[For Discussion] Limiting Access to Automated Vault

I wanted to suggest something different for AVs limited access by owning Alpies and I also think it should be moved in another thread later on.

We have an ALPACA-BUSD pool that has only 20M TVL but also a good APR.
For what I understood the max size of a 8x AV built on top of it would be of 2M TVL (250K of position value).
By a rough estimate I did, this AV should generate something like 200-300% APR (600-1100% APY on 250k$ => 1.5M - 2.75M).
I’m aware that from the smart contract it’s not possible to effectively short Alpaca in that pool (max 2x leverage) but for this proposal I’m assuming we can create an AV that can ignore this limitation.

I understand that the problem with an AV like that is that it would be limited to a very small TVL and won’t attract a lot of funds.
But what if the purpose of this AV could be to increase Alpies value instead?

I thought 2 possible options for this AV:

a) We create it as a normal AV with access limited by the owning of an Alpie, we estimate a max number of people that could enter considering that not everyone that owns an alpie could be interested into the AVs (eg. 2.5k on 10k) .
At this point each Alpie would grant a space of 250k / 2.5k = 100$ x Alpie with an APY of 600-1100%

b) We create a closed access AV and the alpaca finance team funds the initial 250K needed to max out the 2M TVL.
Then we give the possibility to all Alpies owners to gather all the interests that this pool generates.
I know this can be technically done because I’m aware of another NFT project that did a similar things but with reflections from NFT trading fees.
In alternative we could allow people to stake Alpies and only people who stakes them could earn a portion of the earnings.
That would become an effective way to generate a passive income for Alpies just owning/staking them.

As a result we:
a) Increase the utility and intrinsic value of Alpies
b) Increase the utilization for the alpaca lending pool making it a more appealing option for people that don’t want to lock into the governance vault
c) Increase the liquidity for the Alpaca-BUSD pool by 10% helping to stabilize the price fluctuations a bit, may be more relevant if we decide to make a bigger sized AV.

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Hi, first time contributing to the group discussion on a proposal :slight_smile:

I’ve been around Alpaca for a long(ish) time relative in crypto terms, this is the product that stands out, its the proper USP for the platform something that so far i’ve not seen anywhere else. I think it makes sense to reward Alpaca investors and provide them the best returns ‘reward those with skin in the game’ only fair and a double benefit to Alpaca holders as you can get in the 8* vaults and you also get increased demand for Alpaca token. I think option #1 is fairer and better. Atm I have around 900 xAlapac which i’d want to increase to give me greater exposure to the higher lev vaults, in option 2 i’m basically capped realistically at ‘green tier’ while in option 1 my DCA approach provides me actual benefits and therefore gives me an incentive to hodl and accumulate and stay active in the ecosystem over a longer period of time. This also I think helps with marketing as people can get in still, get good returns and also see a path towards improving their returns if they so wish. If you look at the market this approach is standard - CHSB - lock tokens to get higher APY, NEXO - tiered % of total account balance = higher APY, any of the launch pads tokens etc. etc. etc.

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Hi, I actually think the per vault option is better. If the total is across all vaults using the proposed ratios this means that if you have $20k you’d need to put half in Alpaca and lock up for 1 year to get $10k into AV at 8*, you’re now stuck with half your investment being locked up for a year and you are 50% exposed to market volatility when your goal was ‘market neutrality’ in the first place.
If the limit is a max per vault then you could put $5k into Alpaca and $15k into AV across 3 vaults, or 3k into Alpaca and 17k into 6.5 vaults etc. I can see valid counter arguments but I fear the alternative would mean a lot of potential users being turned off from the higher lev AV’s. Maybe a middle ground is to adjust the ratio to make it more accommodating

Hi Adam,

Welcome to the forum and thanks for the suggestion. I believe your concerned can be addressed by changing the ratio of xALPACA to $ allocaion.

The 2xALPACA = $1 allocation was a starting point for discussion and this is a parameter that the community can vote on.

So, as you suggests in the last sentence, I think across-the-board allocation is better than per vault allocation, but we can vote on the right ratio.

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Thanks for the answer, but I am surprised.

With these new rules in place do you really think that all xAlpaca holders who want to will have time to deposit in x8 VAs without rushing?

Personally, if the conditions remain the same i.e. $1 of xAlpaca = $1 of allocation in AV x8 and $242M (plus or minus 20%) of additional TVL for all AV, I bet you $10k that AV x8 will be sold out in less than 30 minutes after they are re-opened to xAlpaca holders.

So, even if you consider that the AV x8 will be private, how do you plan to notify all xAlpaca holders of their opening?

Personally I think it’s going to be a race and therefore it would be fairer to warn in advance all the people concerned about the day and time of the start. So that everyone can participate under the same conditions.

And if I’m wrong and this pool fills up slowly as you seem to expect, then I’m ready to honor my bet.

Sorry, bad idea. The one who wants a stable investment will not bet on another risky investment. The “half xalpaca - half AV” just like another version of Avalaunch (XAVA) or other launch pad, which has no successful case.

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This is derailing the thread too much here. I suggest adding this into the future Alpies thread

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If it’s for xALPACA-dedicated 8x vaults, I’m not sure how fast the vaults will fill up but we’ll discuss internally regarding how communication should be handled

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I think you are assuming we have unlimited supply or are discussing a product that has a high amount of demand relative to supply, and that’s not the case.

The capacity of Automated Vaults is limited so we do not need to accommodate so many new investors. We can accommodate current ALPACA investors and ones who want to invest by holding ALPACA. That should be enough to fill the capacity. If someone wants to arbitrage purely on market-neutral profits without putting skin in the game, they can invest 3x vaults. It’s still better than the other products on the market. We don’t need their capital in 8x vaults. This is what’s called a seller’s market.

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This discussion has been moved forwarded in the process to an AIP [AIP-6] Limiting Access to Automated Vault

Thank you for all the participation. Please review and continue the discussion in the new thread.

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Great idea. My vote is yes.

Little mea culpa guys,

I was clearly wrong, there is not enough space for everyone by far.
Presently the bottle neck seems to be the BNB lend market on Alpaca.
I’m sure depth will improve with this nice APY for BNB lenders, but for now APY is negative on the AV 8x and people keep their money inside with a strong faith !

You was pointing that eventuality @Velkydemidz and you was right. Nice read.

When Binance has a launchpad, it happens that lending assets pull out to participate in that, which is a temporary phenomenon and we’ve seen it multiple times before. The lending assets always return in less than a week.