[For Discussion] Proposal to Enhance ALPACA On-Chain Liquidity and Incentives Program

Background:

  1. As previously discussed [Strengthen $ALPACA on-chain liquidity before it dries up], there are issues with ALPACA on-chain liquidity.
  2. Liquidity in the ALPACA-BUSD PCSv2 pool has dried up.
  3. The majority of liquidity in PCSv3 is concentrated between 0.17 and 0.22, and half of that ends at 0.34. Furthermore, 50% of the liquidity in PCSv3 pool now is provided by a single user; if this user exits, a significant loss of liquidity will occur.
  4. On-chain liquidity is insufficient for ALPACA buyback; for instance, this week, we did our ALPACA buyback at Binance.
  5. There is a lack of effective incentives to attract users to provide liquidity.

Voting Phases:
We can have the proposal divided into 3 voting stages.

  1. Adjustment of Buyback Mechanism:

    • Stop using total regular revenue for weekly buyback and burning; instead, use half of it to buy back ALPACA, and add liquidity to ALPACA-USDT PCSv2 LP as reserves or incentives.
    • Note: irregular revenue, such as liquidation, early withdrawal, or others will be excluded in this adjustment
  2. Use ALPACA-USDT PCSv2 LP for Incentives:

    • Decide whether to use PCSv2 LP for incentives to attract more users.
  3. Choice of Incentive Mechanism:

    • Choose one of the following incentive methods.

Incentive Mechanisms:

  1. Direct PCSv2 Incentives:

    • ALPACA-USDT PCSv2 LP will be fed weekly to a reward pool, and will be distributed linearly over the 12 weeks (similar to ALP staking).
    • Pros:
      • Rewards are instantly claimable.
    • Cons:
      • 12 weeks of linear distribution to get to full APR.
  2. xPCSv2-LP Lockup Incentives:

    • Similar to xALPACAv2, PCSv2-LP will be unlocked after a 12-week xPCSv2-LP lockup period.
      ⁃ Users can withdraw their locked reward earlier, but they need to pay a fixed 50% penalty.
      ⁃ When user chooses to withdraw their locked ALPACA-USDT PCSv2-LP earlier, we will break the LP to 50% USDT and 50% ALPACA. USDT will go to the user and ALPACA will go to weekly burn as the penalty

    • Pros:

      • Full APR is visible from the first week.
      • Enables a fixed 50% penalty for early withdrawal (unlocking PCSv2 LP without receiving ALPACA), equivalent to half APR.
    • Cons:

      • Establishing liquidity may be challenging if most users opt for early withdrawal.

All of your feedback and votes on each phase of this proposal are crucial for the enhancement of ALPACA’s liquidity and user engagement.


背景:

  1. 正如先前所討論的 [Strengthen $ALPACA on-chain liquidity before it dries up],有一些鏈上流動性的問題。
  2. ALPACA-BUSD PCSv2 池的流動性已經枯竭。
  3. PCSv3 中的大部分流動性集中在 0.17 到 0.22 之間,其中一半在 0.34 結束。此外,50% 的流動性由單一用戶提供;若此用戶退出,將導致重大流動性損失。
  4. 鏈上流動性不足以進行回購;本週我們在幣安進行了回購。
  5. 缺乏有效的激勵手段來吸引用戶。

投票階段:
該提案分為三個階段。

  1. 調整回購機制:

    • 停止使用全部固定收入進行回購和燃燒;改為使用其中一半回購ALPACA,並與另一半組成流動性到ALPACA-USDT PCSv2 LP中,作為儲備或激勵。
    • 註:本次調整排除非固定收入,如清算、提前提領或其他。
  2. 使用ALPACA-USDT PCSv2 LP進行激勵:

    • 決定是否使用PCSv2 LP進行激勵以吸引更多用戶。
  3. 激勵機制選擇:

    • 選擇以下其中一種激勵方法。

激勵機制:

  1. 直接PCSv2激勵:

    • PCSv2 LP每週將被注入獎勵池,並在12周內線性分配(類似ALP質押)。
    • 優勢:
      • 獎勵可立即領取。
    • 劣勢:
      • 完整的APR需等待12周的累積。
  2. xPCSv2-LP鎖定激勵:

