Dear xALPACA holders,
Fellow Alpacas salute you.
We’re calling on you to help us with our petition to introduce a new proposal that would change the course set by AIP-12, which activated the insurance plan to address the bad debt resulting from the Ankr BNB (aBNBc) exploit that occurred on December 2, 2022.
Background information:
As many of you are aware, on December 2, there was an exploit on Ankr BNB (aBNBc) which caused a temporary depeg of stkBNB’s price, due to the dumping of aBNBc in pools shared with stkBNB on other protocols, which allowed the exploiter to drain stkBNB and subsequently sell it in other pools.
Alpaca Guard worked as intended and managed to save a noteworthy % of positions from liquidation. However, due to the extent and duration of the depeg, some LYF positions on the stkBNB-BNB pairs were still liquidated, and the platform incurred some bad debt.
At the time of the event, we put up a vote to activate the Insurance Plan, and the community voted “YES.”
Since then, we have been repaying the insurance premium by taxing 50% of the governance vault’s rewards.
You can find more information here: [AIP-12] Handling of bad debt from the recent stkBNB's depeg
Why now?
Since the activation of the insurance plan to address the bad debt resulting from the Ankr BNB (aBNBc) exploit, we have been monitoring its impact on the protocol.
After six months, we have gathered enough data and have enough insight in how the market has changed to take adequate action.
Furthermore, we have received feedback from the community expressing concerns about the impact of the insurance plan on our Governance Vault product and proposition.
This proposal comes at the right time as, with the launch of our new Perp product, AF2.0 and AV3 we want to attract as many new investors as possible while also ensuring the confidence and support of our existing community.
By addressing the concerns and issues raised by the community, we believe that we can move forward and continue to grow the platform in a sustainable way.
Rationale for a new vote:
1. Significant lower appeal for our Governance Vault product and proposition:
- Following the vote, the APY% of our vault dropped from 10%+ to 3-5%. This APY% is currently offered by TradFi (you might have seen Apple offers 4%) making our value proposition less appealing. Simply put, people won’t go through the effort of discovering Alpaca and locking for 12 months for pretty much the same ROI
- We have observed a decrease in the number of tokens locked in our Governance Vault, from approximately 78 million tokens to around 60 million tokens, a decrease of approximately 23%.
- Additionally, we have seen a decrease in the number of unique investors staking, from approximately 4,000 investors to around 2,300 investors, a decrease of approximately 43%.
- These statistics suggest that the community’s confidence in our platform has been impacted by the hack, and that there is less demand for our Governance Vault product than before.
2. The fact that the hack had nothing to do with our protocol:
- We believe the proposal shouldn’t have been voted on in the first place
- The hack was due to the exploitation of a third-party contract and not our protocol.
- It is unfair to burden our community with the cost of another platform’s security failure, especially given that we have taken measures to improve the security of our own protocol since the incident.
3. The fact that we are not necessarily repaying the affected people as they might have moved their funds:
- While we understand that the affected users have suffered losses, it is possible that some of them have already moved their funds and may not benefit from our repayment efforts.
- It is important to consider the practicality and effectiveness of the repayment plan, and that it may not be the best use of our community’s resources to repay individuals who are no longer part of our ecosystem
Voting options:
This section can be evolved with other ideas put forward by the community
1. Stop repaying the bad debt altogether!
→ This option completely reverts the previous vote and puts an end to the repayment
- Pros: No additional cost to the platform or its community, potentially higher APY% for the Governance Vault.
- Cons: Affected users may feel that they have not been adequately compensated, which could lead to loss of trust and confidence in the platform.
2. Only repay the investors who are still part of the ecosystem!
→ this option involves looking at the wallets that were lending BNB at the time and are still lending and airdrop a repayment to their wallet in a single payment (for example using the left over funds from [For Discussion] - Handling of extra ALPACA tokens from the AIP-15 incentives)
- Pros: Provides direct compensation to affected users who are still part of the ecosystem, which could help restore their trust and confidence in the platform.
- Cons: Need to decide how we are going to repay them and acknowledge that it might impact the alpaca token price temporarily
3. Continue to repay the debt but significantly reduce the tax burden on investors!
→ This option involves reducing the tax rate from 50% to a smaller amount, like 16.5% (1/3 of the current amount)
- Pros: Continues to provide compensation to affected users, but with less impact on the APY% of the Governance Vault, which could help retain and attract new users. This also would mitigate the optics of “changing a previous vote”
- Cons: Could take longer to fully repay the debt, potentially leading to ongoing concerns from affected users about the speed and effectiveness of the repayment plan.
Next steps
- If you believe this could be a good idea, please upvote and comment.
Once enough people have shown support, the official alpaca team will be able to progress this via the typical governance - If you have ideas or other voting options/solutions, please comment and I’ll incorporate
