Summary : Cancel / Lower the early withdrawal fee from Alpaca Governance vault.
Abstract : I suggest canceling or at least substantial lowering the fee from Governance vault which is penalizing Alpaca gov stakers. This fee de-motivates people to stake into governance vault and is unreasonably high, especially after the emission of new tokens ended and we switched from inflationary to deflationary token. It also applies, that the reward for early withdrawal for Alpaca protocol is also close to 0 - so it is literally only very demotivating feature, which in its current state, brings nothing to the protocol and only harms Alpaca investors.
Overview : Governance staking and voting is an important part of Alpaca protocol. Reaching higher % of stakers is desirable, but at current state of things hard to reach. At present only 30 % of Alpaca are staked in Governance (and that is also due to lack of other options how to use Alpaca tokens, otherwise the % would be much lower).
When someone wants to join Alpaca governance he needs to take into account all the pros and cons.
The current % for infinite locking your Alpaca is 3.6 %. Gov staker has to lock his Alpaca tokens for 1 year, but to reach the official percentage (3.6 %), he would need to re-lock each week and thus keep it permanently locked for 1 year. If such person would lock for real 1 year (52 weeks) and came to withdraw the tokens after the locking period, the reward would be only half of the officially stated: 3.6 % for the first week and 0 % for the last week - so 1.8 % on average for 52 weeks.
On the other side, if someone want to withdraw Alpaca tokens from the vault, he must pay penalty. The early withdrawal fee is set as “0.75 % of the withdrawn amount per week of the remaining locked time.” So if someone really needs to end his staking - for any reason - being it personal, financial or his wallet was hacked, he would pay penalty which is much higher than is the reward.
Let’s assume someone stakes his Alpaca for 1 year. After 6 months he is forced to withdraw from governance for any reason . Even if he re-locked each week, his reward was ~ 1.8 % so far. On the other side, the penalty for early withdrawal is 0.75 % x 26 weeks = 19.5 %.
1.8 % reward vs. 19.5 % penalty!!!
Motivation : At these conditions it is hard to convince any people to stake in Alpaca Gov vault. And it is also the reason why there is not high demand for Alpaca - there is not much you can do with it, except keeping it in your wallet without any locking (as locking has more cons than pros).
References: I like how Fantom FDN handled this problem. The 1-year locking means really 1-year locking - you earn 6 % for the first week of staking and also 6 % for the last week of your staking (so the % is not gradually decreasing as it is in Alpaca). Moreover, if you lock your coins for 1 year (6 %), but decide withdraw sooner, you will not pay any penalty - you would still get your reward, but the reward would equal to the reward for no locking (2 %). If you were withdrawing your rewards each day, the difference would be subtracted from your invested principal. The only con is that there is 7-days unbonding period from staking. Something to think about - what we can take from this to attract more investors into Alpaca protocol.
Voting: My suggestion is: Cancel the early withdrawal fee for Gov Alpaca lockers. Alternatively, I suggest, the fee should be lowered to 0.01 % per week. In such case, if you decide to withdraw after 6 months, your reward so far would be ~ 1.8 % and the penalty for early withdrawal 0.26 % - much more reasonable numbers that it is now (1.8 % vs. 19.5 % penalty).