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About the Rotation Vault & stAMPL
Recall that timely rotations ensure the SPOT collateral set remains filled with fresh senior AMPL tranches so the system can be used to store stable value.
The Rotation Vault automates the process of rotations, so anyone can participate in rotations passively, through a staking mechanism. Stakers do not need to manage intermediate tranches or pay gas fees for each operation. With the current SPOT configuration, rotations happen weekly.
For an overview of how the rotation vault fits into the high level architecture of the SPOT protocol pelase see About Spot.
stAMPL is a staked AMPL that represents a holders position in the rotation vault. The token is a freely redeemable claim on assets in the rotation vault. Additionally it pays or extracts an unsigned fee to those who stake. Like SPOT, stAMPL features free-floating price and proportional redemption.
Example 1: Imagine Alice has 1000 AMPL, the rotation vault also currently has 1000 AMPL in it, and there are 10K stAMPL in circulation. If Alice deposits all her holdings into the rotation vault she will own 50% of the assets in the vault. In return she will receive 10K stAMPL and total supply of stAMPL will increase to 20K stAMPL.
At present, rotations are configured to recur weekly. At the time of rotation, the vault automatically:
- Tranches: Automatically separates AMPL into fixed-term seniors and juniors using SPOT's minting bond
- Rotates: Automatically exchanges Maturing senior tranches for newly minted seniors into SPOT's collateral set.
The newly minted juniors created as a byproduct of tranching, remain in the rotation vault balance where they are held until they mature into raw AMPL, to be used for future rotations. The diagram below shows the flow of assets.
stAMPL / SPOT rotation diagram
Referring to the diagram above, at the weekly time of rotation :
- 1.The maturing
Sr0tranche rotates into the stAMPL vault and beomes raw AMPL. The maturingJr0tranche becomes raw AMPL. - 2.AMPL is tranched into fresh (Sr3, Jr3) pairs. The new
Jr3remains in the stAMPL rotation vault. The newSr3tranche rotates into the SPOT collateral set.
Note: In the case where the AMPL balance in the vault does not cover the entire rollover, it rotates as much as possible.
The rollover reward or fee is calculated based on the relative demand for stability and volatility (seniors and juniors) respectively.
To gauge relative demand, the protocol looks at the balance of assets in the rotation vault relative to SPOT's total supply to determine an implied perp ratio:
It then compares the perp ratio to the preconfigured tranche ratio and evaluates whether relative demand is "high" or "low."
- When
perp_ratio < tranche_ratio: Demand for juniors is low relative to seniors. In this case stakers extract a rollover reward. - When
perp_ratio > tranche_ratio: Demand for juniors is high relative to seniors. In this case stakers pay a rollover fee. - When
perp_ratio = tranche_ratio: Demand is at equilibrium. In this case there is no rollover reward or fee.
Note: The rollover reward pricing function is currently under development but will adhere to the above and follow a sigmoid curve.
Debasement and enhancement is measured as the ratio between SPOT supply and senior AMPL tranches in SPOT's reserve.
When SPOT pays the Rotation Vault a reward on rotation, more senior tranches leave SPOT's reserve than enter it, debasing SPOT's value as measured in senior AMPL tranches.
Likewise, when SPOT extracts a reward from the Rotation Vault, more senior tranches enter SPOT's reserve than exit it, enhancing SPOT's value as measured in senior AMPL tranches.
Recall, parity changes between perp ratio and tranche ratio determine rollover rewards and fees, and thus have the effect of ultimately debasing and enhancing SPOT accordingly.
At steady state, the rotation vault holds a combination of fixed-term junior AMPL tranches and raw AMPL (there are times when the vault will hold senior tranches as well, but this is rarely a significant portion of the vault, with most being paired with their junior tranche to combine back into AMPL). As a result, holding stAMPL is similar to holding a higher volatility AMPL. For more on this please see Volatility Amplification.
Separately from the rollover reward and fee described above, stakers who deposit AMPL into the rotation vault automatically generate yield by:
- Providing Tranche Liquidity: Users who want to redeem SPOT for AMPL before senior AMPL tranches reach maturity can take advantage of the junior AMPL tranches in rotation vault's collateral set to redeem for a fee. See Melding / Swapping.
- Governance token (FORTH) Emissions: Users who hold stAMPL receive an emission of FORTH governance tokens based on the size of their position and time staked.
Recall that users who redeem SPOT receive senior AMPL tranches that typically need to be held through maturity before turning into AMPL. To address this, the rotation vault has a meld feature that provides liquidity ahead of maturity. It allows users to:
- Swap Seniors for AMPL: By matching senior AMPL tranches with their corresponding junior AMPL tranches, the rotation vault can redeem seniors for raw AMPL ahead of maturity. At the time of swap, a fee is extracted. This fee always pays into yield for stakers.
- Swap AMPL for Juniors: This feature effectively allows users to buy juniors from the rotation vault in exchange for AMPL.
The base rate volatility multiple of stAMPL can be calculated as a function of the quanitity of AMPL and junior tranches in the vault and the tranche ratio.
- Lower (senior:junior) tranche ratios correspond with higher volatility stAMPL.
- Higher (senior:junior) tranche ratios correspond with lower volatility stAMPL.
Recall that in the SPOT collateral set if rotations halt the senior AMPL tranches mature progressively into raw AMPL which makes the SPOT token more volatile (bending rather than breaking).
Similarly, in the rotation vault if rotation halt, the junior AMPL tranches mature progressively into raw AMPL. However, in this case the net effect is the collateral in the rotation vault becomes less volatile, because raw AMPL is less volatile than juniors.
Last modified 1mo ago