[AIP-21] Adjusting bad debt repayment scheme from the stkBNB de-peg event

Alpaca Improvement Proposal (AIP) Protocol Parameters
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Background

StkBNB experienced a depeg back in December 2022 due to an exploit in Ankr BNB (aBNBc). Alpaca Guard worked as intended and managed to save a noteworthy % of positions from liquidation. However, due to the extent and duration of the depeg, some LYF positions on the stkBNB-BNB pairs were still liquidated and the platform incurred some bad debt.

Subsequently, the Alpaca community voted on the AIP-12 to repay the bad debt over time from 50% of the protocol revenue that would have gone to the Governance Vault’s stakers in accordance to the Insurance Plan.

More recently, some community members have expressed their desired to revisit the bad debt repayment plan for this event.

Rationale

Safety is one of Alpaca’s Finance main value proposition to the users and we believe the insurance plan pays an important role in the decision making process for lenders deploying capital on our platform.

That being said, given the current market condition and the the fact that it wasn’t technically Alpaca Finance’s fault, we are putting this topic up for a vote. Please note that the scope of this AIP is limited to the revoting / adjustment on the debt repayment for the specific stkBNB event. The Insurance Plan structure itself should be kept as is.

Implementation

Please see below for various options / levers we can use to adjust the bad debt repayment:

  • Reducing the bad debt repayment % taken from the Governance Vault
  • Stop the repayment entirely
  • Do a one-time payment (at a discount) to affected wallets

Below is a model which shows how adjusting the % for repayment and including AF1.0 lending performance fee would impact the Gov Vault APR% and the estimated repayment duration:

We will be conducting a series of votes to determine the final solution.

Voting

The voting structure for this AIP will be as follow:

Vote#1: Whether to make changes to the stkBNB bad debt repayment

The first vote will be a simple YES or NO vote on whether to make an adjustment to the bad debt repayment structure associated with stkBNB

  • A Yes would lead to vote#2
  • A No would leave the repayment as is. No subsequent voting is required.

Vote#2: How to implement the changes

The second vote will be a single choice voting.

  • Option1: Reducing repayment % taken from Gov Vault; if this wins, it will lead to Vote 3.1
  • Option2: Do a one-time payment (at a discount) to affected wallets; if this wins, it will lead to Vote 3.2
  • Option3: Stop Repayment; no subsequent voting is required

Vote#3.1:

This will be a single choice voting, where we will vote on how many % should be taken from the Gov Vault instead of the current 50%

The voting choices will be:

  • 25%
  • 33%
  • 40%

Vote#3.2 One-time payment

The source for the one-time payment will be coming from the extra ALPACA from February emission (~350k ALPACA) The vote will be to determine how many % of the ALPACA token will be used

This is a single choice voting where the choices will be:

  • 50%
  • 75%
  • 100%
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Resounding YES on vote 1 and then we can discuss.

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#freethefuggingalpaca

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Personally, I prefer option 2, a one time payment using existing Alpaca tokens.

I was not personally affected by this event but would think that people who were deserve some form of compensation. However, it should not come at the expense of Alpaca stakers, at least not for such a prolonged period of time.

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Are we able to determine the affected wallets for the payout in 3.2?

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Yes. We can take a snapshot at the time of the event to determine the affected wallets and their relative shares in the BNB pool.

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Vote#1 for this AIP has been created on Snapshot.

Voting is now live and will run through 11.59PM UTC Sunday, May 28th.

You can go to vote here: Snapshot

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[AIP21.2] is now live on Snapshot.

You will have until 11.59PM UTC Wednesday to vote.

https://snapshot.org/#/alpacafinance.eth/proposal/0x6e16c4073513d95c0c96cc3ac0a5d55db82fa400e514abe33530aa6d1f8e36f7

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What happens if no option reaches 50%?
Do we go for ballot or do we choose the most voted option?

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Let gianni choose pls

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Since none of the choices received > 50% vote, we are doing a runoff voting of the top two choices:

The vote is now live. You will have until 11.59 PM UTC Sunday June 4th to vote

https://snapshot.org/#/alpacafinance.eth/proposal/0x1736c67a45eb4345121ae85bd74025c785d23087c9e39e153002b6ccca50d42a

Thank you for your continued participation in the Governance process.

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Morning HC - i dont think this run off scenario/option was mentioned as ‘approach’ in the AIP (unless i missed it).

It was a plausible outcome given the 3 options.

I don’t think it’s correct to introduce it now and change the cards on the table last minute

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Hey Gianni,

Thanks for the feedback. I agree with you that the runoff voting format was not previously communicated. Also, based on my search, there doesn’t seem a be a “default” method. In major elections, runoff voting are not always used - i.e., in a multi-candidate race, the winner just need to have the highest vote# and can be less than 50%.

Based on the above, we will cancel the runoff voting and the original result of the AIP21.2 vote will be considered final.

That is, the bad debt repayment will stopped, and hence the AIP-21 is now final.

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We will clarify the voting format for future proposals together with the quorum discussion. [For Discussion] Implementing Quorum in future votings

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