ARC: Update AMPL interest rate curve to account for over-approximation in compounded interest

when is it expected to start…


Is there any conclusion?


Really interesting read, lots of passion here. Excited to see how this one plays out.


Snapshot vote scheduled to start tomorrow!


With the current slope we have a nearly constant utilization of 100% and people are not able to withdraw (seeing reports popup on twitter/discord).

Does it make to reconsider the slope to fine an equilibrium so that at least smaller positions aren’t “locked in”?


Im sure this is being iterated many times, but im not able to withdraw my funds from aave ampl lending and its very frustrating. Can we please manage a vote to raise the maximum interest rate for borrowers? Thank you


I would agree that I think the slope should be re-considered. With near constant 100% utilization for the last week it’s clear that the 180k% maximum borrow APY is not enough to offset the rebase gain for borrowers, and is causing depositors to be locked into their positions.


No matter how high the interest rate is raised, there will always be periods before a positive rebase where liquidity is unavailable if we assume borrowers are rational. I still ultimately advocate for disabling this current AMPL market and reimplementing the debt token to rebase along with AMPL, as liquidity is always going to be in jeopardy otherwise.

But if we are to continue on this route, then can I suggest targeting having liquidity available for 18 hours per day in a period of AMPL having twice the value of the target oracle rate? If AMPL has twice the value of the target rate, then the positive rebase would be predicted to be 5%. To have liquidity available for 3/4 of the day and we assume that borrowers will borrow the max liquidity when it would profit them aka for 6 hours before rebase, then we would have to target a max interest rate of 20% daily, or 7300% APR. This would be about ten times the current APR. The APY of course would be completely off the charts at this rate, but this is the kind of insane APR that is needed to protect liquidity during positive rebase events like we’ve seen recently.

It’d be great if we could get a risk DAO perspective on this.


APR limits need to be raised or borrowers can easily lock up lenders and literally steal from them everytime AMPL > 1.27$


I think that the most important change are show de APR diary and not de APY YEAR. This change make the website really more friendly

I feel like this issue should be addressed with a bit of urgency. Liquidity has been unavailable for more than a week at this point, and would likely continue for another week if AMPL stays at the current market cap. The number of messages I’ve seen in discord and telegram of people asking why they can’t withdraw their AMPL has been growing significantly.

Depositors have also lost significant amounts of money from their AMPL being deposited into AAVE at this point. Depositors are earning ~2% interest on their capital per day. Based on AMPL’s rebase history, from the October 21st to November 1st, the rebases have been as follows and total loss of market cap share is as follows if we assume a 2% daily interest rate:

2.07% - 0.07%
3.38% - 1.38%
4.63% - 2.63%
5.63% - 3.63%
5.82% - 3.82%
7.86% - 5.86%
6.95% - 4.95%
3.30% - 1.3%
2.63% - 0.63%
3.84% - 1.84%
6.21% - 4.21%
7.02% - 5.02%

This unfortunately points to AMPL lenders having lost more than 25% of their AMPL’s value relative to just holding AMPL in a period of 12 days, and the damage is still continuing. With $16 million of AMPL deposited at the time of writing, this is extremely severe damage to lenders and I believe at this point AAVE governance should intervene.


I think a 18h timeframe where users can drain their liquidity, might solve most issues people are facing right now, but wouldn’t it rather make sense to never make it economical reasonable to drive the reserve to 100% utilization - not even for 6h?

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This is why I ultimately still advocate for disabling the AMPL market and reimplementing the debt token to rebase. There is no reasonable interest rate that will guarantee liquidity will be available at all times with the current implementation.

EDIT: It may also be possible to simply use the Wrapped AMPL implementation that the Ampleforth team has been advertising.


Have to agree with @pakim249 and @henrydeclety that this pool seems broken with the current implementation. Reading the full thread above, most of the modelling and discussion clearly predicts/expects very brief moments of full utilisation - we’ve now seen a very prolonged period
where this was true, and that should prompt a rethink.


Most of these new posts have not done enough research into Ampleforth before deciding to lend.

Now they are complaining that 80k APY is not enough after what seemed to be a good investment turned out to be not the “best” investment. Opportunity cost is not the same as losing.

