AIP-15.1: 新商品(Perp, AF2.0)の報酬について


In response to the feedback we received from the community in the original forum post, Adjustment to ALPACA tokenomics to support the upcoming (Perp, AF2.0) and future product launches, the team went back to refine the proposal so as to NOT make any changes to the ALPACA tokenomics. Options 1-3 from that post will no longer be considered.

The below discussion thread will instead focus on potential alternative sources of funds we can use to incentivize the launch of Perp and AF2.0, and the mechanics of distribution. First, we’ll summarize the goal of such incentives:


By providing incentives, we can increase the chance of returning, existing, and new users to use the new Alpaca products. Many of these users are already using other platforms for these use cases, such as perps and overcollateralized lending. As such, these users have switching costs of leaving their current platforms, which become a hurdle when they consider embracing a new service provider (such costs can include bridging, knowledge accumulation, gas, token swaps, security analysis, increased uncertainty of using a new platform, etc.). Their perceived benefits of our new products need to be higher than the switching costs for new users to use our products, and early incentives can significantly help push perceived benefits higher, thus crossing the obstacle of switching costs.

With successfully implemented incentives, the ultimate goal is to have additional revenue outpace the cost of the incentives, and for that revenue to continue growing over time. In the mid to long-term, superior product design will maintain high retention, and the new users will re-establish new switching costs for Alpaca, where switching costs will change from a negative to a positive for us; in other words, instead of costs to switch to Alpaca, these users will have costs to switch from Alpaca, which will become our strategic advantage, and a hurdle for our competitors.


We break down the discussion into 3 sections, which should form a basis for discussion and future votings:

  • How many ALPACA are required?

  • Where would the ALPACA come from?

  • What is the mechanic to distribute these ALPACA rewards?

How many ALPACA are required?


We would like to incentivize Perp to two main user groups: liquidity providers and traders.

Liquidity Providers:

ALPACA will be used to supplement yields from other fee sources earned by the liquidity providers (borrowing fees, position opening, closing fees, swap fees, etc.), because those fees will take some time to ramp up to a steady level as traders are onboarded to the platform.

  • Target liquidity pool’s TVL: $10 - $15Mn

  • Target APR% (from ALPACA yields only): 10.5-12% - based on the current yields of comparable pools in the market

  • Incentivization period: 2 months

Based on the parameters above, we will require roughly ~$175 - 300k in rewards for liquidity providers. You can see the analysis here.


ALPACA will be used as incentives for traders through:

Rewards for trading competition ($50k)

  • We plan to run two trading competitions with $25,000 prize pool per competition

0-fee trading ($0)

  • Users will be able to open and close positions for free or a relatively nominal fee. We may implement this through rebates. There will still be borrowing interest while positions are kept open.

  • This is technically $0 cost required up-front. The cost is to missed revenue during this period, but this should be an effective promotional campaign to get traders to at least try the new product.

Total rewards required for Perp launch is: $225k - $350k

AF 2.0

For the AF2.0 Money Market’s launch, we would like to incentivize lenders and borrowers to bootstrap the activities.

  • Target TVL: $100Mn

  • Target APR%: ~1% higher than the benchmark platform

  • Duration: 2 months Total rewards required for AF2.0 MM launch is: $250k - $275k. You can see the analysis here.

In total, we believe the total incentives in the range of $475k - $625k is required to maximize the chance of success for the upcoming product launches.


  • These figures are preliminary; once we have a total budget number from the Governance, a detailed rewards schedule can be created (e.g., higher incentive in the first month, etc).

  • The incentivization period has to be long enough to make it worth it for new users to switch over, for which we’ve estimated 2 months to be the most appropriate. After the 2 month period, incentives are expected to no longer be required, and any potential additional incentives would have to be discussed in governance based on the status of the products at that time.

Where would the ALPACA come from?

We list below the sources where the ALPACA can come from: (calculated based on price as of 16 January 2023)

Previously collected fees that are waiting to be burned $134k

  • Liquidation fee: ~$72k USD (link)

  • xALPACA early withdrawal fee: ~$62k USD (link)

Unclaimed ITAM rewards: $417k (link)

Based on the two sources above (pending how much ITAM rewards will be claimed by the deadline) we will be roughly at the low-mid range of the estimated required ALPACA. We recommend that these two sources should be utilized first. Any additional requirements can come from other sources listed below.

Potential additional sources of ALPACA

Buyback and Burn

  • This recurring revenue sources currently generates ~$20k - $25k per week.

  • We can execute the buybacks as usual. However, the burn will be paused / reduced to save up ALPACA to be used as incentives for the new products.

  • The burn can resume after we have saved up enough ALPACA to an agreed amount.

  • Once the new products are successful, their increased usage would lead to additional burn from the new revenue sources

ALPACA emissions

  • A portion or all of the remaining ALPACA emissions could be redirected to save up for future product incentives.

