Average Daily Volume (7 days) : 29.29M
TVL : 118.51M
Wombat
Average Daily Volume (7 days) : 71.32M
TVL : 40.77M
As you can see Ellipsis’ ADV and TVL pales in comparison to it’s peers. Higher ADV means more people use the protocol and higher TVL boosts confidence for protocol users. While Ellipsis has gauges, it does not have the bribe feature.
In order to incentivize liquidity providers on Ellipsis, Alpaca Finance would need to buy EPX and lock it to receive vlEPX which could then be used to vote for a share of the daily EPX emissions. This is inefficient and undesirable.
With the bribe feature, you can simply incentivize veTHE(Thena) / veWOM (Wombat) holders to vote an allocation of the daily token emission for your pool by providing some extra APR (bribe).
This way, Alpaca Finance does not need to buy any extra tokens to vote for it’s AUSD liquidity pool. It can simply use a portion of the protocol’s revenue to bribe existing voters on any/both of these platforms.
This solves the problem of not having our own emissions to incentivize liquidity providers at the cost of a small % of revenue.
The cost for moving the liquidity would be minimal, just normal transaction fees afaik.
Most of the work will fall on the core team in the form of contacting Thena/Wombat to whitelist AUSD/ALPACA (which would be used for bribes) and setting up the gauge/bribes.
As for the cost of bribes, I think we could use the 50% of stability fee that normally goes to buyback & burn. It doesn’t have to be the whole amount, just up to what’s necessary.
Using the current AUSD supply and stability fees:
Assets
Stability Fee
Total Borrowed (AUSD)
Buyback & burn (AUSD)
USDT
3.25%
42,154.59
685
BUSD
3.25%
304,970.42
4,956
BNB
3.0%
470,235.17
7,054
We get 12,695 AUSD worth of bribes per year or ~250$ per week. This is a small cost to governance stakers but the goal here is to grow AUSD into something that works without having to modify ALPACA’s tokenomics.
250$ per week might not seem like much but this assumes AUSD notional remains constant and it should be enough to at least bootstrap liquidity for AUSD on these protocols.
Obviously, the more AUSD grows, the more we can bribe veToken holders and that attracts more liquidity because of the favorable APR.
I’m in favor of the proposal including your suggestion of using the buyback-and-burn part of the AUSD stability fee as a source for bribes. It wouldn’t cost us much, though I don’t know whether this amount would be enough to attract more liquidity.
As for the DEX, I would prefer having the pool deployed on Wombat simply because I’m already using that DEX (directly and through Magpie) but I don’t know anything about Thena.
After doing some quick math, it appears that $250 per week would result in approximately 25-70k votes on Thena (most projects receiving between 50 to 300 votes per bribed dollar). Based on similar projects, this would translate to 0.08% of the votes, which is equivalent to about $921 in Thena incentives per week. This would result in around 5% APR at 1 million.
Estimating the value of a vote for Wombat is more challenging. It’s unclear if 1 veWOM equals 1 WOM token in value, how the APR is calculated or determine the actual value of the bribes. However, assuming 1 veWOM is equal to 1 WOM token, we can estimate a WOM incentive of around $9-23 per bribed dollar.
But yeah, It may be worthwhile to experiment with both options to determine the return on investment per bribed dollar. Maybe we could negotiate with them for better terms or explore partnership opportunities that would benefit us both?
The Ellipsis team is indeed not supporting their own protocol, which is why they created an opportunity for other protocols to take their market share in the stablecoin swap vertical. But almost all the volume you showed is probably coming in through major stables, not minor stablecoins. So it’s not like moving to another DEX would increase AUSD’s trading volume. Only AUSD use cases can do that.
Our protocol has 400Mn across multiple products. Meanwhile, there is only 700k of AUSD atm which barely generates revenue, so it does not make sense to assign team resources to moving dexs and negotiating with them for that, and then the additional maintenance work for distributing rewards externally, etc. If in the future AUSD can have more use cases, such as if private AVs go back up or something with perps, then it might make more sense to improve the product’s structure.
Most of our users aren’t currently interested in this product, so I suspect if you submit a proposal here for some revenue to be attributed to bribes or AUSD rewards, it won’t pass quorum or a vote, but you can try.
Rewards don’t come out of thin air, at least not sustainably. Any rewards from the DEX has to be first sent to them by us. It’s mostly moving money from one hand to the other. I’m not sure about your math, but a portion of the stability fee goes to dev fund for maintaining the product. Even though it’s not much, if there are no funds to maintain it or incentive structure to grow it, there won’t be the people or reason to maintain it.
Thena’s model is not sustainable. They live based on token rewards that are being dumped every day. We’ve all seen many times how that model ends.
I agree that most of the volume comes from major stablecoin pairs. I was using ADV and TVL to show that ellipsis is falling behind.
That makes sense to me. It does raise some questions though. Can AUSD even grow on its own without the team putting some work into it? It’s certainly not looking like it’s going that way.
I didn’t consider the portion that goes to the dev team in my calculations.
What about Wombat? They’ve already shown interest in partnering with Alpaca Finance.
Thanks Lyria for doing the math on bribe returns. I was skeptical that this would do better than directly incentivizing the existing pool, but it looks like in fact it would do quite a bit better.
From my point of view, one of the main reasons not to use AUSD is the rather dire lack of liquidity. I could mint 18000 AUSD at the moment, and if I could sell it that might even be a reasonable idea, but that one move by one person would drive the AMM price all the way down to $.30. And ideally I’d be able to change it to Tether and run it through again, which requires even more.
So on the one hand there’s limited usage of AUSD, and I can see not wanting to devote resources to it. But on the other hand I’m not sure we really know the demand because using it has been made impractical.
I do think having it sit around as a ghost project is not ideal, and if the opportunity for growth could be provided without too terribly much effort, it’s probably a good idea. But that would really need input from whatever team member would be responsible.
Also, though, Alpaca 2.0 will provide more options for using the lending pool as collateral and might make the whole question moot.
Yeah, that might be a solution. Just accept it into the lending pool of Alpaca 2.0 with a fixed value of $1 per AUSD, similar to other stablecoins. That might fix its usefulness, but then the question arises: why even have AUSD? If AUSD can be accepted, we might as well accept the underlying assets (IB-tokens or deposited assets in general) as collateral and skip the whole AUSD aspect. An option would be to make it cheaper to borrow or to have a higher collateral factor for AUSD. But in my opinion, to make AUSD useful (and skip the borrowing costs of the main stablecoins), we simply need sufficient liquidity
I actually agree that moving to Thena would be a good opportunity to have more liquidity.
I don’t fully agree that we should do nothing because the product is not widely used. I think nobody mints AUSD because there’s no place to farm it. If it was possible to farm somewhere, people would use it.
Hence I believe moving to Thena would actually create more usecase for AUSD
AUSD was launched in late 2021, and supported APY rewards of 10-15% up until only Q1 of this year. What has been suggested here as a hypothetical pool on Y or Z DEX would not create better farming conditions than what was available previously. To grow AUSD, the usecases would have to be stronger than that. Moreover, I think it’s wrong to assume that you can get free rewards somewhere; Money doesn’t print out of thin air, and any model like that is unsustainable. AUSD has no trading volume and will not have any before usecases exist, so even a DEX has little incentive to support that.