Discussion: Financing the expansion to an additional blockchain via a community-led crowdfunding round

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Important: please engage with the post with an open-mind, trying to focus on the key points rather than the specific numbers, which are purely illustrative at this stage

Hey Alpaca Finance Community!

Introduction

Here we go again!

Today, I wanted to initiate a discussion regarding the feasibility of financing the deployment costs on an additional blockchain for our beloved DeFi protocol.

As we all know, Alpaca Finance has been thriving on super liquid and established chains, but the widespread sentiment in the community is that time has come to expand our horizons and embrace new opportunities.

However, there seems to be a divergence of opinions regarding the risk associated with this expansion. This is completely understandable, as the Alpaca team has always been very conservative and meticulous with their investments.

To address this concern, I propose a structure for debt financing via community crowdfunding.

By collectively contributing to the costs associated with deploying on a new chain, we can distribute the entrepreneurial risk while actively participating and be part of the growth of Alpaca Finance.

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Let’s dive into the details of this proposed deal structure:

1. Cost Calculation:

To ensure transparency, the all-in cost of deploying to the new chain will be calculated and communicated to the community. For illustration purposes, let’s consider an estimated cost of $500,000. This figure will cover the engineering and testing expenses required for the deployment over a period of three months. Additionally, it will encompass the standard cost of promoting the chain and ensuring its full operational capacity.

2. Investment Rounds:

To provide an inclusive opportunity for participation, there will be two funding rounds:

a. First Funding Slot (Exclusive to xAlpaca Investors):

The initial funding slot will be exclusively open to xAlpaca investors, giving them preferential treatment for their loyalty and commitment. During this round, you will be able to purchase shares up to the dollar value of your xAlpaca holdings. For instance, if you have 10,000 xAlpaca with a valuation of 1 Alpaca = $0.25, you will be eligible to buy up to $2,500 worth of shares. This incentivizes our loyal investors and rewards them for their long-term support.

b. Second Funding Slot (Open to External Investors):

After a specified period, such as 15 days, the funding will be opened to external investors. This allows for broader participation and enables new members to contribute to Alpaca Finance’s growth. It also offers an opportunity for individuals to support the ecosystem without a 100% exposure to our token.

The objective behind this approach is to balance rewarding our existing community members while also allowing new participants to join us on this exciting journey.

At this point the team will have the certainty of having funds available to commence recruitment and delivery planning.

It must be understood that while the intent here is to not impact the core team’s roadmap, there will be some effort required to hire, train and manage the new development squad whilst in build

Now, let’s examine how the deal will be structured once the protocol is successfully deployed on the new chain:

Phase 1: Debt Repayment

During this phase, 80% of the revenue generated from the new chain will be allocated to repay investors who participated in the crowdfunding campaign. The remaining 20% will be directed towards the Alpaca team, acknowledging their efforts in driving the expansion.

Phase 2: Interest Payment

Following the completion of the debt repayment phase, we enter the interest payment stage. In this phase, 50% of the revenue generated from the new chain will be allocated to the Alpaca team, recognizing their ongoing commitment and dedication. The remaining 50% will be used to provide a 100% interest payment to the investors, ensuring their investment is not only repaid but also rewarded.

Phase 3: Business as Usual

Once we successfully complete the debt repayment and interest payment phases, we enter a phase of normal operations. During this stage, 80% of the revenue from the new chain will go to the Alpaca team, enabling them to continue building and expanding our protocol. The remaining 20% will be allocated to governance stakers and utilized for buyback and burn, strengthening our ecosystem.

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Closing thoughts

I believe this structure not only mitigates the perceived business risk but also fosters a sense of shared responsibility and prosperity within our community!

Our legacy is to be a fair, community-first project and this will reinforce that statement

It will also be a good way (if the deal is appealing enough) to get more investment into the platform and potentially more people locking alpaca to get access to a very interesting financial proposition

Looking forward to a prosperous and fruitful discussion.

Thanks,
Gianni

10 Likes
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Although we experienced unethical results from the Fantom network, we should not give up on our efforts to attempt cross-chain. The OP and ARB foundations have provided significant token airdrops to the foundation projects. I believe that alpaca finance as a great project, with the efforts of such a successful team and effective communication, can reach an agreement with L2 foundations such as zksnyc.

