Alpaca Finance is the largest lending protocol allowing leveraged yield farming on Binance Smart Chain. It helps lenders earn safe and stable yields, and offers borrowers undercollateralized loans for leveraged yield farming positions, vastly multiplying their farming principals and resulting profits.
As an enabler for the entire DeFi ecosystem, Alpaca amplifies the liquidity layer of integrated exchanges, improving their capital efficiency by connecting LP borrowers and lenders. It's through this empowering function that Alpaca has become a fundamental building block within DeFi, helping bring the power of finance to each and every person's fingertips, and every alpaca's paw...
Furthermore, alpacas are a virtuous breed. That’s why, we are a fair-launch project with no pre-sale, no investor, and no pre-mine. So from the beginning, this has always been a product built by the people, for the people. Or as we like to say: by the alpacas, for the alpacas.
Yield farming is an innovative DeFi concept where users stake or lend their crypto assets, providing liquidity in order to receive returns.
Leverage results from using borrowed capital to expand your asset base and the potential returns on that asset base. In other words, you borrow funds so you can invest more, and as a result--earn more.
In the context of yield farming, leverage involves borrowing assets to multiply your yield farming position, resulting in you accruing larger yields. This is a general profit maximization strategy. More on leveraged yield farming: https://thedefiant.io/leveraged-yield-farming/
That’s a great question! In fact, you should always try to understand where the yield comes from in each DeFi project.
In Alpaca Finance, the source of your yield will depend on how you participate in the protocol:
As a lender, your yield comes from:
Interest paid by borrowers to open leveraged yield farming positions (Interest rate is based on lending pool utilization).
Incentive rewards paid in ALPACA.
Incentive rewards paid in tokens of platform partners (in featured pools).
As a yield farmer, your yield comes from:
Yield farming incentive rewards from the AMM, if applicable - i.e. CAKE tokens from PCS.
Underlying trading fees of the pool - i.e. trading fees from the PancakeSwap pools.
Incentive rewards paid in ALPACA (only if you have a leveraged position).
You can participate in Alpaca Finance in three ways:
💵 Lender: You can earn safe and stable returns on your tokens by depositing them into our lending vaults. These assets are then offered to yield farmers for leveraging up their positions.
👨🌾 Yield farmer: You can borrow tokens from our lending vaults, allowing you to open a leveraged farming position, multiplying your farming APR by up to 6x(minus borrowing interest). Of course, these higher yields come with larger risks than lending: liquidation, impermanent loss, etc.
🚨 Liquidator: Monitors the pool for leveraged farming positions with Safety Buffers at 0(when equity collateral becomes too low, thus approaching risk of default) and liquidates them. (Bots only)
In short, yes. Within the BSC community, Alpaca Finance is widely regarded as one of the most secure platforms because of our spotless track record of never having had a security issue, and our multi-layered security processes, which you can read below:
We’ve had 11 security audits which is one of the highest amounts for any project on BSC, from top firms such as PeckShield, Certik, Inspex, and SlowMist.
Regarding the ALPACA token, we've made it as dump-proof as possible. Our ALPACA token is fair launch, with 87% of total supply going to platform participants. The team is only getting less than 9% of tokens, and that’s vested over 2 years. We also had no presale, no pre-mine, and no investors, so there’s no one to dump on token holders.
Then, besides extensive code reviews having been conducted both internally and externally, there are also built-in safeguards in place. For example, all the contracts we deploy are owned by a Timelock contract. Thus, any changes made by our developers will have a 24-hour lag before becoming effective. That means users will have ample time to withdraw their funds and exit safely in the case of any questionable update to the code. With tens of thousands of users, you can believe that every small change is under constant scrutiny from many participants. At times, it's a tough job dealing with all their questions, but it's honest work. 👨🌾
Regarding flash loans, Alpaca does not allow them so you will be safe from all such attacks.
Then for price manipulation and flash liquidation, Alpaca integrates Chainlink price feeds and also has an in-house Alpaca Guard which prevents those.