“This unfortunately points to AMPL lenders having lost more than 25% of their AMPL’s value relative to just holding AMPL in a period of 12 days”. You are still gaining value, this is just hindsight bias. You are also forgetting that lenders have in the past gained mc share compared to those that have held naked AMPL during negative rebases. You are making a judgement about the system being flawed after a 12 day major expansion period which won’t last forever.

AMPL is making AAVE a lot of money right now, disabling the market would be counterproductive.


That might be, but it dosn’t change the situation for these users.
They supplied ampl in the pool and can’t withdraw for 10days in a row.
Also there’s no secondary market so they can’t leave exposure.

In my eyes it’s not about the missed “best” investment, but locked up users.
If increased incentives are a lever to stop the 24/7 100% utilization I guess that’s fine as well.

edit: as people argue that there are times where you have a short period of time where you can withdraw. That might be true, but doesn’t help the users - the usual user doesn’t run a bot to snipe liquidity & multiple users compete about this liquidity, ther#s a reason for it going to 100% again within seconds.

That’s not exactly true there have been several times where large borrows have paid back their loans (in the last 10 days) and lenders would have had the opportunity to exit.

You shouldn’t need to. One of the best things about AAVE is that you have very little to worry about when depositing your funds if you don’t care for the technical details. Other protocols build on AAVE because of this, simply taking for granted that AAVE is very low risk. This is key for AAVE to build a userbase beyond the most technically oriented, and things were going pretty well until this asset came along.

How can it be hindsight bias when a bunch of us literally predicted that this could happen? The fact is in a lending protocol, liquidity being available at all times is key to the protocol fulfilling its role in the ecosystem. Putting aside the issue of lenders losing a gigantic share of market cap, if liquidity cannot be protected with extremely high uptime, AAVE will not function as a liquidity protocol. It would instead function as a rent collector on bad bets, and other protocols will not be able to rely on AAVE to have funds to borrow or withdraw when they need it.

You cannot withdraw your funds when you want to. You cannot borrow funds when you want to. 12 days is far beyond what can be considered a reasonable amount of time to have liquidity crunched and depositors wanting their money back and unable to retrieve it. But I guess if AAVE is making a nice profit, it’s all good!

Pointing out brief windows of opportunity to withdraw liquidity seems like a pretty low standard to meet for liquidity availability…


The Ampl pool wasn’t designed to behave like other lending pools. Expecting it to do so is counterproductive. Special consideration should be given to how liquid or illiquid lending in this pool will be in exchange for the massive APY that it pays.


The ampl market needs to behave differently - specifically it definitely needs to separate the rebase from the lender. This is the whole point, and it is why people are borrowing it - if you re enable rebase to the debt token it becomes another useless 0 demand token.

I think its going to be difficult to get it right and I think the ampl market ultimately needs a unique fee structure on Aave. Im not intelligent to know what that is. My worry if we say double it from 180k% to 360k% is that it scales SO FAST after 80% especially after 90% that I don’t think the market can find a balance that matches the rebase. I.e I don’t think we can pick ANY correct fee structure with the 80% curve feature and a small TVL in the pool as $10m in the pool and an extra $500k lent out of given back will move the APY fee either way up or way below the optimum.

I also think there SHOULD be a gap between the borrowing rate and what the rebase will be - this is a risk trade off and the same people who want to borrow ampl simply wont if the fee is an exact match - while professional lenders are happy to have less risk and take less reward.

Perhaps a custom fee could be implemented that takes yesterday’s rebase rate and implements it but -2% as the top tier 100% utilised rate. Ie. when the rebase comes in at 7% then the 100% utilised effective borrow rate will be 5% for the next 24 hours. Then rebase is 9%, the next 24 hours will be 7% - higher, more fair to all, but still a gap. Just thinking out loud.

But beyond this I think it is TOO EARLY to drastically change the fee structure or definitely to disable the market or any such step. There is only $9m out to borrow right now, this is TINY. This whole 2 weeks is just a test - we need to see how this works at a $100-500m market. Then there might just be enough TVL that it isn’t always 100% utilised, or at least that the deposits and withdrawals are $50-500k+ amounts and leave room for smaller actors to get in and out.