Proposal for automated and transparent burns

Community Discussion & Proposal
1

Before I start, let me make a little clarification. I consider a transparent mechanism to be the mechanism in which there are rules on exactly how much we burn each week (even randomly). Below I will tell you how to recreate such a mechanism

1. Summary: I propose to create a transparent and at the same time RANDOM Alpaca burn tokens mechanism

2. Abstract: In my opinion, Alpaca really lacks a transparent burn mechanism. This would give investors confidence that there will be fewer and fewer offers on the market, and the number of their tokens in percentage ratio will grow not only because of the payments in governance, but also because of larger-scale burning

3. Overview: To provide protection against sandwich attacks, I propose the following formula for burning TotalBurn = 15-30% of the amount in the alpaca burning wallet, but > than the emission of tokens this week. If the funds on the burning wallet are not enough to cover the emission, then we randomly use from 50 to 80% of the funds on the burning wallet

The percentage ratio is necessary for two reasons:

  • protection from sandwich attacks

  • we will always have funds in our wallet

4. Motivation: For many of you, it may seem that I am interested in the pump of the token price, but this is not the case. A year ago, when I decided to invest in Alpaca, the project ignited me with its transparency. The more Alpaca team earned, the more its holders earned through burning. I have been observing the situation for a whole year that even without the additional purchase of new Alpaca tokens, my percentage of the entire supply is becoming more and more due to burning. And I was happy about it, and I don’t think I was the only one.

Sam, I remember your words that Alpaca will ALWAYS burn tokens, even when the emission stops

These are very important words for investors, but now I am concerned about the situation in which we started burning exactly as many tokens as needed to cover the emission

But in February 2023 we will stop issuing tokens and then there is a chance that we will burn only 888 Alpaca a week to be able to say that we are deflationary

Such a mechanism, which I propose, will allow investors to gain confidence that the team will really continue to burn tokens and will do it in large quantities, depending on the income of the platform itself

The more Alpaca service earn — the more we burn each week

The more Alpaca earns, the more funds we will be able to spend on burning and reduce the number of tokens in circulation on exchanges. This will reduce supply, but increase demand, as we will be a mega deflationary token with a strong fundamental. And this, in turn, will increase the value of the token (lower supply and higher demand leads to an increase in the value of the asset)

I propose to conduct a survey in 3 stages:

  1. Here under this post we will decide whether we need a transparent burning mechanism that will burn tokens as a percentage, but at the same time will do it RANDOMLY and gradually over the course of a week (to protect against sandwich attacks)

  2. At the second stage, we will conduct an AIP for holders, whether to make a similar mechanism or not

  3. At the third stage, we will determine the percentage ratio, which share of the funds we will spend from the wallet for burning Alpacas

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2

Sir, donalpaca. I didn’t even know that the rules for burning were revised. I fullest support your proposal and consider it very necessary for the future economy of ALPACA.

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3

Donalpaca, the rules for burning were never revised and the way the team currently does buyback and burn of Alpaca token is consistent regardless of market conditions. No one can predict the market and I’m currently very comfortable with the current burning mechanism.

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4

You didn’t know because the rules were never changed.

5

Of course it was revised. Previously, we burned everything we had on the burning wallet, which is replenished with Alpaca income. Now we burn only 10% of the amount of this wallet

6

I will ask you not to mislead

7

Again, i’ll point out that the burning mechanism was not revised. we burned everything in the treasury wallet because the funds was too small to cause a spike in Alpaca price. But suggestion we spend 80% of 1 million dollars to burn the token at once will definitely cause a spike in the token and arbitrage bots will profit.

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8

You should read proposal again. Donalpaca does not offer to burn everything now.

IMO that is amazing proposal

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9

1.) Your choice of word, transparent burn, is not accurate and very misleading to the community.

We have a proof of burn page w/ all the historical burn records with all the detailed breakdown on various dimensions which get updated on a weekly basis. Proof of Burn - Alpaca Finance

Please change it to the burn “mechanics” or some other words

2.) Alpaca Revenue come from various sources as mentioned in the Proof of Burn page, and it’s ALWAYS been the case that we use all the income sources to buyback and burn ALPACA.

  • For example, there has NEVER been a case where we only use a portion of lending performance fee that week to buyback ALPACA and reserve a portion for later on.

The only exception would be income from liquidation where, at a certain time, can be in the 7 figures. In which case, it’s more appropriate to spread out the buy over time, as that creates the most value for long-term holders.

If you would like to suggest / discuss of how to handle the burn from liquidation, then we can do it but please change your post accordingly.

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I have and like I said, transparency isn’t even in doubt here.

