Edited by EeFi Richard

Welcome to follow my twitter @coinhun77349652! Today we'll introduce a hedge staking platform: Elastic Vault. This is a very interesting currency innovation, which hedges against elastic currency risks by providing different ways of yield when AMPL is in the contraction/deflation state.

HODL & DCA

The main characteristic of AMPL is the expansion/inflation and contraction/deflation of supply, in which the contraction state is very unfriendly to normal holding strategies, such as:

• HODL strategy: buy and hold strategy. The negative rebase makes buying and holding for long periods of time difficult, as supply volatility (combined with price declines) can erode a holder's capital significantly
• DCA strategy: Dollar Cost Averaging (DCA) strategy refers to the strategy of adding to positions in batches when the price falls, and ultimately reducing the average cost of total positions. While AMPL can be purchased during price declines, negative rebases can make it more difficult to break even on a position, depending on the time horizon

In addition to HODL and DCA strategies, AMPL's current borrowing on AAVE can only generate high interest rates in the expansion state. All these reflect a reality: AMPL lacks different ways of yield in the contraction state to help holders make up for losses.

• Elastic Vault

Elastic Vault is a platform developed by the AmpleSense DAO organization initiated by DaVoice and Solomon Adekale, which allows AMPL holders to earn hedge yield. The token issued by AmpleSense DAO is called $EEFI, an elastic currency to hedge against AMPL. When AMPL enters the expansion state, $EEFI enters the deflation state, and vice versa. For the introduction to AMPL expansion, contraction and rebase, please refer to Article 2 “How to Realize Elastic Currency?” of the last Series on Elastic Finance. No more details will be covered here.

As shown in the above figure, Elastic Vault is a staking pool serving AMPL holders:

• When AMPL is in negative rebase, Elastic Vault will mint $EEFI and allocate it to AMPL holders.
• When AMPL is at equilibrium (in neutral rebase), Elastic Vault will also mint $EEFI and allocate it to AMPL holders. More $EEFI is minted during neutral AMPL rebase periods than during negative AMPL rebase periods. How much $EEFI is minted is determined by the amount of AMPL staked in Elastic Vault.
• When AMPL is in positive rebase, portion of new AMPL supply due to expansion in the pool will be used to buy and burn $EEFI. The burn amount is determined by the magnitude of positive AMPL rebase and $EEFI price.

$EEFI is minted and burned through the Elastic Vault smart contract developed by AmpleSense DAO. For specific instructions, please refer to: https://docs.EEFI.finance/docs/intro. Elastic Vault governs through AmpleSense DAO. Next, let's learn more about the governance model of AmpleSense DAO.

• Token Governance: $kMPL

KiloAmple ($kMPL) is a multi-purpose token developed by AmpleSense DAO that will:

• Help fuel DAO operations;
• Support products, services and initiatives that will grow the elastic finance ecosystem;
• Enable holders to engage in governance, and shape the direction and priorities of the DAO via voting.

$kMPL use cases include:

• Governance: $kMPL holders will shape the DAO's priorities, initiatives and activities via community voting.
• Air Drops: $kMPL holders who vote on AmpleSense DAO initiatives will receive exclusive air drops of tokens from projects the DAO funds.
• Token Rewards: DAO-initiated special projects will include opportunities for $kMPL holders to earn token rewards in exchange for providing services such as additional governance.
• Finance: $kMPL holders will earn fees from Elastic Vault.
• Borrowing: When $kMPL matures, AmpleSense DAO may launch a special lending platform where $kMPL holders will be able to borrow other assets, including Ample, by collateralizing $kMPL.

More about $kMPL:

• Hedging Strategies of Elastic Vault:

There are two hedging strategies officially introduced by AmpleSense DAO:

1. Use EEFI to go long on AMPL, but avoid negative rebases

$EEFI reversely increases the amount of mint and burn with the change of AMPL's supply, which can be regarded as a hedge against AMPL. When AMPL is in positive rebase, $EEFI begins to be burned and its supply declines. This provides an option for holders who adopt HODL or DCA strategies to avoid the negative rebase risk of AMPL.

2. Earn yield and earn ETH token rewards

Another hedging strategy is to use the Elastic Vault to earn yield of ETH during negative/neutral rebase periods. After deposited AMPL is locked in the Elastic Vault for 90 days, individuals have the opportunity to benefit from $EEFI supply deflation during positive rebase and earn ETH token rewards.

Like all hedging activities, strategies 1 and 2, reduce AMPL holders' downside risk, but also limit their upside. Meanwhile, it’s worth noting that holders will not have access to AMPL deposited into the Elastic Vault immediately, for it will be locked for 90 days. In the locking period, AMPL is in positive rebase and $EEFI will be burned.

It can be seen that Elastic Vault has provided a perfect solution to hedging against AMPL negative rebase risk. Similar logic can be applied to more elastic currencies and elastic derivatives. I believe that with the use of Tranche and PRIME, Elastic Vault of the hedge type will be used in more and more scenarios.

Note: The strategies outlined above are just knowledge sharing and should not be considered as financial advice.

Disclaimer: Due to recently poor market conditions and community sentiment the $KMPL and $EEFI tokens will be undergoing a number of changes which may include swaps to new tokens. This article is not an endorsement to purchase either tokens. Do your own research.