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Disclaimer: Nothing in this report constitutes investment advice—I am just reporting on my accounts and its progress on each platform. You should not use this report to make financial decisions. I recommend you seek professional advice from someone who is authorized to provide investment advice.
Hey everyone and welcome to the HODLer’s Den, DeFi Edition!
Here you will find information on the DeFi (Decentralized Finance) crypto space. As usual, I will try my best to provide insight from a HODLer’s perspective.
Ampleforth (AMPL) Geyser Incentives
This DeFi issue of The HODLer’s Den will focus mainly on Ampleforth and its Geyser Incentives.
What Is Ampleforth?
Briefly, AMPL is a cryptocurrency like Bitcoin (BTC) but it has an elastic supply—this means the supply of AMPL automatically adjusts accordingly depending on market conditions. Most cryptocurrencies, like BTC, have a fixed or inelastic supply. You can read more about the AMPL protocol here.
The AMPL protocol automatically adjusts supply in response to demand. When price is high, wallet balances increase. When price is low, wallet balances decrease.
Geyser Incentives
Geyser Incentives generate rewards, in AMPL, for liquidity providers that participate in the AMPL pools. It started in June 2020 with Beehive V1 and has since matured to Beehive V3 which is active as of writing this article. New geysers have been announced on a regular basis every 2 to 3 months and each geyser tends to last for 3 months.
To participate in a geyser incentive, you have to contribute liquidity to an appropriate AMPL pool that is supported and active.
As you can see above, there are 4 active geysers that are generating rewards. Each geyser requires that you to provide liquidity on a specific exchange. For example, the Old Faithful V1 geyser will require that you provide liquidity on the Balancer platform by contributing USDC (USD Coin) and AMPL.
Old Faithful V1 Geyser
Here I will document how I participated in the new Old Faithful V1 Geyser by adding AMPL liquidity on Balancer.
Navigate to the geyser page: https://www.ampleforth.org/geyser/
Then select your desired Geyser. In this case, select Old Faithful V1.
Next, click on the Balancer icon (red rectangle) which will direct you to the appropriate pool.
Click “Add liquidity”.
You will then have to unlock your AMPL and USDC to allow them to interact with the protocol. Click “Unlock USDC”.
I used Meta Mask, so I was prompted to approve the transaction. This costed me 1.67 USD. Once completed, repeat the same steps to unlock AMPL. The cost was also around 1.67 USD.
Once both assets are unlocked, you can finally add liquidity to get your LP (Liquidity Provider) tokens from Balancer.
Again, I was prompted by Meta Mask. This time the fee was 21.34 USD. Once the transaction is complete, you can return to the geyser website to continue.
Make sure you select the appropriate geyser and hit Deposit to participate in the Geyser Incentive.
The first confirmation is to unlock your LP tokens. My cost was 1.71 USD.
The second confirmation is to deposit the LP tokens into the geyser. This costed me 14.14 USD.
In total, the fees came out to roughly 41 USD from start to finish. This is assuming you had both assets ready in your Meta Mask wallet.
Beehive Geyser
Although I was a bit late, I was able to participate in the Beehive V1 Geyser back in July 2020. When the Ampleforth Team released Beehive V2, I quickly withdrew my LP tokens from V1 and placed it into V2 on the same day to take advantage of the Reward Multiplier.
The Reward Multiplier increases every couple of days, but every 30 days it goes up by a factor of 1. So after 30 days, the Reward Multiplier will be 2.0x, and after 60 days, it will be maxed out at 3.0x. Basically, it is a great incentive to keep your LP token locked up in the geyser to gain bigger rewards as there is nothing to stop you from withdrawing at any time.
I have been participating in the Beehive Geyser since July 2020 and my LP value is down 8.5% overall. However, the geyser rewards have helped immensely as it generated over 15% of my initial investment, putting my original investment up by 6.5% in just 5 months.
New Geysers
Three new geysers were released this week: Pescadero V1, Old Faithful V1, and Beehive V3. This time, the Reward Multiplier will hit 3.0x in just 30 days instead of 60, which will help increase the amount of rewards for liquidity providers. In addition to receiving AMPL, users who participate in Pescadero V1 and Old Faithful V1 will receive SUSHI and BALANCER (BAL), respectively.
I was planning on sticking until the very end with Beehive V2 to maximize the 3.0x Reward Multiplier, but the new incentives are too good to miss out on so I immediately moved my LP token from Beehive V2 and put it into Beehive V3.
I took my AMPL rewards from Beehive V2 and placed it into the Old Faithful V1 Geyser. I had two options: provide liquidity via single asset or via multi asset. I chose to use multi asset because I wanted to keep my original AMPL exposure.
So far I have earned 13 AMPL from Old Faithful V1. I am unsure how to determine the amount of BAL generated from this geyser and will have to look into it.
From Beehive V3, I earned 40 AMPL. This geyser strictly earns only AMPL.
Conclusion
AMPL can be very volatile at times and that at several point in time my portfolio was down more than 40%. The geyser incentives eased the pain a bit and eventually it put me in the green once again. Being a liquidity provider also subjects you to impermanent loss—do your own research as this topic will require it and it took me a while to understand the concept.
With the new geysers generating SUSHI and BAL, being a liquidity provider for AMPL might be of intrigue for many. In addition, liquidity providers are also collecting exchange fees—not much, but better than nothing.
There are a lot of fees involved with DeFi due to Ethereum’s price which may be a barrier to entry for many looking to invest. As you saw above, I spent over 40 USD to participate in the Old Faithful V1 Geyser. I had to do the same process when I started with the Beehive Geyser. Do the math and determine if participating in Ampleforth Geysers will be beneficial for you.
So far I am satisfied with the rewards generated by the Beehive Geysers. I will report on my new investment with the Old Faithful V1 Geyser once the time comes. I am interested to see how much BAL and AMPL I will earn.
The DeFi space is highly risky so invest with caution.
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