Using a Low Inflation Rate to Strenghten the Alpaca Finance Protocol

Hi Gianni,

Thank you for your feedback. I really appreciate it.

Regarding the thesis that the team requires additional funding:

The last two products (Perps & AF2.0) were incentivised with a total of 1,750,000 Alpaca tokens. These incentives were essential to bootstrap liquidity and attract new users. Remember that both products reward liquidity providers by redirecting fees. Fees are only generated when liquidity exists and is used. So there is a chicken-and-egg problem, where external funds are essential to get things going.

One could argue that especially for AF2.0, the bootstrap incentives were not sufficient. There was not enough liquidity to meet the demand generated by the automated vaults. Additional incentives for usdt would have solved this and allowed it to grow faster. The same can be said for perps. Perps has been very successful from a fee perspective. Could additional incentives have made Alpaca Perps the biggest Perps product in the BNB Smart chain?

If we want to launch new products, we will again need to bootstrap liquidity. Even if the team designed the most beautiful product, without a significant incentive structure, the acquisition of liquidity and new users would be too slow.

Regarding the question of whether we already have enough funds (warchest, unspent marketing funds, burn budget)

The management team told us in their last proposal that additional funds would benefit the development & use of new products.

For example, without new tokens being issued, it will be more difficult to attract new users to Alpaca’s new products, which will ultimately cost ALPACA holders because they will not earn the revenue from those users, and it will also make it more difficult for those products to scale. On the contrary, with sufficient token support, the upcoming products will have the best chance of attracting new users from the BNB chain and even other networks, creating the highest revenue potential for ALPACA holders. [For Discussion] Potential adjustment to ALPACA tokenomics to support upcoming (Perp, AF2.0) and future product launches

Most companies have the ability to issue stock to raise funds for new products or growth. At the end of the day, if most shareholders agree issuing for growth will be a net positive to the bottom line, they approve it. This is a reasonable and common approach.
The alternative is also reasonable, and one might have different reasons to vote no to growth, but without those funds, you should expect less growth, lower chance of success of new products, fewer new products, less R&D. [For Discussion] Potential adjustment to ALPACA tokenomics to support upcoming (Perp, AF2.0) and future product launches - #40 by Samsara

So the dev fund portion can make the difference between having some marketing/BD people to grow the products or not, or more devs to develop faster. While it’s true revenues can increase, more revenues also come with more work and more resulting expenses (more customers to support, more tech maintenance, security, and operational oversight, etc) [For Discussion] Potential adjustment to ALPACA tokenomics to support upcoming (Perp, AF2.0) and future product launches - #60 by Samsara

I fully agree with you that it would be preferable to use the funds we currently have before minting new tokens. However, I do not believe that the current funds are sufficient, especially in the longer term.

Sure, the unspent 35K + warchest + burn budget could be enough for development and incentives for another product. But do we want to risk it all for just one more product? I think what we all want is sustainable development and a long term, fully funded roadmap.

If, as you suggest the team does not need the emissions to fund the development of new products, then I trust them to save the funds for a later date.

Why does this proposal have to come from the community and not the management team?

We, the community, voted not to increase the token supply. I believe that the situation has changed since then and that we need to reconsider. As such, it is up to the community to propose it. I value your opinion and that of others, and if it turns out that my desire for a 1-5% inflation rate is not shared by the community, then we can leave it as it is.

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