How does AmpUSD generate yield?
How does AmpUSD generate yield?
AmpUSD is built with a two-token model: AmpUSD for transactions and sAmpUSD (staked AmpUSD) for earning yield. AmpUSD alone doesn’t generate yield, but is used for transacting or providing liquidity.
Users can stake AmpUSD into the 'Stability Pool', receiving sAmpUSD in return. Yield is primarily generated from interest paid by those borrowing against SPOT, along with additional collateral from liquidations.
Users may also use AmpUSD in 'Incentivized Liquidity Pools', allowing both liquidity providers (LPs) and sAmpUSD holders to benefit from enhanced yield options under the two-token model.
Here’s where the yield trade-off comes into play, leading to higher rewards for both sAmpUSDstakers and liquidity providers:
Users have two options with sAmpUSD: To choose between staking their AmpUSD in the stability pool or providing liquidity in pools. 1 AmpUSDf cannot be used in both at the same time, but users can split their AmpUSD stack across either, should they wish.
If a user stakes AmpUSD for sAmpUSD, they forgo the liquidity pool rewards, leaving those rewards for the remaining liquidity providers. This creates a higher yield for LPs because fewer participants are sharing the pool rewards.
If a user provides liquidity, they sacrifice the opportunity to earn yield from the stability pool. As fewer users stake in the stability pool, the share of interest payments and liquidation collateral is spread across fewer sAmpUSD holders, leading to higher individual yields.
This two-token model offers flexibility, but also creates a healthy tension between staking and liquidity provision, ensuring that both pools remain attractive by rewarding users based on their choices and the overall participation in each pool.
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