AMPL problem on Aave v2 Ethereum

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168

The system of calculation and rewards for aAMPL that was initially used was unfair for those who provide liquidity. But because we didn’t know about the problem, we didn’t know that most of our aAMPL is virtual. If we knew what it really was, most people would pull out the liquidity provided long ago. Therefore, the question for AMPL and AAVE is why, when you discovered this error and discrepancy in 2022, you did not notify the asset holders? You should have either fixed it or notified liquidity providers warning that some part of aAMPL was virtual and will only grow.

Therefore, in the current situation, it would be much fairer to make the calculation based on aAMPL as of December 16 and with all further rebases, without APY from AAVE, which, by the way, you yourself proposed to reduce. I’m sure the vast majority of investors would agree with this option. This way we will receive compensation that is more in line with the reality where we bought AMPL and held it. I don’t know about others, but what you are offering, relative to my situation, is 30% of AMPL in $ terms, compared to when I bought it, and how much it would have been if I had just kept it without depositing it on AAVE.
It is also worth noting that both proposals from last Autumn were made with an absolute lack of understanding of the mechanics of the asset, and they should not be taken into account at all.
You must admit your mistake and take responsibility for it. Because it is this error that is the root of the problem, and everything else is a consequence of this problem. And you continue to evade the topic of why this whole situation arose, and that both teams that knew about this error hid it from everyone. Also, I personally have not seen any words of apology regarding this situation in the public space, neither from AMPL nor from AAVE, why are you better than centralized corporations? Where is the humanity and benefits of blockchain decentralization, of which we are all ideologists and participants? Or is it only in words, and not in real actions?

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169

Dear ChaosLabs,

Thank you for your explanation regarding the liquidity ratio and compensation calculation methodology following the market freeze. While I appreciate the transparency, several aspects raise significant concerns about fairness and governance.

Early Withdrawals and Equity: It’s clear that those who withdrew their funds early benefited from higher virtual balances, potentially creating an unfair advantage over others who trusted in the platform’s stability and accuracy. This situation necessitates adjustments to the compensation plan to ensure equity for all stakeholders, particularly those who supported the platform continuously.

Governance and Decision-Making Process: The proposal to resolve these issues through a rapid voting process without extensive community discussion is concerning. This method seems to be influenced by a small group of large aave holders and may prioritize cost-saving measures that do not fairly treat all AMPL investors. This approach not only undermines the principles of decentralization but also risks disenfranchising smaller investors who are essential to the platform’s diversity and health.

Potential Impact of Uniform Withdrawals: Importantly, if every investor had been able to withdraw their funds, Aave would face the same financial exposure as they would if they now decided to fully honor the virtual balances for all remaining investors. A rapid vote could be justified if it were aimed at equitably resolving all investors’ situations. However, rushing decisions that potentially impose losses on dedicated stakeholders who have not withdrawn their investments is neither fair nor just.

Proposals for Improvement:

  • Transaction History Analysis: Conduct a thorough review of transaction histories to determine who withdrew funds and at what valuations, ensuring that any compensation reflects the true impact of their actions.
  • Revision of Compensation Methodology: Reassess the compensation methodology to include the timing of withdrawals, the duration of investments, and the full honoring of virtual balances for those who have retained their investments in the platform.
  • Enhanced Governance Transparency: Establish a more democratic and transparent decision-making process that allows for extensive community input and thorough deliberation before any decisions are finalized.

By addressing these points, we can work towards a solution that respects the principles of fairness, transparency, and community governance, ensuring that Aave remains a trusted platform for all its users.

Kind regards,
AMPL Investor

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170

Following the timeline, we have created an ARFC Snapshot for the Aave governance to vote on a follow-up distribution described in the previous post.


To keep the transparency with the community, we would like to clarify different points:

  • Both us and Chaos Labs are technical service providers of the DAO, and as such, during this thread we have tried to do an objective analysis of the situation and provide a recommended solution, with this topic being top on the list of priorities. During these past 4 months, we have tried to be as transparent as possible and, at the same time explain our reasoning in what we think is a clear manner for everybody on this forum.
  • Any proposed resolution has a time component associated: no matter the model, aAMPL holders should receive funds as soon as possible, and also all different models introduce compensation until exactly when the funds are claimable.
    Not doing any type of proposal is not an option, as it would lead to further problems for users of AMPL on Aave, the Aave DAO and Ampleforth.
  • Aave is an open governance on which any participant has the right to submit proposals, and the DAO has mechanisms like the Skywards program by @ACI which allows entities not having AAVE power to get their proposals submitted.
    This means that if anybody simply doesn’t agree with our proposal, it is possible to go through that route and pursue an additional proposal, after our final proposed distribution.
  • After this proposal, from both our professional service providers engagement (BGD Labs and Chaos Labs), we are open to support any additional proposal by any other party, but only when fully approved by our customer (the Aave DAO) via the standard Aave governance procedures, and always if falling within the terms of our respective agreements.
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171

