction.

    Aside from that, full disclosure I’m an AmpleSense Founder, an actual Nigerian Prince, long LONG time supporter of AmpleForth, and an EeFi enthusiast. Good to meet everyone. Follow me and follow me on Twitter @solomonadekale

  • sun-ah

    Member
    October 14, 2020 at 22:58

    ??

  • Xuyeye

    Member
    October 15, 2020 at 03:12

    I fully agree with this proposal. The most important thing is to increase the market demand of ample,which may be the next important step

  • Victoria

    Member
    October 15, 2020 at 03:24

    Fantastic, look forward to seeing AMPL coming to the lending space. This is MAJOR for the protocol.

  • davoice321

    Organizer
    October 15, 2020 at 03:34

    Note: The proposal by @brandon is just the first step in the AaVE governance process.

    Here are the phases (from the Aave governance portal).

    We Are Here – Ideation phase (Optional)

    Any member of the community can start a discussion in these forums. If the discussion becomes a viable proposal, then a community member may decide to submit the proposal as an AIP (Aave Improvement Proposal). The AIP at this stage is a WIP (Work In Progress).

    Next Phase Discussion and Signal collection phase

    The proposal is polished and formatted according to the AIP guidelines, as detailed on https://aave.github.io/aip/ 24 (currently a work in progress). More discussions on the proposal are made if relevant. During this phase, community ‘signal’ is collected to determine whether there is support within the community for the proposal. If there is support, then an AIP editor will assign an AIP number to the proposal, the creator will submit a PR for the AIP to the AIP repository on Github, and the AIP will be in the ‘Proposed’ stage.

    More info is here.

  • camille_henri

    Member
    October 15, 2020 at 11:39

    A pretty good move, a key step on the road map for AMPL global acceptance

  • davoice321

    Organizer
    October 15, 2020 at 18:19

    Hi everyone. I was just made aware of this note from Emilio who is on the Aave team.

    He says:

    I personally am a big fan of the idea behind AMPL and i think enabling lending and borrowing can open interesting use cases.
    Supporting AMPL in V1 is a bit tricky though: The Atokens are not upgradeable and even implementing a custom one for AMPL would require significative changes.
    On V2 though, the implementation should be more straightforward. Would love an AIP developed in the open to have an AMPL-aware aToken once V2 is released.

    Because of this we’ll continue to get comments on the collaterlization issue from folks here and then, post the statement of support closer to Aave v.2’s launch, which should be fairly soon based on what I’m reading on the Aave blog.

  • Brandon

    Member
    October 15, 2020 at 19:56

    Regarding collateral / liquidation risk, I think it’s totally fine to acknowledge the volatility AMPL saw this past Summer since the Geyser program and influx of attention.

    At the platform level, this risk is primarily managed via the collateralization ratio parameter. Even if AMPL launches with a collateral ratio of 0 (or something else very low), it still offers a great set of new possibilities for Aave users. This can be relaxed over time, according to risk assessments of the platform governance process.

    (This would mean you can’t “borrow a different asset against ample”, but you could still lend it to get interest, or “borrow AMPL against another asset”.)

  • alphapawn

    Member
    October 16, 2020 at 15:31

    There are two main criticisms of AMPL that I see. One is the recent blacklisting of an address related to a CEX hack by Ampleforth which flies in the face that Ampl is decentralized and hypocritical since Ampleforth had openly criticized MakerDAO following Black Thursday calling it a repo market and claiming it’s increasingly centralized and flawed as a stable pin mechanism. This was before Ample market cap exploded with a lot less eyeballs on Ampleforth and I think the tone today would be a lot different

    Second is Ampl’s rebase mechanism is seen as a arithmetic trick that preys on human psychology by abstracting away the volatility of the currency. The idea pushed forward that Ampl is non dilutive is misleading. Ampl price volatility is causing hyper inflation and deflation. Ampl is not diluted due to rebase but real money used to buy Ampl during hyper deflation is diluted.

    • FudBuster

      Member
      October 16, 2020 at 21:11

      I don’t think the Kucoin hack is even remotely comparable to Black Thursday. Can you elaborate on what the connection is?

      Also I really don’t see how dilution has anything to do with losses due to supply contraction.

      Are these you own view points or are these arguments you have seen presented somewhere?

      Because all I see is red herrings, and I would start any conversation by defining the terms in order to point out the logical fallacies if faced with these arguments.

      • alphapawn

        Member
        October 17, 2020 at 07:27

        Maker added USDC a centralized stablecoin as collateral shortly after DAI went off peg during Black Thursday. Ampleforth criticized the move towards centralization and billed itself as a decentralized alternative. This article sums up the false decentralization or decentralization theatre going on: https://cryptobriefing.com/kucoin-hacker-exposes-decentralization-theater-among-defi-projects/

        • FudBuster

          Member
          October 17, 2020 at 08:31

          Yes, I am perfectly aware of what happened, still these are very different events and different actions, for different reasons under different circumstances. Only thing similar about them is that they spark conversation about decentralization. So I don’t believe there is any there there.

          • davoice321

            Organizer
            October 17, 2020 at 09:40

            From a risk assessment perspective (which is all that ultimately matters for aave from an operational perspective) the centralization concerns are covered in the counterparty risk section of my analysis.

            As I mentioned, aave allows usdc and usdc to be used for collateral, two coins that are more censorable than ampl.

            Second, as mentioned in the dao’s official launch announcement, (https://forum.amplesense.io/the-amplesense-dao-offiically-launches-with-the-kgeyser-challenge/) the ampleforth team is pursuing a path to decentralization that will make this point moot.

            So from an aave governance perspective the centralization concerns are worth mentioning, but will likely not be a significant barrier, given the precedent set by their previous listing activities and the core team’s public commitment to decentralization.

  • Jake_F

    Member
    October 17, 2020 at 13:30

    Very interesting and in-depth discussion

  • Jag

    Organizer
    November 24, 2020 at 14:49

    So it has been about a month since this discussion was last active, and our two geysers have successfully launched. Several perspectives were introduced and shared here.

    Have we reached consensus for the next best steps?

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