[For Discussion] Close remaining LYF positions on stkBNB-BNB pool to avoid any potential future bad debt


With the recent temporary depegging of stkBNB, the liquidity pool on PancakeSwap for stkBNB-BNB has reduced in size to ~$480k USD. Moreover, PCS has removed the $CAKE rewards from the pool, making it highly unlikely for the pool to attract any additional TVL. This kind of low liquidity pool poses a higher risk of liquidation and potential bad debt.

There is currently ~$435k USD farming in LYF through Alpaca Finance on the stkBNB-BNB pool.


By closing out remaining positions, we help secure the platform for both lenders and in-active leveraged yield farmers. If you still have active positions in this pool, we highly recommend that you close them now.

We outline recommend the steps below to close your positions, based on their current debt ratio::

Your position’s debt ratio < 50%

  • Your position already has enough BNB to pay back the loan in your farming assets. You can close your position without incurring any swap fees.
  • We highly recommend that you close your position using the “Minimize Trading” option to avoid any swap.
  • This means you will receive stkBNB back, which you can then turn into BNB, if you wish, through the unstaking process or swapping at a small amount at a time to avoid the large price impact.

Your position’s debt ratio > 50%

  • Your position DOES NOT have enough BNB in the farming assets to pay back the loan. This means if you close your position, a swap is required.
  • If your position size is large, the price impact incurred could be very high. In this scenario, we highly recommend you perform an “Add Collateral” function to bring down your debt ratio to <= 50% before closing your position.
  • When adding collateral, we recommend you add stkBNB and BNB in equal proportion to minimize any swaps required.


We will follow a similar approach to AIP4.2 (AIP-4.2: Solution to eliminate bad debt risks from remaining Waultswap positions - Alpaca Finance) where we closed out positions on WaultSwap.

Below please find the implementation plan:

  1. We will upgrade the stkBNB-BNB farming contract to allow for a privileged address (i.e., dev controlled address) to liquidate any remaining positions in the vault.
  2. We will change the liquidation method. Instead of swapping non-borrowed tokens in the DEX (this could cause bad debt due to low liquidity), we will use oracle price and let the new liquidation strategy deduct the necessary amount from our wallet as determined by the Oracle with a 5% discount.
  3. Farming positions will now have all base assets and be able to pay back debt and close the positions
  4. Any remaining value after debt repayment is sent back to users

In Step #2, Alpaca Core team will provide the BNB liquidity required to close the positions. We will then unstake the stkBNB to receive back BNB. To eliminate the risks from BNB price fluctuation, the team will have short position to hedge the BNB exposure during the 2-weeks unstaking period. If there is any profit after (in USD terms), we will use them to buyback ALPACA and burn.


It looks like a penalty to close stkBNB-BNB pair, which is kind of weird given the fact that previous bad debt is not due to stkBNB’s fault.

I believe alpaca users who are in the pool might have already been fully aware of the situation (no cake award, low apy, high risk etc.), thus they will gradually quit spontaneously. It may be better to encourage/accelerate this process instead of actively force it happen.

How about

  1. We suspend new entering of this pool.
  2. Announce that (need gov procedure ?) no future bad debt recovery anymore in any circumstance.

The market will do the rest. Once the position is low enough, we can handle it much more easily.

Yes, and we should next time let the community decide if we should list a token / pair like this.
With a token like this I mean:

  1. Pegged to a big token;
  2. with low liquidity.

Maybe we should always vote. Now it seems like the Alpaca team decides to take the risk and community / investors have to pay for it if it goes wrong. If the community always votes for a pair to be listed we actively take the responsibility. Plus side: it removes the question if we should activate the insurance plan.

Thanks for your suggestion, Ian. Let me give some more details below.

The issue is not for the stkBNB-BNB borrowers, but for lenders. This pair is no longer safe for lenders, for new and existing positions, due to the high % of the stkBNB-BNB pool’s liquidity coming from Alpaca, and not enough from Pancakeswap. Because of this, if another Ankr-like event happens, it would be troublesome and could create bad debt, because liquidation would have little capital to sell into, which is also why we have to take this uncommon approach to close the positions.

Announce that (need gov procedure ?) no future bad debt recovery anymore in any circumstance.

The issue is that this would be announcing that the lenders aren’t protected, but leaving the power to create bad debt(which only affects lenders) in the hands of the borrowers, and that’s a mismatch. Because lenders don’t control which pairs they offer lending capital to, it’s up to us to protect them by closing pairs that become unsafe. To be responsible for this, we should do it promptly, without relying on third parties with no determinable closing schedule, because that would entail leaving risk on the table.


An AIP has been created for this discussion. Please continue the discussion in the new thread.