AIP-3: Handling of Governance Vault’s Early Withdrawal Penalty


We published an article last month on the early withdrawal feature for the Governance Vault Governance Vault Part 2 Is Here! Early Withdrawal, Governance & Insurance Plan! | by Huacayachief | Alpaca Finance | Jan, 2022 | Medium 8

In the article, we outlined the penalty structure for an early withdrawal:

  • The penalty for early withdrawal will be 0.75% of the withdrawn amount per week of remaining locked time. ( There needs to be a sufficient penalty so that those who would consider early withdrawal could not game the mechanism by choosing a long lockup duration for higher APR, and then withdrawing early. )


Alice wants to perform an early withdrawal of 100 locked ALPACA from the Governance Vault, but her position still has 65 days locked time remaining. Alice will have to pay:

Penalty = 0.75% * roundup(65 / 7) = 7.5% of the withdrawn amount

And she will receive: 100 ALPACA * (100% — 7.5%) = 92.5 ALPACA

How the penalty from early withdrawal above will be utilized is the focus of this discussion thread. In the article we proposed the following:

  • 50% of the penalty will go towards weekly burn

  • 50% will be distributed as rewards to the Governance Vault’s stakers in the following week.


Four voting choices were presented and users can vote by Ranked Choice Voting (IRV) Voting types - Snapshot 24

  • Option1: 100% to burn

  • Option2: 75% to burn 25% to stakers

  • Option3: 50% to burn 50% to stakers

  • Option4: 25% to burn 75% to stakers

  • Option5: 100% to stakers


Community voted for Option#3 (50% to burn 50% to stakers)


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