Finally, we make efforts not only to secure our own protocol, but also the entire ecosystem. That's why we only work with projects that meet our high standards for safety. Every project we work with has to pass our Security Scorecard, a type of qualitative audit that complements code audits.
As a final word, even with everything we do, users should still educate themselves. It's important to be aware of the potential risks of participating in any DeFi project, which you can read more about here.
No, Alpaca is only EOA which means it does not allow flash loans to interact with the protocol. This makes flash loan attacks impossible.
No, only borrowers that use leverage can be liquidated if price moves too far against them.
It's extremely unlikely. Alpaca uses conservative liquidation thresholds which protects lenders. The protocol also has numerous additional security layers including Chainlink price feeds, our Alpaca Guard to prevent price manipulation, and the total prevention of flash loans through only EOA.
Yes, we've had 11 audits as of 8/21/21 which should be the highest number on BSC and more than the majority of Eth protocols.
ALPACA token is the central token for governing and capturing the value of the Alpaca Finance platform. The benefits of holding the token are listed below:
We will let the community decide how they want the economic incentives to be captured by the ALPACA token ; For example, it could be similar to Sushiswap where x% of fees generated go to perform token buyback and burn. At the moment though, there are already several mechanisms in place for both performance fee sharing and for making ALPACA deflationary in nature.
10% of the 19% performance fees for yield farming positions on the single-asset CAKE vault is distributed as Protocol APR to ALPACA lending depositors.
4% of the 5% of every liquidation bounty that any liquidation bot receives as a fee, goes towards buybacks and burns of the ALPACA token.
10% of 19% of the lending interest that lenders earn goes towards buybacks and burns of the ALPACA token.
Through adding mechanisms like these, most of the rewards from the ALPACA platform will soon be directly or indirectly shared with ALPACA token holders.
ALPACA tokens are long-term deflationary. Emissions have a hardcap and are continuing to decrease, while burn is permanent and continuing to increase, and we burn quite a bit of tokens; A significant portion of protocol fees go towards token burn: 80% of all liquidation fees and 10% of all protocol lending interest earned by lenders. So as Alpaca Finance continues growing, more ALPACA will be burnt, leading to the value of each remaining ALPACA token rising continuously and permanently.
Once we implement governance (slated for Q4 on the roadmap), holding ALPACA will give you the power to decide the future direction of the protocol itself. To appreciate the significance of that, it's important to realize one thing--Alpaca Finance is unlike the majority of current BSC projects.
We are not a copy-paste yield farm or low-volume AMM that only provides inflationary farming tokens, adding no real value to the BSC DeFi ecosystem. Instead, Alpaca is quickly becoming a foundational layer of BSC, because it offers genuine value as a lending platform posessing the unique strategic advantage of providing leverage. In this way, we can offer more stable APYs to lenders, higher APYs to yield farmers, and additional liquidity to AMMs and partnered projects we create pools for. This is a multiplying enabler for the DeFi ecosystem as a whole.
In addition, only a handful of other platforms can offer leverage at all because of its technical complexity. Meanwhile, we are the leading platform providing this service on BSC across all metrics(TVL, user base, volume, etc), with the most flexibility in customization, while also having the most intuitive UI. In other words, we're ahead on all fronts, and the market is still in its nascent stage.
So why is understanding this crucial in order to comprehend the significance of governance? Well, the value of a right to governance is directly proportional to the value of the thing you're governing. So if you believe in the long-term potential of Alpaca Finance, you should also understand that the value of the governance power of your ALPACA tokens--shares that same potential.
ALPACA tokens are the voting slips to control this protocol we've built, and their governance value is permanent because our tokens have a hardcap. That means 1 token will always be worth 1 vote. That's as true now as it will be 1 year or 10 years from now, and as the protocol continues to grow, that voting power will also accrue in value.
What's more, governance is only one benefit of holding ALPACA tokens.
Through partnerships, we regularly provide token rewards available only for Alpaca holders in our Grazing Range section.
We are planning to integrate NFTs with actual utility into the platform. Users will have to hold ALPACA in order to benefit from this utility, as well as to gain access to these NFTs in the first place, along with other exclusive items such as real-world Alpaca merch.