  • If we save up the entire emissions for February, we would have roughly 240k ALPACA ($64k)

Governance Vault

  • Weekly distribution to the Governance Vault is roughly ~$15k per week.

  • Given that currently 50% of the Governance Vaut yield is already being redirected to cover bad debt, we believe this source should not be used, so that we still provide reasonable APR% and incentive for stakers to keep ALPACA locked.


  • There is ~5.6 million ALPACA ($1.36Mn) remaining that can be minted from the Warchest, which exists to be used as expenses for the next ~2 year period.

  • Unlike other options above, by minting from the Warchest, the circulating supply of ALPACA will increase because Warchest allocation is not minted in advance.

  • Since there is a fixed, limited amount of Warchest that can be used, which is required for operational expenses, and the fact that it will increase circulating supply, it’s the team's opinion that this should be the last option to consider.

We can fund the upper range of the incentives by pausing the burn for ~ 3-4 weeks. You can view the analysis in this spreadsheet.

What is the mechanic to distribute these ALPACA rewards?

We list some possible options with their pros and cons.

Option1: Distribute rewards as ALPACA

Rewards will be distributed as ALPACA, the same way as it is now

Estimated development time: 1 - 2 weeks


  • Simple to implement

  • No audit required


  • Rewards more likely to be sold in short-term

Option2: Distribute rewards as ALPACA with a vesting schedule

Instead of giving out ALPACA tokens immediately, users will need to wait for a period of time (e.g., 6 months) before receiving the tokens.

Estimated development time: 2 - 3 weeks


  • Relatively simple to implement; we only need to create a new vesting contract

  • Lower immediate selling pressure from the added vesting period

  • Given the simplicity of the contract, an Internal audit will provide sufficient security


  • Rewards still likely to be sold after vesting period ends

Option3: Distribute rewards as xALPACA locked for 1 year

This distribution method is what was proposed in the original forum post for ALPACAv2, where instead of giving out ALPACA as token rewards, we will give xALPACA locked for 1 year.

Estimated development time: 4 - 6 weeks


  • No immediate selling pressure - new emissions will be unable to dilute ALPACA tokens until they unlock after a year, or until the holder decides to take a significant haircut on their tokens through an early withdrawal (up to -39%)

  • New users are incentivized to hold ALPACA as they receive Governance Vault’s yields

  • New users more likely to extend lockup time

  • New users incentivized to participate in governance, strengthening their belonging to the Herd


  • Requires significant development effort. In our opinion,while the effort would makesense if we were updating the entire tokenomics with a 10-year emissions schedule, in this context where the incentives might only be used for several months, the development effort is too high

  • Higher development effort here means less time to improve products

  • Also requires an external audit ($10k - $15k)

Option4: Distribute rewards as esALPACA

For this option, instead of distributing rewards as ALPACA, we give out esALPACA. This has similar functionality to xALPACA but adds an additional vesting layer with the key properties below:

  • esALPACA cannot be transferred or sold

  • esALPACA can be staked for yields in its own staking vault

    • Governance Vault stakers will vote on the percentage of the platform revenue to allocate for esALPACA staking vault

    • At the end of the 3-months period, based on the figure presented above, there will roughly be 2Mn - 4Mn esALPACA (vs. 37Mn xALPACA currently) This means, for example, that if we allocate 5% of the Governance Vault’s revenue to esALPACA staking vault, they would receive a comparable APR% to Governance’s vault stakers

  • esALPACA will have voting power

    • It can be 1esALPACA = 1 vote = 1 xALPACA, or voting power for esALPACA can be lower

  • esALPACA can be turned into ALPACA by going through a vesting period (e.g., 6-12 months.). While vesting, user will not earn any rewards

Estimated development time: 4 - 6 weeks


  • Strong incentives to hold esALPACA as stakers will earn yields (as long as a reasonable percentage of revenue is allocated to the staking vault) and have voting power. This aspect is similar to xALPACA

  • Strong incentive to not vest esALPACA as users won’t earn yields during the entire vesting period

  • No immediate selling pressure or dilution of ALPACA

  • Unlike other mechanics where ALPACA tokens must be available for claim right away, this mechanic allows for a “fund-as-you-go” setup because ALPACA is only available to claim 1 year after vesting


  • Requires significant development effort. In our opinion, while the effort would make sense if we were updating the entire tokenomics with a 10-year emissions schedule, in this context where the incentives might only be used for several months, the development effort is too high

  • Also requires an external audit ($10k - $15k)

  • Two separate staking vaults and two voting tokens will make our protocol more complicated for users, especially less experienced ones


This is the first vote in a series of votes for this AIP.

The first vote will be a simple YES or NO vote on whether to incentivize the Perp and AF2.0 for their launches.

  • A YES vote would mean we will provide incentives for the upcoming product launches.

  • A NO vote would mean we do not provide any incentives to the upcoming product launches and the below votes would not take place.


  • Community votes to provide incentives for the upcoming product launches.


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