Let’s be clear here: bgdlabs and chaoslabs do this because it’s their job. They are paid by the Aave DAO to act in its interests, which is also why they’re presenting “compromises” that benefit the Aave DAO at the expense of aAMPL holders.
Which brings me to:
Considering the eagerness with which the proposed solution tries to reduce the cost burden to the Aave DAO, is it not fair to say that bglabs and chaoslabs should have been considering some aspects of this problem more seriously three months prior?
Aspects of the proposed resolution include paying aAMPL holders a below market rate amount of USDC instead of actual AMPL. Reasons cited are the currently abnormally high price and low market liquidity of AMPL, and whilst it’s clear that yes this would make this more costly for the DAO to purchase that AMPL, it remains the case that it’s AMPL denominated debt that the DAO owes affected lenders. Repaying them in USDC just transfers the burden of price impact to them if they wish to then rebuy AMPL with it, and denies them the ability to sell the asset they should have for its current elevated price if they don’t.
What’s more, the argument that the Aave DAO should not be burdened with buying the asset during a time where it’s less favourable is undermined by the Aave DAO’s previous decision to sell its AMPL reserves, despite still having borrowed AMPL at the time. Put bluntly: the DAO seems happy to sell low but not to buy high, and argues that lenders should bear the brunt of that.
The other detail proposed that beggared my belief was that Ampleforth contributes 40% of funds for resolving this. It’s unclear whether they’re proposing this comes from the FORTH DAO treasury, or the Ampleforth team’s private funds, but as a holder of FORTH and AMPL I have a vested interest in seeing neither cover for Aave’s mistakes. I had previously stated that since I do not have any aAMPL at this time I am interested in this issue only as an onlooker, but I cannot say that any longer.
So to reiterate, it seems clear to me that bgdlabs and chaoslabs have failed in their duties to mitigate risk for the Aave DAO by delegating this issue to a third party that has different priorities and obligations. Whilst it’s reasonable to rely on the Ampleforth team to assist with analysing the bug and trying to map out intended balances, the Aave DAO should have been immediately taking action to ensure it can meet its financial obligations to lenders at the same time.
My expectations are not that the DAO would have back in January purchased enough AMPL to match aAMPL 1:1, but that they now argue for repaying in USDC makes it painfully clear that they should have purchased enough AMPL to at least cover its most conservative estimates of what lenders were owed.
It is clear there was early recognition by these entities that there was cause for concern about this matter too, as we can see from their proposal and ratification of freezing interest on AMPL during this time.
- The Aave DAO voted in favour of the design, integration and listing of AMPL
- The Aave protocol advertises its Safety Module as a means to ensure any lender can withdraw their deposits in full, selling and even minting AAVE as necessary to repurchase the shortfall assets
Whilst I accept that there are grounds for reimbursing aAMPL below 1:1, I strongly object to it being paid as USDC, and sourced in part from Ampleforth (team or DAO). In terms of what the true aAMPL to AMPL exchange rate is/should be, I want to reiterate my previous requests for the raw data that is being used for this analysis and technical details of the bug itself (which continues to remain a mystery to everyone involved…?)