Yet, these are only some of the things we're working on for the ALPACA token. We'll announce many more initiatives in the future. For now though, you can read more about the ALPACA token here.
We are a fair launch project. There was no investor, presale, or pre-mine. Thus, the only way to earn ALPACA is to participate on our platform. To learn more about ways to earn ALPACA, please visit our tokenomics page: https://docs.alpacafinance.org/tokenomics/alpaca-tokens
ALPACA can be purchased on the following centralized exchanges (CEXes) and decentralized exchanges (DEXes):
Binance.com (different than Binance.us)
Contract address of ALPACA token: 0x8F0528cE5eF7B51152A59745bEfDD91D97091d2F
We're also working on listing ALPACA on more CEX and DEX exchanges
Visit our Alpaca Academy!
You need to set the gas limit to at least 2 million since our code does a lot of back-end work for you (setting up your position's LP tokens by optimally converting the individual assets). If that doesn't work, try raising the gas as well. If that still doesn't work after several tries, contact us at [email protected] or DM an admin on Telegram or Discord.
Relax, young Alpaca. Your funds are safu. They are not lost. Our code has to convert funds into wBNB in the background to interact with AMMs. Since your transaction failed part-way, they must still be in wBNB. In other words, your tokens are in your wallet where they've always been.
So add wBNB to your wallet: 0xbb4cdb9cbd36b01bd1cbaebf2de08d9173bc095c You can unwrap your wBNB into BNB without fees on PancakeSwap. Then, try opening a position using the instructions in the FAQ question above this one.
This happens on rare occasions. It's due to lag with BSC nodes and there isn't anything we can do about it. You can relax though because it's only a UI issue. If the transaction went through, your position exists and is accruing yields. You can verify this by checking that you're earning claimable ALPACA rewards on the Farm page. Try closing the browser window and reopening it. If that doesn't work, then your position should also show up on the Farm page eventually, in some minutes or at the latest, hours.
Alpaca Finance is a lending protocol allowing leveraged-yield farming. That means what supports the protocol the most is not a thicker LP pool, but a higher utilization of the lending and borrowing pools. We generate the most TVL and fees from them and they also help grow the protocol. This then feeds back to ALPACA holders in two ways: higher ALPACA prices through burn, and increased governance value through having voting power over a bigger protocol.
ALPACA is not a short-term speculation play. It is a long-term ecosystem play, like when people bought ETH, BNB, UNI, or CAKE in their infancy. You see, our primary goal as a team and protocol is not to raise ALPACA's price as high as possible so the founders can dump and move onto their next project. Yes, unfortunately, that's the goal of many of the other projects you've looked at... Instead, we're aiming to build a protocol that's going to scale out horizontally and vertically. The ALPACA token will be the lifeblood of that in the future. So the incentives are all aligned in order to make that vision a reality, not for people to make temporary gains from flipping ALPACA.
The lending pool is there for people to borrow funds. That's why you're earning yields from it. So when people are borrowing your funds in active positions, how could you withdraw them? If you're unable to withdraw, then the utilization of the lending pool is too high, which means a high percentage of the funds are being borrowed at the moment. You can try to lower the amount you attempt to withdraw and it may succeed. However, the inability to withdraw is also a temporary issue.
The interest rate model exists to stabilize utilization levels. At above 90% utilization, the interest rate rises at a steep rate, making borrowing more expensive and lending more lucrative. This inevitably leads to borrowers closing their positions and more lenders coming in. When that happens, the utilization will drop to an optima where everyone can still profit, but lenders can withdraw without issue. This should not take longer than hours in most cases, and if something isn't working and the utilization rate remains high for a few days in a row, the team will step in to change the interest rate model to lower utilization.
We're also optimizing one step at a time to always have the most efficient interest rate model, allowing everyone to profit while lenders can also withdraw with ease. You can read more about the interest rate model here.
This is due to a utilization spike from supply and demand for the lending asset. Too many people want to borrow from the lending pool and there aren't enough lenders, leading to high demand and low supply. However, it shouldn't last long.