    • 與xALPACAv2類似,PCSv2-LP將在12週的xPCSv2-LP鎖定期後解鎖。
      ‐ 用戶可以提前提取鎖定獎勵,但需要支付固定的50%罰金。
    • 當使用者選擇提前提取鎖定的 ALPACA-USDT PCSv2-LP 時,我們會將 LP 拆成 50% USDT 和 50% ALPACA。 USDT 將歸用戶所有,ALPACA 將進行每週銷毀作為懲罰
    • 優勢:
      • 完整的APR在第一周即可查看。
    • 劣勢:
      • 如果大多數用戶選擇提前提領,建立流動性可能會有挑戰。

您對該提案每個階段的反饋和投票對於增強ALPACA的流動性和用戶參與至關重要。


7 Likes

I propose that we levy Alpaca’s strength, the AVv3 technology. A conservatively managed pool to which only the Alpaca protocol can deposit. Profitability is not the main aim, and any proceeds would automatically be re-invested. Also, use all regular burn sources.

I will write a longer reply at some point, but wanted to ask one question before that. Was on-chain liquidity really insufficient to buy 10000 ALPACA from regular sources? Or were there some Liquidation funds that needed to be swapped too?

The on-chain liquidity between $0.17 and $0.22 is barely sufficient now, but because most of liquidity is from 1% fee pool, so the price much higher than binance
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1 Like

Imo, that’s not such a large loss, but ok.

What’s the reason for putting the liquidity in PCS v2 instead of v3 with wider range?

Don’t need to manage the v3 price range, and v3 don’t have token that can be used as incentive.

1 Like

Wdym? We can stake the v3 liquidity for Cake.

And our AV product is designed to manage liquidity, so in my mind we are just making the most of our existing solutions. Is that a bad idea?

  1. We don’t need to compete with other users for CAKE rewards, they can help us strengthen liquidity
  2. v3 management is extremely difficult, especially the main purpose of AV is not to enhance liquidity. If you just want to make money, you can propose to invest the revenue directly into the existing AV instead of increasing the management burden.
  3. v2 LP token can be directly used as incentives, but v3 NFT can not do this.

Chin - out of curiosity, what happens if we do nothing and liquidity does somewhat dry up?

  1. Buyback on chain will have a huge cost
  2. The risk of listing on lending protocol will be high
  3. Users who do not use CEX will be difficult to swap

I believe it would be a huge vote of no confidence in our primary product if even Alpaca Finance itself does not use AVv3.

Thanks for your posts guys. I`d like to poke at these a little bit to first establish there is a problem worth caring about.

  1. We can buyback off-chain. This is what we did at first and a few people complained, but so what? It`s not worth wasting rewards and creating a liquidity campaign for this.

  2. Seems extremely unlikely there will be some opportunity for this on BNB Chain in the short-midterm future

  3. How many users are there like that? My impression has been that these days, almost all BNB Chain users have an account on Binance or another CEX where ALPACA is listed.

3 Likes

I took some time to think about this and to be honest, I have reached sinilar conclusions to Sam.
I think V3 liquidity is doing ok without Alpaca Finance doing much about it. I have been providing V3 liquidity in the ALPACA-USDT pair and this is what I see:

  1. the APR is usually very good without extra incentives. CAKE rewards are way less than trading fees anyway. People will be providing liquidity in the future as well, because of rhe 1% pool fee and the reasonably high volume for now.
  2. The PCS V3 pool is used by a lot of arbitrage bots that react to the price change on Binance (mostly) and create the volumes mentioned in 1). If those stop to operate, this may dry up liquudity as the APRs will go down. We can simply monitor the APR in the pool and react only if it falls bellow acceptable levels.
  3. due to the bots mentioned in 2), the V3 pool is technically an extension of the CEX, but just on-chain. Regular users use it only for small purchases. Last time I neeeded to swap 18k ALPACA, I went to Binance. I think this wasn’t a big inconvenience and I am not sure how many people do not have an account there (as Sam said). I don’t think we have than many users from the US, for example.
    Thus, I am not sure how much value this liquidity provision will have in terms of acquiring new users. I see it’s appeal as a money making tool for the protocol (farming instead of burning), but that’s about it.
    Finally, people seem to love the burns even if many complain that there is no immediate effect on the price. I think if we’re going to reduce them, we should have a better reason than this.

P.S. Thank you Chin for this proposal, the Dune dashboards, and all the wonderful work you are doing!

1 Like

Moving the liquidity to Thena and bribing should also be considered. They would probably give some bootstrap incentives as well, they’ve been doing that for other protocols.