[For Discussion] Limiting Access to Automated Vault

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Background:

Due to strong demand for Automated Vaults and potentially limited capacity, some community members have requested that the core team put up some sort of limitation on who can invest in the Automated Vaults.

Based on the current pool’s APR and liquidity, we estimate that an additional ~200 Mn TVL can be accepted by the Automated Vaults at current metrics. While this number is not small, we believe that the demand will be higher, given a good track record so far of the vaults’ performance and the current market conditions. Given this, we see merit in further exploring the topic of exclusive access to the Automated Vaults, and would like to get our community’s opinions on the best implementation option.

Rationale:

By limiting access to certain Automated Vaults, we can add value to the Alpaca ecosystem and give privileged access to valued community members. So far, we have launched 3x and 8x Automated Vaults. Their characteristics have several differences (APY, Sharpe Ratio, max drawdown.) Depending on their goals, investors can choose a vault that is more suitable for them. So far though, the 8x vault has been more popular given its higher APY. And because of its higher leverage, the capacity gets filled up quickly, recently within minutes of launch.

Given the facts above, after an internal discussion, we are proposing categorizing Automated Vaults into two groups and limiting their access as follows:

  • Low-Leverage Vaults: allow public access to <= 4x Automated Vaults
  • High-Leverage Vaults: limit access for > 4x pools Automated Vaults to only xALPACA holders

While we have only offered 3x and 8x automated vaults so far, in the future, we could potentially offer other leverage -e.g, 4x, 5x, etc., vaults on LP pairs with lower underlying yields such that the APY is comparable to the higher yield pool such as BNB-USDT. Our goal is to keep the Vault’s APY roughly the same across different LP pools to minimize decision making / rotation for users to seek higher yield, which would cost gas and swap fees.

Implementation:

Only xALPACA holders will be able to invest in the high-leverage vaults. The max amount a user can invest in each pool will correspond to the xALPACA balance they have.

Option#1: Linear allocation

We propose a linear allocation quota as described below:

2 xALPACA = $1 allocation in EACH high leverage vault.

  • Example: Alice has 10,000 xALPACA, she is entitled to invest up to $5,000 USD in each high-leverage vault.

Option#2: Tiered Access

Only xALPACA holders will be able to invest in the high leverage vaults. The max amount a user can invest in each pool will correspond to the xALPACA tier they are in:

  • Green Tier: at least 2,000 xALPACA get $1,000 allocation
  • Silver Tier: at least 20,000 xALPACA get $10,000 allocation
  • Gold Tier: at least 200,000 xALPACA get $100,000 allocation

Other Implementation Notes:

  • We will track the amount invested in each vault’s smart contract (and not # of share token in the wallet.) So users cannot game the system by transferring the token out of their wallet to gain additional allocation.

  • xALPACA balance will be determined in real-time, on-chain, at the time of the investment

  • It would add considerable implementation effort to account for cross-chain xALPACA balance, so the initial implementation will only be for BNB Chain stakers for access to high-leverage vaults on BNB Chain.

  • While this topic is in discussion, we will pause opening new high leverage vaults until the implementation of this proposal is completed (if passed.) Lower leverage vaults will continue to be added on a regular basis if the capacity is full in all the active vaults.

  • The estimated time for implementation is 2-3 weeks (once we add it to the sprint) If passed, you can expect it to go live towards the end of May.

  • We can’t do anything with the existing investors in the current high leverage vaults. However, once they withdraw, they can only invest back again if they meet the criteria.

We look forward to hearing your thoughts on this topic.

26 Likes
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Personally, I’m not too fond of this general idea at all that to provide higher service priority to stakeholders than ordinary customers.

It’s against certain basic business logic, and may ultimately lead Alpaca to an insiders’ party.

Letting customers want to be stakeholders is a good thing, but totally another thing to force them to.

7 Likes
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How are you going to manage the constant decreasing of xAlpaca?
Will it be considered only at the time of opening/changing a position?

Also how will it be integrated with the early withdrawal feature we are going to implement later on?

Can you also add an estimation of how many alpaca, at the current price, will be locked in the gov vault to fill up the 200M TVL in the two case?