Hello BGDLabs,

While I appreciate the clarification that new proposals can be introduced post-distribution, the stipulation that these must first be approved by the Aave DAO raises significant concerns about the real viability of such proposals. This effectively sets a high barrier, particularly for smaller investors, and might indeed signify an endpoint to meaningful revisions based on community feedback.

Concerns Over Proposal Viability:

The statement that any new proposal can be submitted but must first gain Aave DAO approval before even being considered effectively precludes a fair chance for community-driven changes post the final distribution. This process seems to favor existing power structures within the DAO, potentially sidelining minority voices or those without significant voting power.

Critique of the ‘Final’ Distribution and Fairness of Calculations:

Labeling the upcoming distribution as ‘final’ without robust community agreement or sufficient discussion time is troubling. It underscores a governance model that may not fully align with the decentralized

and participatory ethos that Aave markets itself on. Moreover, the assertion that the calculations for the distribution are ‘fair’ is questionable, as fairness is subjective and should be determined through wide-ranging community consensus, not just technical service providers or a select few within the DAO. The two-day discussion window provided is grossly inadequate for such critical financial decisions that affect all of us, especially those who have suffered significant losses and feel their voices are not being heard.

Call for Genuine Openness and Flexibility:

I strongly urge a revision of this approach to make the governance process more inclusive and flexible. True community governance should allow for the introduction and consideration of new proposals without such stringent pre-approvals, ensuring that all stakeholders can influence outcomes in a meaningful way.

Addressing the Needs of Those Who Suffered Losses:

The community’s needs, particularly those who have been most adversely affected, must be at the forefront of any proposed solutions. It is essential that these individuals feel that their losses and their voices are taken seriously, which requires more than hurried decisions and should involve thorough discussions and equitable considerations.

Conclusion:

The path forward should not only be dictated by those already in power but shaped by the diverse voices that constitute the Aave community. We ask for more than just a nominal allowance for proposals; we seek a commitment to genuinely democratic practices that respect and respond to the community’s needs.

Kind regards,

AMPL/Aave Investor

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172

Dear bgdlabs,Chaoslabs,brandon

You are asked for feedback that is given and then nothing is done with it?
Fair compensation has been requested from day 1. You come up with compensation that seems fair from your eyes. Try looking at it from the inverters side. Including the second compensation, the loss remains between 40 and 50% per inverter, I think.
It is said that the amp team reimburses 40%, but that is about it. Apparently nothing comes from AAVE. But there is not even a discussion about the percentage, a calculation is provided and that is it. In order to receive more compensation, investors are referred and, as investor AMPL already said, this has little chance of success!
Once again an explicit request on behalf of all investors to provide a third and final compensation so that it can be a reasonable to fair compensation

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173

@Paulus Both on the already done 300’000 USDC distribution and this follow up of 758’000 the AAVE DAO covers to start with the 100% of those amounts, released to the distribution smart contract directly from the Aave treasury (Collector). The Ampleforth team then will transfer to the Aave DAO the 40% of that amount, with the final split being that Aave compensated 60% and Ampleforth 40%.

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175

I deleted the last message from @AMPL. It was simply a double post. You can refer to the existing one.

Edit: From now on I will monitor this thread, as it seems emotions are heating up, although a lot help is being offered. Be nice and fair to each other if you want to communicate and abstain from double posting.

176

As we feel there is still misconceptions about the proposed distribution, procedures around, and nature of AMPL on Aave some extra clarifications:

