[For Discussion] Utilization plan for the BUSD conversion fee


As per AIP29, the community has decided to charge a 2% conversion fee on the BUSD deposits in AF1.0. Based on the remaining BUSD balance (9 Million), the fee should be roughly close to 180k USD.

This thread is created for the community to discuss how we should utilize this fund.


To kickstart the discussion, some of the ways we can use the fund include:

  • Distribute to Governance Vault stakers
  • Buyback and burn
  • Fees rebate for traders on Alperp

I would skip the burn and use the funds to attract users in the governance vault as well as in the financial products.

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Would an option be to use the funds to expand to another chain OR to finance/accellerate other features that might be perceived as high risk?


I think solution 1) and 3) are one-off that do not bring much long-term value.

  1. is nice because it helps reduce the circulating supply.
    Other option as mentioned above is use this to go to another chain (Maybe Zksync where Pancake has some traction and where we can expect airdrops)
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I think Alpaca should focus on growth and therefore we should scrape all three options.
Buybacks and burns are happening now as well, they create value, not growth.
Governance definitely use can use higher APY, but again, it will mostly benefit existing stakers and the potential to create new users is limited.
Rebate fees for Perps is the worst idea, unless we want a temporary (smaller) spike of activity there. If we want to kickstart something there, we should start by doing the Trading Competitions, for which 30,000 ALPACA were allocated and were NEVER done because…(fill in excuse here)…
I think we should try to expand to one new chain. Potentially, Arbitrum or maybe Base. Every time this suggestion was raised, the answer always was: “a careful cost-benefit analysis must be done”. Well, let’s do the same analysis with $180k “subtracted” from the cost. The funds can pay for dev time, maintenance costs, buyback of ALPACA tokens to be used later as incentives, etc.
Let’s stop the excuses and do something.


As a recap i would include these extra options:

  1. Expand to new chain (with subsequent vote on which chain)
  2. Implement LYF on CL pools
  3. Form Alpaca treasury/investment fund (and subsequent vote on what token to buy)
  4. Buyback and Burn Alpies
  5. Airdrop to Gov stakers as of AIP vote date (Not to future stakers)
  6. List on Nexo (pay listing fees)

If we end up with many options in the vote, i would also consider shortlisting the top 2 options and then have a subsequent vote on whether to only do the most voted, or to split the budget in 2


I agree 100% with Polka (and options 1-2 from Gianni). I believe that Alpaca Finance can best use the funds to grow the protocol.

At this point it is difficult to decide exactly how the funds should be used. To make this decision I need to know what the team is working on. The funds could be used to bootstrap the expansion into a new chain, but also to one of the secret projects the team is working on.

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Thank you for all the comments so far. Let me address some of them.

1.) Expand to a new chain with our current product line has a very low potential upside in our opinion. And we came to that conclusion by looking at the numbers of similar projects in the space. Let me share the model with you so you can see if you agree with our assumptions and evaluation. (I am cleaning up the model / updating the numbers a bit so it’s understandable and will share it by early next week)

2.) We have looked at many potential products and there is one we believe could have a high enough potential upside to be interesting. We will share a draft of the proposal of this idea soon for the community discuss and give feedback. If there is enough support, we could use the fee to help fund its development.


Thanks HC.

Can we also get your opinion on LYF on CL?

I know leverage on CL can be dangerous, but i also know that LYF is the money maker


I think the upside for LYF on CL is limited.

From our experience managing AVs, it’s not-trivial to make it profitable in the long-run in all market environments. This will put off many retails from participating.

The financial projection model I will share is based on Stella https://stellaxyz.io/. While their platform doesn’t currently offer fully customizable position / range management, I don’t think making it more sophisticated would attract more TVL and users in a meaningful way.


Would it make sense to expand on a new chain with the new product?

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This new product being proposed will be on a new chain


What’s the ETA on the model you mentioned. I can’t wait now to see what it is

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My proposal is:
Add possibility to use AF 2.0 money market liquidity for LYF
Looking at burn source details we see the main driver of burn amount (and gov rewards) is still “AF 1.0” position. Especially when AF 1.0 lending pool usage is high.
We also have lending pools on AF 2.0 money market but there is not enough usage to generate decent revenue.
Considering that:

  • low TVL and generated revenue of AV V3
  • still quite high APY on pancakeswap and biswap v2 (the old ones) farms (today 22nd of Feb there is 85.39% APY for x3long BNB-USDT)
  • no end of support announced for these farms
  • possible high demand longing using LYF in near future

adding LYF for some most popular and profitable pairs (BNB-USDT, CAKE-USDT, BSW-USDT) would attract more users and increase AF 2.0 money market incomes
I think that could be done easy and fast because devs already developed that product - they need change only lending contract.


1.) Following up from my comment above, here is the financial model of what it could look like if we were to expand to Arbitrum. LYF Potential Expansion - Google Sheets

The level of details in this model should give you an idea of magnitude of the protocol revenue we could get.

Key Assumptions

  • TVL based on Stella’s stats as displayed on its UI as of 23 Feb 2024
  • Protocol Revenue assumes using current Alpaca Finance’s fees parameters
  • Base APR% assumes wide range farming configuration
  • Assumes average leverage of 2.5x


  • Activities on Stella, and other major protocols on Arbitrum, are boosted from the Arbitrum Short-Term Incentive Program (STIP), so the estimates here is already on an optimistic case.

2.) I will try to share the proposal for the potential new product by next week.

  1. So if Stella generates 50k on 6.2M TVL(less than 0.8%) and considering the implementation costs, roughly how much TVL would be needed to justify creating LYF on CL pools?

  2. Is the new product idea still aimed at arbitrum?

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1.) I would say getting to the revenue level we are currently generating on BNB Chain is a bare bare minimum. The issue though is that in reality, we are not looking at a “green field” expansion, but we will need to compete with incumbents to win market shares.

2.) It won’t be on Arbitrum. Not trying to be secretive about it but I think it’s better I share all the info in one go with the proposal.


HC, given this will require expanding to a new chain and setting up infrastructure on it, can you also let us know what it would take to then add our current feature set eg perps to that very same chain?

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I’d imagine moslty oracle feeds prices for Perps, no?

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It seems to me that growing/expanding the protocol before the bull market kicks in is a must.

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