One of the challenges that Alpaca Finance faces is how to attract and retain more users and liquidity, especially in the face of increasing competition from other DeFi platforms. Another challenge is how to balance the interests of different stakeholders in the ecosystem, such as lenders, borrowers, stakers, and developers.
To address these challenges, I propose to create an incentive coin called iAlpaca that will be burned at a rate by using part of the Alpaca coin repurchase from protocol profits. However, it will be emitted to have a target maximum emission of 1000000 coins. The emission will be 1 coin * (1-emitted percentage). This coin will be used to reward Alpaca Stacking (75%) as well as new projects (20%), and over and under utilized pools (5%) to bring in more people to use it.
The main benefits of this proposal are:
- It will create a positive feedback loop between Alpaca coin and iAlpaca coin, as more demand for iAlpaca coin will increase the repurchase and burn of Alpaca coin, which will increase its value and scarcity.
- It will incentivize Alpaca Stacking, which will increase the security and stability of the protocol, as well as generate more fees for the protocol profits.
- It will incentivize new projects to integrate with Alpaca Finance, which will increase the diversity and innovation of the ecosystem, as well as attract more users and liquidity.
- This will also reward lenders with higher returns in overutilized lending pools, and reward borrowers with iAlpaca coins in farming pools that have underutilized lending pools. In the future, when direct borrowing from the protocol is possible, this will also reward borrowers who maintain their borrow position with iAlpaca coins.
Solution:
My proposed solution is to create an incentive coin called iAlpaca that will be emitted to have a target maximum emission of 1000000 coins. The emission will be 1 coin * (1000000 + burned - emitted). This coin will be used to reward Alpaca Stacking (75%) as well as new projects (10-20%), and over utilized pools (5-15%).
The details of my solution are as follows:
- iAlpaca coin: This is a new ERC-20 token that will be minted and distributed by a smart contract. It will have a fixed supply of 1000000 coins, which will be gradually emitted over time. The emission rate will depend on the number of coins that have been burned and emitted. For example, if 100000 coins have been burned and 500000 coins have been emitted, the emission rate will be 1 coin * (1000000 + 100000 - 500000) = 0.6 coin per block. The emission rate will decrease as more coins are emitted, until it reaches zero when all 1000000 coins are emitted.
- iAlpaca coin distribution: This is a mechanism that will allocate iAlpaca coins to different pools according to their weights. The weights are determined by the following criteria:
- Alpaca Stacking pool: This pool will receive 75% of the iAlpaca coin emission. It will reward users who stake their Alpaca coins in the Alpaca Finance protocol. This will incentivize users to hold and stake their Alpaca coins, which will increase the security and stability of the protocol, as well as generate more fees for the protocol profits.
- New projects pool: This pool will receive 20% of the iAlpaca coin emission. It will reward users who participate in new projects that integrate with Alpaca Finance. This will incentivize new projects to integrate with Alpaca Finance, which will increase the diversity and innovation of the ecosystem, as well as attract more users and liquidity.
- Lending pools incentives: This is a mechanism that will use iAlpaca coins to incentivize lending pools to balance their utilization rate. The incentives are as follows:
- Lenders: Lenders who deposit their assets in overutilized lending pools will receive higher returns in terms of interest rate and iAlpaca coins. This will incentivize lenders to deposit more assets in overutilized lending pools, which will increase the available funds and lower the utilization rate.
- Borrowers: Borrowers who borrow assets from underutilized lending pools or use them in farming pools will receive iAlpaca coins as rewards. This will incentivize borrowers to borrow more assets from underutilized lending pools or use them in farming pools, which will increase the borrowed funds and raise the utilization rate. In the future, when direct borrowing from the protocol is possible, borrowers who maintain their borrow position with underutilized assets will also receive iAlpaca coins as rewards.
I believe that my proposal is a win-win situation for everyone in the Alpaca Finance ecosystem. It will create a positive feedback loop between Alpaca coin and iAlpaca coin, increasing their value and scarcity. It will incentivize Alpaca Stacking, increasing the security and stability of the protocol and generating more fees for the protocol profits. It will incentivize new projects to integrate with Alpaca Finance, increasing the diversity and innovation of the ecosystem and attracting more users and liquidity. It will incentivize lending pools to balance their utilization rate and improving the capital efficiency of the protocol. It will also benefit lenders with higher returns in overutilized lending pools, and reward borrowers with iAlpaca coins in farming pools that have underutilized lending pools.