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Ampleforth's Deviation Ratio (DR) Explained: A Self-Balancing Mechanism

🎢 When Pendulums Meet DeFi

By Ampleforth

Aug 14, 2025, 4:03 PM

Ampleforth's Deviation Ratio (DR) measures how far the system's $SPOT/$stAMPL balance deviates from equilibrium. Key points:

At DR=1, system is balanced with minimal fees
When DR deviates from 1, protocol increases fees to incentivize rebalancing
DR>1: enriches perp collateral
DR<1: debases perp collateral

This creates an automatic stabilizing mechanism without requiring external incentives. The bounded fee curve ensures faster return to equilibrium while maintaining long-term stability.

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Deviation Ratio (DR) is SPOT’s ‘swing angle’. I.e., how far the system’s $SPOT ←→ $stAMPL balance has drifted from the center. At DR≈1, the pendulum hangs still; actions that restore balance are cheap. As DR swings away (above or below 1), protocol ‘gravity’ increases:

3:50 PM · Aug 13, 2025

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