[AIP-3] Handling of Governance Vault's Early Withdrawal Penalty

Dear Alpacas,

We published an article last month on the early withdrawal feature for the Governance Vault Governance Vault Part 2 Is Here! Early Withdrawal, Governance & Insurance Plan! | by Huacayachief | Alpaca Finance | Jan, 2022 | Medium

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  • The penalty for early withdrawal will be 0.75% of the withdrawn amount per week of remaining locked time.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. )


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Penalty = 0.75% * roundup(65 / 7) = 7.5% of the withdrawn amount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.


Four voting choices will be presented and users can vote by Ranked Choice Voting (IRV) Voting types - Snapshot

  • Option1: 100% to burn
  • Option2: 75% to burn 25% to stakers
  • Option3: 50% to burn 50% to stakers

  • Option4: 25% to burn 75% to stakers

  • Option5: 100% to stakers


I’ll choose option 3. Burning is good of course, but a reward for xALPACA holders is also necessary. Option 3 will bring us balance.

I honestly can’t decide if burn or reward would be the best option, that’s why I would go for the 50:50

1 Like

option 5, 估计要什么时候投票开始啊

1 Like

I prefer option 3. Need to maintain the balance between burn and share the revenue back to the stakers.

  • Option5: 100% to stakers
1 Like

Option 3 seems to be the best hedge to me

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.”


option 3 maybe a neutral way to balance short term and long term interest

I would rather prefer if 50% went into treasury ,25% burn and 25% rewards .

Option3: 50% to burn 50% to stakers

burn50%and give 50% to stakers i think is ok

I’ll take Option3, a balance for token hodlers and project itself.

我认为如果xalpaca和alpaca都是自由流通的,那么50%burn 50%staker是公平的,但由于锁定造成时间成本的不同,公平的方案应该是100%staker 0%burn,那么更礼让的选择,75%staker 25%burn,既不会向50/50那样不公平,又比100/0拥有更多的love。

Voting for this AIP is now live on Snapshot. You will have until 28 March to vote:


Note: Please note that this proposal is in a Ranked Choice Voting. You can read about how it works here: Voting types - Snapshot

Voting for this AIP has concluded.

Option3: 50% to burn 50% to stakers was the winner

1 Like

What’s the ETA for the early withdrawal?