  • The start reference point for recalculations of AMPL returns on Aave was the freezing moment, end of 2022. Alongside much better terms for affected users, the rationale is that the bug had no major influence on balances at that moment, so it was the most objective point in time.
    In the model, by doing a recalculation of AMPL on Aave returns from that moment of time based on Aave configured params (rates and utilization), the bug goes completely out the picture, and the final scenario/amount is actually higher returns than if it balances would only be proportional to debt.
  • We (BGD Labs, Chaos Labs), notified the community on this forum just after we observed the issue, and following our contractual obligations with the DAO of supporting on technical aspects, immediately started working on it coordinating with the Ampleforth team. Only aspect we were aware before is that high interest rates created some imprecision, but from asking to the Ampleforth team, we never thought it was something to worry about.
  • We already clarified it before, but given that the topic comes back again and again:
    • We didn’t implement the integration of AMPL on Aave (aAMPL and vAMPL).
    • We didn’t decide about high-level design of that integration.
    • We didn’t propose the listing of AMPL on Aave, in July 2021.
    • BGD Labs was not engaged as service provider of Aave until May 2022 (BGD Labs didn’t even exist before), and Chaos Labs even later during the year.
  • AMPL on Aave was not supposed to be working like AMPL outside Aave, and like everything else, changes on configurations depend on on-chain Aave governance proposals. That is the case since listing in 2021, and a specification that any user of AMPL on Aave (and any other user of Aave) needs to be aware of. Once again, the bug detected had no relation with this.
  • As can be seen in this thread, we have tried different models, and listened/addressed to all feedback. In addition we have always tried to balance timing (users having funds as soon as possible) with exhaustivity of the analysis. But it is simply not an option to go in circles from our side within our professional engagement, and we stand behind our current proposal.

Once again, precisely a DAO like Aave has mechanisms as the ones we described before (Skywards by @ACI) to do any type of additional proposal in an open way.

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177

Guys, I don’t know about the others, but I really appreciate your efforts. I still have only one complaint, which is quite logical. Why on December 16, when you raised the % for borrowers for all frozen assets, for Ampl you lowered the % and made it the same as for the others. It is clear that you did not know about the mechanics of its work and rebases mechanism, but you can check, - I notified you about this omission, you agreed and said that you will fix it soon. After that, I wrote to support in discord, and Paulo said that everything will be sorted out in the near future, after which you created a topic on this forum.

But instead of raising the percentage for those who borrowed our assets, you adopted the next proposal, which lowered the percentage even more. That’s why we say that, based on all the circumstances, it would be fair to calculate based on 87k% APY, surely not taken into account any rebases that generated virtual aAmpl.

And I also recommend that you return 186k% APY for borrowers ASAP, otherwise they will simply never repay the debt, as I wrote to you about back in December. I really dont know why you didnt done that, otherwise it would be now not 71k aAmpl borrowed, but way more. And borrowers took our AMPL and got lot of profits with rebases, but will give back only small portion of the total amount.

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I, for one, will say that I appreciate your efforts. I had pretty much given up on recovering anything, so this proposal is far better than the nothing that I had been expecting.

179

Of course I also appreciate the effort taken. The amount of compensation is disappointing. And I think I’m not alone in that

180

Hello @EzR3aL,

Thank you for moderating, but the removal of my critical post—even as a duplicate—given the total lack of response to my original contribution, is concerning. This limits the opportunity for genuine dialogue on crucial issues such as the AMPL distribution.

Concerns Over Lack of Dialogue: It appears that substantial decisions are being pushed through with your votes, without real room for in-depth discussion or responses to serious questions from the community. This is worrisome, especially when these decisions significantly affect all stakeholders in AMPL.

Lack of Open Discussion: The way proposals are labeled as ‘fair’ by service providers, who directly report to the DAO, does not foster genuine dialogue. This seems more like a way to avoid discussion by unilaterally endorsing a viewpoint that aligns with the interests of the DAO, rather than the broader community. This practice does not contribute to the healthy, robust exchange of ideas that a platform like Aave should encourage.

Concerns Over the Short Discussion Period and Lack of Responsiveness: The haste with which this discussion period has been set up—with less than two days for discussion—seems more like a cost-saving maneuver than an effort toward thoughtful decision-making. Moreover, during this brief period, the concerns expressed by investors are neither seriously considered nor addressed, and the vote is pushed through regardless. This undermines trust in the governance process and suggests a lack of genuine engagement with the community.

Additionally, I note that despite being one of the biggest voters in recent decisions, you do not actively participate in the discussions. This raises questions about the transparency and integrity of the governance process within Aave. Substantial contributions are ignored, and the real, open discussions that are essential for a healthy, decentralized community are undermined.