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I think this could work. Several things:
Who would be the custodian of the croudfunding money (I presume a team-controlled wallet)?
Also, even if cross-chain is not extremely luctrative, we should do it to reduce BSC dependancy and mitigate risk.
Finally, we may need some tokens to incentivize users in the beginning. If so, we can allocate some of the funds to buyback ALPACA from the market and distribute those. At current prices 500k ALPACA is not really that much.
P.S. we may need an AIP vote to determine which chain.

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Thoughts:

  • the money could go into a transparent wallet that is used to drawdown from
  • you can add incentives to the total cost. Its normal when u do financing deals that u include adjacent costs
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First of all - thanks for your time and that you come up with the suggestions. In this case, I personally would vote AGAINST such proposal. It has two main disadvantages:

  1. It makes the current situation even more complicated. Alpaca generally is already very complicated and this creates more alternatives and side paths - these users will be able to do this, these users won’t, and it will be applied for this long…

One of my goals is to make Alpaca protocol and services as simple as possible - that is what people like, that is what I put on No. 1 spot.

  1. My aim in the future will be cancel/change governance locking. Instead of locking we should reward holding (similar to e.g. UniDex / BiFi / BOO / Tarot etc.).

Currently, an infinite lock (a lock that must be renewed every week) is required to achieve the maximum yield. Locking for 1 year would give us only 50 % of the max. %.

Moreover, if the lock is canceled prematurely, a fine of tens of % is paid - which is an extreme penalty for gov lockers and I don’t know any other token which does this (alternativelly I would suggest to lower the fine to make it 20 -50 times lower).

The proposal you came up with, however, only cements the current state of locking with extreme penalty applied and will make it only more difficult to abolish this system in the future - that’s why I personally would vote against it.

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How is the proposal “cementing” the current state? The Governance vault is barely mentioned in the “Business as usual” part. This is about crowdfunding a cross-chain implementation, not at all about rhe governance vault.

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Hi Jarmush – thanks for taking part into the discussion.

I would like to ask you a few questions because I’m not clear on the key takeaways from your post:

  1. Do you agree it’s a reasonable idea to explore the feasibility to expand to a new chain? Y/N?
  2. Do you agree with the idea of supporting such expansion with external investment (in this case the community crowdfunding proposal?)? Y/N?
  3. Have you acknowledged that this wouldn’t impact all users, but just those who want to take part in it?
  4. Have you acknowledged that the proposal is somewhat independent of the governance vault proposition? By this I mean that it’s common to give earlier investors earlier access to a funding round but it’s just “a way” to do it

Finally, it sounds like your concern is with the governance vault product and how it works, however, this is not what we’re trying to discuss here

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The proposal divides people into two groups:

Slot 1 - xAlpaca gov lockers;
Slot 2 - external investors.

… and the more advantages and other stuff you connect to the existing system, the more hesitant will people be in the future to change anything.

Let’s decrease the penalty for premature unlocking first or let’s change the system to reward xAlpaca holders, not lockers (helps to create interest in the coin and attract new investors).

When the system is changed, people can think about upgrades - but in my case the rule No. 1 would still apply. I support things which are in line with Keep It Stupid Simple, not with proposals which makes things more complicated.

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Hi Gianni

  1. Yes.

  2. No.

  3. No, it affects everyone - because of the suggested rewards dividing. People who do not take part in the program, will be served as the last ones.

  4. The problem is that other protocols do expand to other chains withou anything like this - have a look at Tarot, Unidex, Beefy etc. It is in their own interest. E.g. devs will get their part from the new chain fees. I don’t see any reason for this this kind of financing and then complicating profit dividing for various groups.

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Going multi chain is very appealing to me, In the long run, I just think it’s not the right time. Right now the most important is getting the product right on a chain where we are strong. Starting to spread to other chain might be very natural once we are a bit more mature and can do such in the momentum of another bull run. The idea of funding is interesting though, but auto-funding might be possible in the next bull run. Wouldn’t it be simpler to do such funding through increased value of $ALPACA?..

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Expanding on other chains will divert resources, that are needed for new products or making current ones perfect. I would not recommend this now, better to focus on core products. If there is a vote, i will vote no. I have seen projects which fail, due to porting to too many platforms, then bugs are 3x, features are 3x, mistakes are 3x, alternative will be to drop say bsc and move to entirely new network, arb looks fine to me

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The diversion of resources will be limited as its an additional team. There’s also a difference between “many chains” and 1 other chain.

You need to also take into account business risk. Single chain means less bugs but also full business exposure to Binance and PCS.

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Anyone from the team?