As explained in the previous question which you can reference, high utilization will soon lead to a systemic correction as lenders enter to chase the high lending rate and borrowers exit due to the borrowing interest being too high. Just wait and you can watch this happen.
There's also not much to worry about. Even if the APY became negative, it would have to stay that way for a long time to make you lose any substantial funds, and not only is the system designed to prevent this, pushing corrections to happen in minutes, but the team would step in to change the interest rate model if there was any nagging inefficiency.
We're also optimizing one step at a time to always have the most efficient interest rate model, allowing everyone to profit while lenders can also withdraw with ease. You can read more about the interest rate model here.
Equity value when you open a position is the value of your principal equity when you first added it to the position. However, remember that because this is leveraged farming and not normal farming, you borrowed funds. Depending on which asset/s you added and the leverage level, the protocol may have had to do AMM conversions in order to get your added funds + borrowed funds into the correct 50:50 ratio to create your LP position. That means you would've paid price impact(slippage) + trading fees. Those fees reduced your starting equity value and act as entry costs for opening a leveraged yield farming position. When you exit, you will also have similar fees.
That is why when you want to farm at high leverage, you should keep in mind that you'd be best off intending to hold that position for a while. That way, you will give enough time for the APR to cover your entry and exit costs, and allow your yields to grow.
If you do not wish to pay entry or exit costs, you can also farm at 1x(standard farming without borrowing), or up to 2x while adding funds so that when combined with the borrowed funds, your assets are already in a 50:50 ratio and the protocol will not have to make any swaps.
For example, if you want to farm ETH-BNB at 2x leverage and you plan to borrow 2 BNB, if you add an amount of ETH that is worth 2 BNB then the assets will already be in a 50:50 split and you will pay no fees.
First, please read the prior question's answer if you are unaware why your initial equity might be less than the funds you added.
Second, you should note that with leverage, price moves will have a larger effect on your equity value. Please take a look at a price chart of your pair. Even if it is a stablecoin-stablecoin pair, the prices swing 1-2% very regularly. With leverage, that price movement is multiplied. So at 4x, a 1% movement, can cause a 2% price drop to your equity value on that token's portion(% move * leverage / token's portion of equity = 1% * 4 / 2). Of course, since these are stablecoins, you can believe they will soon swing back to peg with high confidence.
You may have another doubt: since this is an LP pool, shouldn't it not matter if one stablecoin drops in value because that means the other goes up in value? if I am farming USDT-BUSD and USDT drops in value, BUSD will go up to cover that, and IL is insignificant with these small price movements.
Well, that is the case for normal farming. However, when you leverage above 2x, you are borrowing an asset, and that also means that you are not long, but short on that asset. (We'll be releasing more articles to explain shorting in the future.)
What this means is that when you borrow BUSD to farm something like USDT-BUSD, you are long USDT and short BUSD. So when the price of USDT drops, you are losing value on your USDT portion, but this also means that you are losing value on your BUSD when the price of it rises. This creates additional volatility, multiplying your temporary losses on your total equity by 2. What's more is that it's not necessarily true that BUSD value rises when USDT price falls, because both USDT and BUSD can drop against the market at the same time and still have a ratio like .99:1.01. Albeit, it's true that's not common with stablecoins, but happens somewhat often with non-pegged tokens.
Finally, you need to realize that unlike other farms, we actually show you when your asset value goes down. Most projects don't show you the USD value of your staked LP tokens on their dashboards, which is why it may surprise you to see equity value go up and down. Would you rather be ignorant of this or aware of it? We prefer displaying such data so our users can make better decisions, and we're working on adding more metrics all the time.
So in summary, most of the time it's because the price of your long asset temporarily dropped against the borrowed asset. To reiterate though, this should be temporary.
First of all, you should make sure you understand what APY is. APY is how much you'll earn at the end of the year if you take all your yields and regularly add those on top of your principal into the pool, compounding your equity to earn yields on your yields. This is a powerful process that quickly becomes exponential over time.
APR, on the other hand, is simple interest that shows what your direct earnings would be at the end of the year if you earned yields only on your initial principal.