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My proposal concerns not only the liquidation wallet, but also all other types of Alpaca income that we previously used for burns

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Which part of your proposal is directing to burning from the main revenue (ie: not liquidation wallet) ? Because it seems like it’s only referring to liquidation wallet.

Additionally there isn’t a burn wallet where the alpaca are being held until it’s to burn.

13

If you want to propose to keep all the liquidity that needs to be burned in a single wallet I think it’s a totally different proposal and should have another thread.
The burn mechanics are unrelated to where these funds are stored.

14

Please read my reply.

Liquidation income is the only sources where we do a buyback overtime.

For other income sources, we use up the entire amount.

Again, please change your wording "transparency"

15

This word is not only used for scans. You are transparent when we talk about showing the amount of tokens burned, but not transparent enough in terms of how much we will burn even after emission stops

16

The current burning mechanism will still apply when emissions run out!

17

Yep, as people said above there were no strict rules considering burnings before. But I think that it is the very reason why such mechanism should be implemented. We, plain tokenholders, don’t have any real control over the project which is well-maintained by team.
So at least I want the team to be as much as possible to be open and transparent about cash flows and thus buyback mechanisms or rules.

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18

Lets divide your proposal to a small digestible pieces.

  1. How current system works now.
    In order to change current system we need to know how current system works.

Your core question is how liquidation treasury is treated, right?
You want to know how it is operated now and what set of rules or stratedy team is using, right?

HC earlier said that revenue from all sources is used for buyback and burn.
Only exception is liquidation treasury which is beneficial to use partially.

  1. How you want to change system?
    Is clarifying logic behind liquidation treasury enough for you?
    If no, please elaborate on what rules there should be?

Do you want to change those rules only?
Do you want to change buyback mechanism?
Do you want to change burning mechanism?

I want to see exact measures, for example like this:
“If there is not enough money to achieve deflation then add money from liquidation treasury to achieve it.
If there is enough money to achieve deflation from revenue sources, then we should or shouldn’t use X±Y amount of liquidation funds and if we use them this is the reason why…”.

  1. What is target system mechanism?
    Is it just a set of rules or a smart contract?

  2. What is benefit in changing those systems?
    I would love to see calculations comparison with real data, like “before and after”.
    Is there any benefit in that at all?

Right now your proposal is not clear for me and I would love to read your clarification on topics I mentioned above.

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For anyone that hasn’t seen it, there’s this, where we added sections on Buyback Timing and Burn Timing, the latter of which involves the topic of this thread: https://docs.alpacafinance.org/help-center/faqs#why-are-there-funds-in-the-liquidation-treasury-that-have-not-yet-been-used-for-buyback-and-burn-why

It sounds like you’re asking for 2 things:

  1. Clear language on the calculation for how much is burned.
    In the above faq link, the burn rate section implies how this works. However, I will try to make this clearer now in the docs.

  2. Changing burn to randomly burn some more every week.
    You did not specify what benefit this would provide long-term ALPACA holders now and I don’t see what that would be. However, once burn from revenue surpasses minted ALPACA, we can consider something like burning a certain amount from liquidation treasury on a weekly basis, though it will probably be a flat value rather than %, such as 100k-250k

Here is what I’ve just done:

  1. Added “At what rate do you buyback&burn ALPACA?” Updated Burn Timing/Rate section with more info: GitBook

  2. Added the above links to the Burn page so the info is easier to find: https://docs.alpacafinance.org/tokenomics/proof-of-burn#how-does-buyback-and-burn-work

As described in that link, it’s a simple set of rules regarding how much to burn from liquidation treasury. Let me know if you’re still unclear about anything.

Regarding how much to burn from liquidation treasury once minting significantly reduces, I think we can consider that in 9-12 months but I’ll propose something like up to 100-250k from liquidation treasury per week.

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Alpaca is very transparent yet burning is centralized.
I understand your point, but I think your issue is more based on centralization than transparency.

let say in the future the liquidation treasury is a contract where any team member or let say “trusted community members” can initiate a buy / burn. I think there is already a “trusted group” but I can’t find a clear list of this on this forum nor the docs.
I think to decentralize burns using a contract is very exploitable. You’ll need a contract which allows buy / and burn mechanism but not be predictable. You’ll need to limit the amount that can be burned at one time in dollar value. Let say you randomize the block height when a new burn can happen, then still the blockchain is open for everyone and it still will be exploitable.

I think the best option is to use a multi sig wallet where only team members and “trusted community members” have access to and can initiate burns.

Conclusion: decentralization can be done using contracts in other words automated burns. But to prevent corruption it’s best to let governance (“trusted community members”) AKA real people decide using a multi sig wallet.

I hope I made some sense here :wink:

1 Like