We’re Doubling Buyback & Burn! More Deflation! More Protocol Revenue to ALPACA holders!
Since Alpaca Finance established itself as a fundamental building block within the DeFi ecosystem, having reached top 3 on BNB Chain and top 25 in all of cross-chain DeFi projects, we senior alpacas have started to put more emphasis on the platform’s long-term competitiveness and sustainability. So besides releasing advanced features and innovative new products, another of our focuses as a platform built by the alpacas, for the alpacas, is to make sure the entire herd profits, moving into greener pastures together.
That’s why we’ve decided to adjust our business model to have fees that are closer to the industry standard, and for most of this additional protocol revenue to go to ALPACA holders through buyback & burn!
To be specific, we’ll be increasing our reserve rate on lending interest from 10% -> 19%, and 10% of that will go to buyback & burn of the ALPACA token, with 9% going to the dev fund for expanding the team and ongoing development costs. This is closer to the market rate for decentralized lending platforms since almost all of them charge 20–30%, with centralized lending platforms charging much more.
For ALPACA holders, this is bullish news. Even though we’ve already burned almost 2 million ALPACA, we’ll soon be doubling the burn! Which means faster deflation on the token!
If you’re a lender, while at first glance it may seem that higher fees aren’t desirable, that’s actually not the case when they’re going to token burn, because this will create higher lending APYs over time. Deflationary pressure will raise the price of the ALPACA token, which means the rewards lenders receive will also go up in value. What’s more is that these fees are only charged on the lending interest, and not on the ALPACA rewards to lenders, so the change is not significant relative to total lending APR.
This update should create a more sustainable model for the entire herd; Making sure all stakeholders (lenders, farmers, and token holders) can participate profitably in our ecosystem.
Additionally, since Alpaca is a fair-launch project where 87% of the tokens are distributed to our platform’s participants, we have to ensure that our rates remain competitive vs. our peers, so we have enough incoming funds to pay our staff, recruit top-tier talents to remain competitive, and cover recurring expenses and marketing costs. This is crucial to keep Alpaca Finance competitive in the fast-moving DeFi space, especially against projects that are funded through private sales and VCs.
So after much internal discussion, we’re excited to share our new revenue structure which will generate new value to ALPACA token holders and platform participants, make our ecosystem stronger, and ensure the long-term competitiveness of our protocol!
In summary, the updated structure aims to accrue the majority of the platform’s value to ALPACA holders. It will also increase the deflationary pressure on ALPACA tokens. The amount of our weekly burn will double, accelerating the pace at which ALPACA becomes a deflationary token, and that’s not counting the burns from liquidation bounties! So you can look forward to every Sunday’s bonfire becoming much bigger! 🔥🔥🔥
As our token’s emissions schedule continues to decline and eventually max out at 180 million tokens 1.5 years from now, and yet our burns keep increasing as protocol use grows, we’re aiming to move in one direction, and we’ll let you guess which. Here’s a hint — that’ll be one small step for man, one giant leap for alpaca-kind.
The change will go live on Wednesday, July 28th 2021 at 10 AM GMT.