Now, here's the key, when you first open a position or make a deposit, APR=APY. Can you see why? Because you have no yields to redeposit! Over time, as you earn yields, APY starts to soar above APR as you redeposit those yields and begin generating compounded earnings. So, in summary, it takes time for your earnings to reach the standard of APY.
To see more, you can make APR to APY conversions here: https://www.aprtoapy.com/
Another factor you have to keep in mind if you are leveraged yield farming is that a large part of your total APR or APY is in ALPACA rewards. Those are claimable on the STAKE page and are not factored into your equity value shown in the farming dashboard. Of course, you can add them as collateral to your farming position if you want or stake them in another pool to earn yields on them which achieves the same effect as compounding, only in multiple baskets.
As for your position/equity value not increasing, if the APR on your leveraged farming pair is low enough, it's possible that the yield farming and trading fees are only enough to cover the borrowing interest. In that case, your position value would not increase, but the ALPACA rewards are where you'd be earning your yields, which is not calculated in those metrics.
In addition, it's important to remember that in the short and possibly medium-term, the greatest impact on your position/equity value will be the prices of the assets. This is like any other farming. If the prices move unfavorably for you, this can result in your equity and position value dropping. Since it takes time for yields to accrue to substantial amounts relative to your principal, they will not be able to cover this asset exposure in a short time. So it's recommended you choose carefully about which token pair you farm in.
On the farm page, on the Your Positions dashboard, at the top right you should see a Claim button. Click that and you will find your rewards.
Here is the formula: Borrowing Interest * Lending Pool Utilization * (1 - Protocol fee) = Lending APR
Protocol fee = .19 aka 19%
Lending APR is actually a variable that is set based on our triple-slope interest rate model but showing the formula in the format above makes it easier to understand what's happening.
You can think of it like this. When a farmer borrows funds, they only borrow from a small part of the available lending pool. Yet, the entire lending pool gets equal Lending APR. So the borrowing interest is spread over not only the portion of the pool that is actively loaning out funds(captured by utilization) but also the unutilized portion of the lending pool.
For example, if the utilization was 10%, and the Borrowing Interest was X, the borrowers would be paying X but only to the 10% of lenders. In our model, all the lenders get paid, so those fees to the 10% get stretched across 100% of lenders, lowering them, which is the primary reason why the lending APR is lower than borrowing interest.
If you make any transaction involving a yield farming position related to that lending asset, the protocol will auto-claim the ALPACA for you. So if you have pending ALPACA to claim for a BNB-BUSD position, and you open or close any position on any BUSD pair, or add collateral, etc, the protocol will auto-claim the ALPACA and send it to your wallet.
The short answer is no. We get prices from your pair's underlying exchange on-chain but they're cross-checked first against Chainlink's price feeds, and then against a batch of off-chain oracles: Coinmarketcap, Coingecko, Cryptocompare, etc. If the DEX's price is more than 10%(5% in some cases) off the other oracles' median price, the protocol will temporarily turn off liquidation. This protects you from price manipulation and flash crashes. This Protection Mode is a feature of our Alpaca Guard which you can read more about here.
These are three different tokens. ALPACA is the central token of Alpaca Finance.
When you deposit ALPACA in our lending vaults on the Lend page, you receive ibALPACA, which is an interest-bearing token that represents your share of ALPACA in the lending vault you deposited into. You can redeem ibALPACA back into ALPACA when you withdraw from the lending vault. ibALPACA accrues the interest you earn from lending and will be worth more ALPACA when you withdraw than when you deposited. ibALPACA is currently not available for buying/selling on any market and can only be gained by depositing ALPACA for lending.
1x leverage is the same as the standard farming you can do anywhere else. In Alpaca's case, we autocompound the rewards for you.
