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.
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.
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
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.