Kind regards,

AMPL/Aave Investor

181

I’m shocked at how naive you dudes are. They don’t care about you, they don’t care that everything happened because of their mistake, don’t you understand that? They ignore serious issues. The question from quantum man still remains unanswered. They know very well that they made a mistake and they throw you a bone to keep you quiet. For them, we are noobs without voting power from whom they need to get rid of as quickly as possible. Welcome to the Jungle! If we want adequate respect in this situation and receive full compensation, we need to report them to authorized government organizations in the USA and EU. The chance that they will begin to treat us with due respect without this is 1%. If no changes occur over the next few days, I propose to create a telegram channel for investors where we can coordinate our actions and submit collective reports to special regulatory authorities in both the US and the EU. I am sure that among us there are many citizens from here and there. After that, we can also sue them. I also suggest starting an active information campaign on Twitter. There are many of us, so you will see what happens to their reputation. The problems that will fall on them after this, what we are going through now will seem like flowers to them. They will lose much more in the end and they cannot see beyond their nose if they do not understand this. Believe me there is no other way, I know well how it works. I would like to be proven wrong but 99% that I am right they don’t care about us and they still haven’t even asked for forgiveness for what happened. Stop being naive noobs my mates, wake up!

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182

We, the AMPL investors, are a bit screwed here. We are losing money after 3+ years of being invested because of the technical errors in the protocols we invested in. My only hope is if the Ampleforth team can chip in, not contribute to the currently proposed $758K but add on top of that to do as much right by the AMPL users/ investors as possible, that will be greatly appreciated. @Naguib @evankuo

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If 758k is 60% of total amount and Ampl would add extra 303k on top as 40%, it would be nice and fine to finish this topic. But from what I have read and understood - they will just follow what Aave will propose. So Aave is the main player here, and Ampl will just follow with their offer

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Once again:

  • The model of distribution removes any influence of the bug from late 2022, before it had any significance, and overestimates balances from that point of time.

  • The total amount distributed will be 300’000 (already available to claim on Merkl) + 753’000, making a total of 1’053’000 stablecoins.

  • The modelling was made based on on-chain configurations done by Aave governance.

It is acceptable if community members don’t agree with the model, but we request not creating confusion of both the analysis and the proposed numbers.

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185

I have been quiet in here as @bgdlabs and @ChaosLabs did an outstanding job. There was no need of a delegate to make a comment, as they are the ones the DAO hired to take care of technical topics/ risk analysis.

But it is really getting ridiculous in here. There has been a really great explanation of the problem and how to calculate the amount AMPL user should receive. But still most in here lack understanding regarding the problem, the amount and much more.

It has been clearly stated that the Aave DAO is providing user 300k + 750k so the total amount will be 1.05m.

It is really unbelievable for me that people in here still think it’s an Aave bug, while the implementation hasn’t been made by anyone hired by the DAO. But still the DAO is totally fine paying everything needed to make you whole.

I have to admit, the calculations provided by Chaos were hard to understand because of the mechanics of AMPL but in the end I do think their job was outstanding and they offered you quite fast a proposal which has already been executed in the first step.

So just to let you all know I will vote in favour to help you get out, but I am not tolerating aggressive words and threats against service provider of the DAO. Rather should you ask yourself why AMPL isn’t as cooperative and communicative as the AAVE DAO…

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186

I agree with the sentiment here but @EzR3aL you have to understand when it’s your life’s hard earned money, some frustration is expected when a technical error is eating that money. I will loose 40% of my USD investment. Imagine you deposited $1000 in your bank account and bank says because of the error in their account management, you can only get back $600. How would you feel?

I wholeheartedly agree with your comment on Ampleforth’s responsibility. They have an opportunity to show their commitment to their protocol and user-base by adding to the pool. There are going to be 1000 AMPL investors who will get financial hurt. That is not a great state for anyone, Ampleforth, Aave and users.

I strongly propose Ampleforth team to help expand the pool by 50% that is contributing an additional $380K to the $755K proposed by Aave. That will make the final distribution amount to $1.135M and total distribution to $1.45M —> this will really help save a lot of users loose their hard earned money. @Naguib @evankuo - hope you could make this one final proposal work. The community will owe to the Ampleforth team.

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187

It was commented again and again, AMPL is not USD, so no bug involved, there was never any type of assurance that X USD deposited will result in more than X returns.

I can only recommend everybody to claim their share from the initial 300k and then wait for the rest to claim. If I was affected, I would be more than happy to see another DAO helping me to get compensation.

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188

Well, I was muted in Ampl telegram, and some of my messages were deleted from their Discord, cause I was saying them to take responsibility and communicate with Ampl investors. Dont have any questions to Aave, especially if it was Ampl mistake by default, it is Aave good will to participate in compensation, and with 60%. Actually it is very sad to see, that Ampl is so hard to communicate with, I thought better of them. And @brandon @evankuo @Naguib this is confusing you know how much Ampl investors were damaged with all this Ampl on Aave event, and not offering to Ampl investors compensation on top of what Aave offered, and really - not saying sorry to all victims :frowning:

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