3 Likes
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I disagree. Almost every financial institution provides benefits to investors, not to mention high profile customers. So I would say that, in reality, is closer to basic business logic.

It also isn’t qualified to be called an insiders party. The team and no other insider party has a large % of tokens. Anyone can buy ALPACA and join this “party.” You can do it right now, so there is no limitation on anyone and no justification to use the term insider.

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One 25Mn instance of an 8x vault requires 3.125Mn xALPACA in equity value to fill up

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Not bad, at current price we could go up to 80-90M locked
image

the problem I’m thinking about is the possible diminishing return in case alpaca rises in price too much

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I love the idea of adding another utility to xAlpaca, however i fear the option 1) Linear allocation might be flawed at its current written stat.

Lets imagine a whale owns 50 million xAlpacas, and pools are opening at 25 million capacity. This would mean that a single person could fill the whole automated vault and other xAlpaca holders are left without having any benefit, while they have xAlpaca locked the same way. That is why i would propose to either provide maximum to Option 1, not have it unlimited as current proposal, or to have an equal distribution right to enter for all xAlpaca holders.

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I don’t understand the meaning of discussing such a proposal. Can you buy an 8x neutral fund with xalpaca? Why don’t you want to make the neutral bigger? Why don’t you go to eth to grab the share with this time? As long as the neutral is bigger, will alpaca not rise? Isn’t it good to make everyone feel snapped up? Or you can open an 8x pool for xalpaca users. It is unreasonable to completely reject ordinary users.

3 Likes
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I will vote to option2. Option1 too hard to personal investors.
But I think even the option2, is still too high to those people who never bought any ALPACA. Maybe we can make it easier?

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With so many fancy restrictions, why don’t you go to eth quickly to turn on neutrality and don’t go to avax? Let’s seize the market first.

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this discussion is not about expansion plans, please attain to the thread topic

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38% of the supply is already locked up and earning 27% APY or so. The use cases of ALPACA are many more than exclusive access to AV. So we don’t need to price that access as being profitable enough alone that it easily justifies buying and holding ALPACA, especially if pricing that too low has a negative effect which it does–diluting and limiting the investing opportunity of current xALPACA holders.

3 Likes
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There is only 40Mn xALPACA in existence now. If a whale shows up with 50Mn xALPACA, that means he just pumped the ALPACA price by at least triple digits and locked 1/4 of the total supply for 1 year. We should welcome such a thing happening as the benefit to ALPACA holders will be much more than the yields on AV. And this rationale persists even with smaller whale holdings.

But I do think frontrunning could be a problem and I brought that up to the dev team.

5 Likes
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I would like to explain the world ‘insider’, 'cause I just realize it’s usually more like an accusation. Sorry for misleading if any. What I really mean by that was “ppl who already know/hold alpaca”.

AV is absolutely attractive but if it must come with a holding request, that’s an entry threshold above average thus kind of keeping users from this project.

In contrast familiars have all kinds of advantages over newcomers. They know how the system works, they know the xAlpaca system in advance, they know when new quota will be released.

This way, as far as I estimate, this fantastic product will probably be kept among us, who already know/hold alpaca. I think it’s better to reach more people, it will never be more enough.

As the benefit for investors is concerned, since we are already allocating a share to xAlpaca, we can simply adjust this parameter to give more or less.

I believe in Ockham’s Razor, new instance should be introduced with extremely care, especially for already existing purpose.

1 Like
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I think we should not pause opening high leverage vaults.
We can add a public vault and release the TVL slowly before the xalpaca vault complete.
If we pause it, and other project fork the automated vault, we will loss the market.

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As we have the capacity of another ~$200mn, I personally suggest we do not limit fully but rather, grant xAlpaca holders a guaranteed entry up to a certain threshold (75m to 100m). We should aim for a win win for both sides and I think this would help satisfy both as :

  1. xAlpaca users has more use case
  2. Public still can enter up to a certain threshold, to be adjusted, and if they want they can buy and lockup alpaca.
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I have another question:
What will happen to existing investors? they can keep their position open even if they don’t have any xAlpaca?

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yes you are correct i didnt consider the effect of buying such amount as currently there is no such holder :slight_smile:

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@Bibendus HC has mentioned it on top

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oh sorry, I missed it