$AMPL is Good for AAVE — This is Why
Aave is an amazing DeFi lending platform. I’m sure everyone can agree upon that.
But as mentioned in my last article — which is a prelude to this one — the borrowing demand on Aave is incredibly weak and they’ve barely innovated in almost 2 years.
However, that’s all about to change. In fact, the change has already begun! Aave listed $AMPL on July 24, 2021, and more recently in September updated the $AMPL interest rate curve to better serve market participants.
Why $AMPL is Good for AAVE
- $AMPL Brings Borrow Demand to AAVE
- $AMPL Brings Users to AAVE (Borrowers & Lenders)
- $AMPL Increases AAVE Fee Revenue Dramatically
- $AMPL is Driving Innovation on AAVE
- $AMPL is a Safe, Secure, and Decentralized Asset
1. $AMPL Brings Borrow Demand to AAVE
$AMPL is the ultimate borrow asset because it serves as a safe denomination of debt (the price always reverts back to its price target) while also providing an opportunity to profit from volatility to the upside and the downside!
Yes, you read that right.
No matter what the price or rebase does, you can execute a strategy to come out on top and rest easy knowing that your borrowed amount always stays the same (and that you’ll be able to pay back your debt at the same price or maybe even lower than what you borrowed at).
Borrow Strategies to Execute in all Scenarios:
- $AMPL price decreases — Borrow $AMPL and sell it immediately. When the price goes down, repurchase the borrowed amount for cheaper. Repay your debt, keep the difference.
(i.e., Borrow→Sell→Wait for Lower Price/Negative Rebase→Buyback→Repay→Keep Profits)
- $AMPL price increases — Borrow $AMPL and hold it. When price goes up, you benefit from the positive rebase (your $AMPL balance increases). Hold this borrowed amount as long as it is profitable to do so, then repay your debt and keep the profits from the positive rebase. This strategy can yield APYs in the 1000’s — 10,000s — 100,000’s, and even Millions of %.
(i.e., Borrow→Hold→Wait for Higher Price/Positive Rebase→Get Increased $AMPL balance→Repay→Keep Profits)
- $AMPL price remains the same — Borrow $AMPL and do what you want with it. Your debt repayment obligation will be unchanged (like a stablecoin).
(i.e., Borrow→Hold/Trade/Sell→Repay)
Never before has there been an asset that enables you to profit in every possible price scenario while borrowing, until now.
$AMPL is changing the borrowing game. $AMPL has incredible borrowing demand.
- This is good for Aave ;)
- Increase in TVL
- Increase in fee revenue
- Increase in utilization
- Increase in users
2. $AMPL Brings Users to AAVE (Borrowers & Lenders)
Going hand in hand with $AMPL’s first benefit to Aave — driving borrowing demand — this also drives more users to the platform.
Once people learn about $AMPL and how it can be leveraged for profit in all of the different price scenarios described above, the DeFi degens will flock to the $AMPL pool on Aave to try their hand at this lucrative game of 4D chess.
Trust me, it will happen.
When there’s potential to earn APYs in the 100,000’s to Millions of %, you can bet that will bring in new users hungry to borrow $AMPL when it’s positively rebasing.
Now, what about the lending side?
$AMPL’s got that covered too. New users will want to lend $AMPL over anything else.
When $AMPL first went live on Aave, it reached a 100% utilization rate and maintained this rate for nearly two weeks! Everybody wanted to borrow $AMPL but nobody wanted to lend $AMPL; that is until Aave raised the maximum $AMPL deposit APY to +180,000%!
This unprecedented interest rate increase was needed to better balance incentives between the borrow and deposit sides of the $AMPL on Aave market. There was just so much demand to borrow $AMPL as it can be extremely profitable to do so — especially when positively rebasing (which it was when first listed on Aave).
Now, however, lenders are paid handsomely when borrowing demand is strong! Depositors earn a 4281.60% APY at 90% utilization and up to 186,210.38% at 100% utilization. When rates get this high, you can bet the profit-focused yield farmers will come piling into $AMPL just so they can lend it out.
That said, $AMPL will bring in both — new borrowers and new lenders.
