[For Discussion] Increase AUSD utility by providing access to high-leveraged AVs

Background:

In March, we announced multiple improvements to AUSD including a move of the AUSD liquidity pool to Ellipsis and an allocation of dev fund to AUSD peg insurance.

We now would like to propose adding AUSD as another mechanism for access to high-leveraged Automated Vault.

Rationale:

By granting access to high-leveraged Automated Vaults to AUSD holders, we will increase its utility and demand for holding AUSD, which would help support the AUSD peg and its adoption.

Proposed Implementation

The implementation will follow a similar pattern as xALPACA, with the following details:
(Please note that this proposal will provide an additional method for accessing high-leveraged AVs. xALPACA holders will continue to receive access as per AIP-6 resolution.)

Locked tokens: users will need to stake Ellipsis’s AUSD3EPS LP token for access to high-leveraged AVs. This option will provide the highest capital efficiency for our users as they will continue to earn yields from trading fees. The locked LP tokens will also be staked in the FairLaunch contract on users’ behalf to continue receiving ALPACA rewards

Staked duration: user can choose the lock duration between 1 - 52 weeks. Similar to Governance vault, the longer the duration, the higher allocation they will receive.

Allocation: We propose a similar structure to xALPACA where $x worth of LP tokens locked for 1 year to receive $1 dollar of allocation in the high-leveraged AVs. The community will vote on what the $x should be.

Other implementation notes:

  • Since users can add any combination of tokens in the AUSD3EPS LP token, we will limit the total AUSD that can be borrowed if the price falls below a pre-determined threshold. This would force users who want access to either add other stablecoins in the pool (e.g., BUSD, USDT, etc.) or purchase AUSD from open market to add to the pool. Both of these actions would help increase AUSD price to the peg.
10 Likes

Indeed this would offer another option for people that prefer to not get exposed to market volatility buying alpaca but staying on a stablecoin option.
Does this require a lot of dev time?

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Not too much.

Devs have already structured the contracts to allow for additional requirements when designing for xALPACA.

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Would it be better if the protocol bought up some amount of EPX and locked it perpetually and vote for it?

Alternatively is to bribe / buy some dotdot (low liquidity hence maybe bribe is better) so generate potential higher apr which also allows vaulting capabilities that will set a buy pressure on it.

There’s already an AUSD Peg Insurance Fund that does buybacks when necessary.

One thing I want to mention is some people in the previous thread on limiting xALPACA for high leverage access complained about not wanting crypto exposure for market-neutral vaults, and this is a solution to that. You can now hold a stablecoin to get allocation.

2 Likes

good idea. this provides a low volatility of total assets for those who want to access high-leveraged av.

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I was thinking about this for a couple of days, but I think this is not a good idea. At least not the 1$ to 1$ ratio as mentioned. Holding Alpaca has a higher risk than holding AUSD therefore it should receive a lower ratio. Also people seem to forget that 3x vaults are open for everyone this means if you don’t want exposure to volatility you can still invest in highly lucrative vaults (comparing to other protocols).
I would rather have a 0.1$ to 1$ (10$ AUSD LP to 1$ allocation) ratio, this means for every 10$ you can allocate 1$ into >3x vaults. This will also result in more AUSD being minted. I think that’s fair.
IMO higher ratio will only result in less AUSD being minted which defeates the purposes of this proposal.
You can’t have best of both worlds.

@danny has a good point on the ratio issue since it’s correct to say that we carry greater risk while on xALPACA.

Maybe one of the voting steps could be ratio levels to be chosen then?

Cheers o/

1 Like

@danny @Yluss

Thanks for the comments

1.) As stated in the original post, the value of AUSD LP required for $1 allocation would be up for the vote. I didn’t suggest using the same ratio as xALPACA.

2.) “IMO higher ratio will only result in less AUSD being minted which defeates the purposes of this proposal.”

Imo, this proposal should strictly increase the demand for AUSD as it will have more utility with no trade-off. However, how much more demand will need to be seen.

Another benefit we see is that the demand would help support the peg of AUSD which would makes it more attractive for the participants.

2 Likes

I agree any ratio will increase in AUSD being minted, but what I meant was if the ratio is 1 to 1 less AUSD will be minted than with e.g. a 5 to 1 ratio. It just makes more sense to make it as low as possible / is fair.

I’m not against the proposal only if the ratio is something between 10 to 1 (or even lower) and 5 to 1.