[For Discussion] Potential adjustment to ALPACA tokenomics to support upcoming (Perp, AF2.0) and future product launches

I didn’t dismiss your comment. I agreed with you that it can be considered.

What you’re saying now is you think it shouldn’t be a separate vote but included as an item in this vote, should this proposal go to a vote. Maybe that’s fine, but I’d still like this topic to be in a separate thread because this thread is too cluttered. Ok?

The question isn’t what will LPs earn, it’s how do we attract LPs and traders from existing incumbents? Why should they use us instead of what they are already using? See my post here on Switching Costs

Both GMX and dydx did this through incentives, same with Compound, Aave, Venus, same with Alpaca LYF.

So you want to say to not have incentives to attract new users, ok, we can try, but we know for a fact that it will be harder. If it doesn’t work well, you’ll cost yourself in missed revenues. Then don’t complain it’s due to a lack of marketing when we didn’t have the funds for marketing because you didn’t want to consider supporting new products’ growth.

Thank you ___________________________

Sam thanks for taking the time to respond to some of our posts. I’ve read a few of your responses, but like you said above, it may in fact be harder to attract new users without incentives, but why not try first that way. What if a miracle happens and we manage to attract users just because of our brand, and how safe alpaca finance has been since inception. If we struggle to get new users, then we get back to the drawing board. But why jeopardize the core value of Alpaca being the best deflationary token in defi (in my opinion) just because we are not sure if launching new products without incentives will be good enough.

Also there have been several other posts from the likes of Gianni and me where we suggest directing some or all burn/liquidation fees towards incentives for the new products. These weekly amounts are good chucks, I would imagine it would be some good incentives to get the new products started.


One thing I want to clarify. I, and the rest of the core team, don’t care which direction this vote goes in, or if it doesn’t go to a vote.

The 9% proposed from dev fund is not going to make anyone rich. It will cover salaries for the necessary people if we’re lucky.

We also have ALPACA that would be “diluted” even though most of the new tokens would be locked up.

We just think more funding to support new products, R&D, and growth will be net positive for xALPACA holders, because it will generate more revenue than new supply. We did not raise investment to fund such growth. If the community disagrees, so be it. But understand that without the funds to support it, it means there will be much less support for product growth, new products, R&D, etc.

Finally, if you didn’t, please read the entire original post before posting here. It’s not fair to force us to reply to messages that clearly did not read all the relevant info.

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Sam thanks for taking the time to respond to some of our posts. I’ve read a few of your responses, but like you said above, it may in fact be harder to attract new users without incentives, but why not try first that way.

Early success is very important unless your product is significantly better than the competitors (then it can steadily grow over time); Such technical superiority can be argued for AF2.0 in a complete sense, but not necessarily individual use cases, so it’s still safer to actively support early growth. Unfortunately, many users in crypto have a perception that if a product is not successful in the beginning, it’s a failure. We’ve seen this with AUSD. Furthermore, lack of early growth and lack of funds means no funds to drive development, not just marketing.

Can be considered.

Thanks again for replying and points well taken.

Based on your “can be considered” statement, can the team add another option for some sort of redirecting burn/liquidation fees towards incentives for the new products. At some point in march we stop emissions so burnings are not as critical anymore. Yes they would be ideal, but even if we just left a very tiny percentage for burning, it would mean alpaca is still deflationary. The rest can move directed towards incentives for the new products. I think an option like this would have a lot more traction with true long term holders of alpaca token. I don’t know the exact numbers, but i think someone in the team could do some math and add a new option to the proposal.

I think this is unfair. We’re a fair launch project. We didn’t take VC funding. 87% of tokens went to users. You can say a tokenomics modification wasn’t in the plan 2 years ago, but in this poor market, no one forced us to create new products either, right?

Launching a Perp exchange and Alpaca Finance 2.0, which are full of innovations and can drive new revenues to xALPACA, isn’t cheap, nor will marketing for these come from thin air. People need to eat, marketing has fees, new users want incentives.

In an environment that’s full of projects going out of business, firing people, doing soft rugs, and secretly moonlighting as multiple teams without communicating anything to the holders, we’ve been innovating for ALPACA holders. You can say that you still prefer no tokenomics change, which is fine, but this response you sent and some of the others today will make one of the few honest teams, the people working hard for you, feel cold.

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Thanks, I’ll bring it up internally first.

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We will discuss this, thank you

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Also devs are getting more than %50 of lyf revenue

That’s incorrect. All Alpaca products accrue a majority of revenue to ALPACA holders either directly through governance or through burn.

If you mean Warchest, that does not go to devs. You can read uses in the post at the top of this thread.

I think this approach isn’t unreasonable. Actually, this is sort of what we’re roughly considering as Option 4. The issue is that Warchest is limited. It was meant for only 4 years. Maybe it’s enough for early support to 1-2 initiatives, what about after that?

Revenue can help, but more revenue comes with more costs, and you have to share most of it with LPs. It’s difficult outside of a bull market.

As for launching a new token later, after it fails to get traction, I think that will be difficult. Let’s imagine what that will look like. The product is struggling to get traction, and so we launch a new token for it, will it have a good price on the market or get big listings? I think it will be difficult. Maybe extended emissions of ALPACA will work though.