- This is good for Aave ;)
- Increase in TVL
- Increase in fee revenue
- Increase in utilization
- Increase in users
3. $AMPL Increases AAVE Fee Revenue Dramatically
Seeing as $AMPL on Aave increases borrowing demand, lending demand, and brings in new users, it obviously increases the protocol’s fee revenue too.
And it’s much bigger than you think.
Let me ask you this:
Say the $AMPL pool is the same size as the $USDC pool and has the same utilization percentage. Which pool will generate more fees? Would it be the same?
No. Not even close!
$AMPL would generate magnitudes more in fees because the APYs are so much higher. When $AMPL is nearing 100% utilization (it gets there when positive rebasing), the borrow APY can be in the 400–500% range and the deposit APY can be in the 50,000% — 100,00%+ range.
With APYs like these, you can bet Aave’s making bank off of $AMPL on Aave fees! In fact, it’s not even comparable to the fees generated from $USDC’s measly APYs.
So, if you haven’t realized by now, $AMPL does not borrow and lend the same as any other asset on Aave. So why would the fees generated be the same? $AMPL is a whole nother beast that has the potential to bring Aave to a whole nother level.
Oh, and one more thing; more fee revenue means more income for $AAVE stakers — who earn fees from the protocol and staking rewards.
- This is good for Aave ;)
- Increase in fee revenue = protocol expansion = legitimacy = complete takeover of traditional banking system
- More fee revenue for $AAVE stakers
4. $AMPL is Driving Innovation on AAVE
Aave is already extremely innovative, there’s no question about that. I mean, the fact they even listed $AMPL as a borrow asset is a huge innovation in and of itself.
$AMPL is the first rebasing crypto asset with a supply that adjusts daily when its price is above or below its equilibrium threshold. It’s unlike any other asset in crypto and it takes a lot of innovation to support an asset like $AMPL.
For instance, Brandon Iles, the CTO of Ampleforth submitted an AIP to support $AMPL on Aave back in October 2020, and it took until July 24, 2021, for it to go live. The $aAMPL implementation had to undergo several audits and testing because of its unique and dynamic but rules-based nature.
Following its implementation, Brandon submitted another AIP suggesting a new variable interest rate model for $AMPL to allow for $AMPL interest rates to reach a maximum of 10,002% APY when at 100% utilization. This was yet another first for Aave and opens up the door for something like this to be used for many other assets on Aave as well.
As stated by Brandon in his AIP:
“We believe a nonlinear interest curve is healthiest long-term and could likely be used by many other assets as well, however, this work can be discussed more in the future.”
- This is good for Aave ;)
- More innovation = new and improved products and services = staying on top
5. $AMPL is a Safe, Secure, and Decentralized Asset
The last, but certainly not least benefit that $AMPL brings to Aave is a borrow asset that is actually decentralized, safe, and secure. These qualities that $AMPL has are incredibly important and cannot be understated.
And they fall in line with Aave’s ethos.
Aave is the leading DeFi lending platform not only for the open and accessible lending and borrowing services it provides, but also because it is safe, secure, and decentralized. People feel safe using Aave because it is audited, time-tested, and cannot be censored or shut down.
However, the same can’t be said for the asset responsible for Aave’s largest pool… $USDC.
Sure, $USDC is safe, secure, audited, and time-tested, but it is not decentralized. If a government or some central authority wanted to, they could shut it down. They could censor and restrict certain transactions.
This is a big issue. Especially since $USDC is by far, Aave’s largest pool with nearly $6 billion.
Seeing as the regulatory landscape for crypto has entered the spotlight from politicians around the world, decentralization is more important now than ever. Soon, the politicians and federal reserve may try to declare which stablecoins we can and can’t use:
This is a problem for the entire crypto space. But especially so for centralized stablecoins.
$AMPL, on the other hand, is 100% decentralized. It cannot be stopped. It cannot be censored. It cannot be restricted. And it borrows and lends like a stablecoin (because it provides a safe denomination of debt).
That said, having an asset like $AMPL on Aave is a really good thing.
- This is good for Aave ;)
- Unstoppable, decentralized, safe, secure, and audited assets ensure Aave survives and thrives no matter what regulation gets thrown at them.