Above 1x, you’ll be borrowing an asset, which will allow you to multiply your farming position, providing you higher yields as well as bonus ALPACA rewards. The asset other than the one you borrow will have leveraged long exposure so your equity value will increase when its price rises. This is the same as standard yield farming. For the borrowed asset, at 2x leverage, you’ll have neutral exposure to that asset. This means at position opening, your equity value will be indifferent to a modest rise OR fall in the borrowed asset’s price; hence — neutral. (*For users who want to hedge neutral: Keep in mind that large double-digit price moves will shift your exposure on the borrowed asset from neutral to slightly long or slightly short. So opening one position at 2x is not the best way to hedge neutral. The 2x is only neutral at position open and is used as an example only to illustrate that. If you want to hedge neutral, please read this article for a better method. You can also view examples of these shifts from a user’s experience here, or get an idea of how your exposures change and affect position value using our yield farming calculator.) Above 2x, you will have a slight short on the borrowed asset, meaning your equity value will increase when that asset's price falls, and your equity value will decrease when the price rises. Below 2x, you will be long on both assets, but more long on the one you didn't borrow. In summary, to maximize your profits, if you have a choice of which asset to borrow, consider borrowing the asset OPPOSITE TO the one you are most bullish about. For example, in ETH-BNB, if you expect ETH's price to rise more than BNB's price, then borrow BNB.
In leveraged farming positions, your yields have 3 earning parts and one part of borrowing interest.
Total APR% = Yield Farming Rewards + Trading Fees + ALPACA rewards - Borrowing Interest
Yield Farming Rewards are the DEX rewards(ie. CAKE/WEX) that the protocol sells and auto-compounds into your LP. You receive these yields as additional LP tokens, meaning the number of LP tokens in your position grows over time. You can view your current LP tokens amount by hovering over your position's Position Value.
Trading fee rewards accumulate internally within your LP tokens. You receive these yields through your LP tokens accruing in value, meaning your LP tokens are worth more over time. (Similar to how ibTokens work)
ALPACA rewards accumulate based on your position’s debt size. You receive these yields by manually claiming them at the top right of the Your Positions dashboard.
Borrowing interest is the component that your above three revenue sources cover to pay the users loaning you their funds so you can use leverage. Borrowing interest reduces your equity value.
Earned rewards from auto-compounding trading fees and yield farming rewards are added to Equity Value. Meanwhile, accrued borrowing interest is subtracted from Equity Value.
The ALPACA token burning is continuous. It works by sending the tokens to a burn address where they can never be retrieved from. You can view our past burns here. However, even though the ALPACA supply is capped at 188 million (minus prior burns), it is not possible to burn the supply to zero. There will always be ALPACA tokens on the market. That's because of how token burning works, specifically its effects on supply and demand.
What burning does is permanently destroy some tokens, hence removing them from the circulating token supply. With fewer tokens available to be sold on the market, that increases the price of the remaining tokens. For example, if there were 100 tokens with a price of 1 dollar, resulting in a market cap (aka project evaluation) of 1*100 = $100, if you then burned 50 of those tokens, the new price of each token could be solved as X in the following: X * 50 = $100.
The price of each token would double to $2. In other words, regardless of the token supply, the market cap does not change. By burning tokens and reducing the token supply, ALPACA is classified as a deflationary token, guaranteeing the price of ALPACA will rise over the long term, benefitting ALPACA holders.
Despite burning ALPACA on an ongoing basis, the price of ALPACA will never reach 0 because what we do isn't just burn, but buyback & burn. That means we need to buy the ALPACA tokens with protocol revenues before burning them. Since the price of ALPACA rises with continuous burns, it means we will be forced to buy back fewer ALPACA over time, even though the USD value of the buybacks will grow as the protocol grows.
As for why we burn instead of doing performance fee sharing, first of all, we do both. ALPACA holders earn Protocol APR from performance fees by depositing ALPACA into the lending pool. Then, the majority of performance fees from lending go to buyback & burn of ALPACA. The reason we do buyback & burn for a portion of the shared performance fees is that it's a more efficient method of value distribution to ALPACA holders.
Users can sell the ALPACA rewards from Protocol APR, though many of them don't, but they can never sell the burned ALPACA. The value of the burned ALPACA is thus redistributed to all ALPACA holders through increasing the price and this happens efficiently in one transaction. This way, we can guarantee ALPACA has a deflationary nature which we could not do if we distributed all the shared performance fees as sellable rewards.