I haven’t seen the evidence you suggested, but I agree if done poorly, a tokenomics change can hurt. However, I think it might be hard to separate all the variables at play in failure to conclude that. These variable include market conditions, quality of product and team, how they went about changing tokenomics (probably not a simple extension), etc. I think if you showed me most of those examples, it’s more likely they were running easy-to-copy forks of Pancakeswap, OHM, Compound, which was the fundamental problem.


Most of our ALPACA has been locked as xALPACA since the beginning and continues to be so.

If you mean for the token extension, it’s because those would mainly go toward staff salaries, and they can’t pay bills with locked tokens.

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I am unsure about #1 and #2 for the following reasons:

  • Conversion from ALPACA to ALPACAv2 will most likely be seen as a taxable event.
  • ALPACA was meant to be deflationary from the start, it might damage our reputation.

Now, what if we took a page from BNB’s playbook (fully deflationary token, used for BSC fees) and we:

  • require some kind of fee payable in ALPACA to open/close positions on the PERP exchange.
  • redirect a portion of the governance revenue to pay for bootstrapping the Perp exchange until critical mass is achieved.

Just my 2 cents, otherwise I think I prefer option #4 but i’ll have to think about it some more.

  • Conversion from ALPACA to ALPACAv2 will most likely be seen as a taxable event.

Are you sure? I’m skeptical. It’s surely region-specific but I would want a specialist to confirm that. I think there are certain rules like trading between stablecoins is not a taxable event, so this seems similar.

I fully agree that new users should be incentivised for the product launch. The problem is we do not have a growth fund available to cover those costs. It’s also understandable that most investors would be upset about raising funds through dilution, which is just taking money from investors who believed to invest into a self-sustaining platform, even when promising increased future returns.
That’s why I think we should look into establishing a growth fund from our revenue streams so that in the future, the cost of incentivising product launches can be calculated.

Now for raising funds for the upcoming product launch, I believe it can be funded by the warchest. IMO it is not justified to raise funds by issuing a new token while there are still enough funds available in the warchest. This would also be a one-time expense if we can get a growth fund going, and still leave funds in the warchest for future expenses.

If developer funding is a problem, as Sam mentioned, I believe it deserves its own discussion. Keeping the amazing rate of innovation ALPACA currently has is just as important as attracting new users. That’s why I propose to include the team in incentives for successful product launches.
One way I can think of how this could be done is by using KPI options. That way incentives increase depending on the success of the launch measured by a defined KPI.
Example: You could use the revenue generated by the new Perp product as the KPI and issue KPI options with a period of 6 months to the team and to new users. If the target revenue is met within 6 months, the maximum amount of incentives will be distributed. If the target is not met, only part of the incentives will be distributed.
This way not only LPs will be promoted, but the actual usage of the platform as well as the development of a successful product.

With that said, I will be voting for Option #4 as long as there is no good evidence that the funds in the warchest are insufficient for the product launch incentive.


Say we were to go the way of approach #1 would some of these incentives go towards growing AUSD?

Can you expand on where these liquidity mining incentives would go?

I assume all the burning mechanisms would still exist, right? Would we still be emission neutral?

TBD. I think some could go to AUSD, yes, since that’s one of the products. Of course, we’d want to build out more use cases.

The incentives would go where they have the most impact. They’d mainly go towards new products, and some towards existing products. For example, lending and LYF will get a complete makeover with AF2.0, and are worth incentivizing so as to get new users to try the new ways to use them.

Burning would still exist. Emissions could be neutral if revenue increases some from the new products. We’re not talking about significantly increasing emissions, it’s a 10-year schedule.

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In business, reputation is also important; Users trust the product because although the profit is small, it is not hacked because we have many audits or even if it is hacked elsewhere, it is also adequately compensated. it is also an advantage. be careful, it’s not worth the trade-off.

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? Then where is going of left fees???

10% of the 19% performance fees for yield farming positions on the single-asset CAKE vault is distributed as Protocol APR to ALPACA governance vault depositors.

10% of 19% of the lending interest that lenders earn goes towards buybacks and burns of the ALPACA token.

  • 2.5% of 5% royalty fees on Alpie NFTs sold in the secondary market go to ALPACA buyback & burn.

  • 5% of 9% of Auto-Farming Performance Fee, which is from rewards earned from farming the collateralized assets in AUSD positions in Alpaca Staking (and potentially external protocols in the future), is used for buyback & burn.

  • 1% of 2% of Stability Fee charged on each AUSD debt position will be used for buyback & burn.

  • 5% of 9% of Farming Performance Fee, which is from yield farming rewards, is used for ALPACA buyback and distributed as performance fee sharing to Governance Vault stakers (as Protocol APR).

  • 8% of 15% of AV Farming Performance Fee, which is from yield farming rewards in Automated Vaults, is used for ALPACA buyback and distributed as performance fee sharing to Governance Vault stakers (as Protocol APR).

  • 8% of 15% of AV ALPACA Rewards Performance Fee, which is from ALPACA rewards on yield farming positions in Automated Vaults, is used for ALPACA buyback and distributed as performance fee sharing to Governance Vault stakers (as Protocol APR).

  • 1% of 2% of AV Management Fee, which is the management fee on Automated Vaults, goes towards weekly buybacks and burns of the ALPACA token.

  • .1% of .2% of AV Withdrawal Fee, which is the fee when withdrawing from an Automated Vault, goes towards weekly buybacks and burns of the ALPACA token.

Where left ones going if its not going to dev?