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AIP-18: Sunsetting Leveraged Yield Farming Support for MDEX pools

Background:

Alpaca Finance currently supports 6 leveraged yield farming pairs on MDEX
  • ETH-USDT
  • BTCB-USDT
  • ETH-BTCB
  • BNB-BUSD
  • MDX-BUSD
  • BNB-BTCB
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As of April 10th, there are 116 farming positions on MDEX add up to ~$1.1Mn in farming TVL.
Given a gradually declining TVL in MDEX liquidity pools, we would like to propose sunsetting the LYF on MDEX to safeguard both our lenders from potential bad-debt and leveraged yield farmers from adverse situations.
We recommend users with existing positions to close their positions now.

Implementation:

We will follow the same implementation structure for when we sunset WaultSwap (Ref.)
  1. 1.
    We will upgrade the MDEX farming contract to allow for a privileged address (i.e., dev controlled address) to liquidate any MDEX’s positions (only for MDEX. No change to PCS or Biswap positions.)
  2. 2.
    We will change the liquidation method. Instead of swapping non-borrowed token in the DEX (this is the cause of bad debt or large slippage due to low liquidity), we will use oracle price and let the new liquidation strategy deduct the necessary amount from our wallet as determined by the Oracle with a 5% discount.
  3. 3.
    Farming positions will now have all base assets and be able to pay back debt and close the positions
  4. 4.
    Any remaining value after debt repayment is sent back to users
In Step #2, Alpaca Core team will provide the liquidity required to close the positions. We will then manually swap them in CEX or other DEX to get back stablecoin. If there is any profit after, we will use them to buyback ALPACA and burn.

Voting

This AIP will be a single-choice voting. There will be two voting options:
  1. 1.
    Sunset MDEX pools and close all MDEX positions.
  2. 2.
    Keep the pools as is.

Resolution:

  • The community voted to sunset MDEX pools and close all MDEX positions.
  • All remaining positions were closed on April 21st 2023.
  • From the operation, there was a profit of 1,547 USDC which was included in the 109th burn (all the closing transactions can be found here).

References: