In the article, we outlined the penalty structure for an early withdrawal:
The penalty for early withdrawal will be 0.75% of the withdrawn amount per week of remaining locked time. ( There needs to be a sufficient penalty so that those who would consider early withdrawal could not game the mechanism by choosing a long lockup duration for higher APR, and then withdrawing early. )
Example:
Alice wants to perform an early withdrawal of 100 locked ALPACA from the Governance Vault, but her position still has 65 days locked time remaining. Alice will have to pay:
Penalty = 0.75% * roundup(65 / 7) = 7.5% of the withdrawn amount
And she will receive: 100 ALPACA * (100% — 7.5%) = 92.5 ALPACA
How the penalty from early withdrawal above will be utilized is the focus of this discussion thread. In the article we prosposed the following:
50% of the penalty will go towards weekly burn
50% will be distributed as rewards to the Governance Vault’s stakers in the following week.
Voting
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I agree with what JimA said.
“I’d propose 100% of the penalty proceeds to be distributed to the Governance Vault’s stakers.
The penalty exists to encourage staking; therefore, any early withdrawal should benefit the remaining stakers and not everyone else. Burning the penalty benefits the early withdrawers, day traders etc.
Plus retaining the penalty within the governance vault is similar to the deflationary mechanism of burning, all the while favoring active stakers who are making a sacrifice.”