Rotation Vault

If you recall from Tranching, all tranches feature a maturity date.

To ensure that SPOT can maintain a stable value, the Rotation Vault was created to automatically manage the rolling over of mature senior tranches back into fresh ones.

The automated process ensures that SPOT maintains low volatility and a stable value. Otherwise, senior tranches would eventually mature back into an AMPL-equivalent asset, meaning the volatility of SPOT's underlying collateral would increase.

A visualization of how the Rotation Vault rolls over tranches is shown below:

The Rotation Vault can be simplified into a three-step process:

1. AMPL is tranched into two derivatives: Junior and Senior tranches.

2. Senior tranches go on to collateralize SPOT, while leftover Junior tranches remain in the Vault until maturity.

3. Once the Senior tranches reach maturity, they are paired with a dormant Junior tranche and rolled back into AMPL to begin the process again.

Anyone holding AMPL is eligible to participate in the tranche rollovers. Holders only need to stake their AMPL into the Vault as stAMPL, an ERC-20 token with proportional redemption to the Vault’s assets.

In essence, stAMPL is the liquid staking token for the Ampleforth ecosystem.

Participating in the Vault by holding stAMPL means that Vault Stakers gain exposure to a leveraged version of AMPL’s daily rebase. When SPOT is minted, SPOT holders trade exposure to the rebase in exchange for greater stability.

However, this does not mean that SPOT’s original volatility is removed from the system. Instead, that volatility is passed on to Vault Stakers holding stAMPL through the Junior tranches in the Vault.

Thus, stAMPL experiences daily volatility equal to the daily rebase % * daily rebase multiplier in the Vault.