DamoTalks#37 Recap: Conversation with Alpaca Finance, BSC’s Blue-chip Lending Platform
Introduction：
DamoTalks#37
Guest: Ariel, Director of Community @Alpaca Finance
Host: Jane — Event Operations of TokenDamo
Live Assistant: Lin Lin
Live time: January 12th, 2022 15:00 UTC+8
It’s great to have Alpaca Finance’s Community Director @Ariel here to share with us about the project!
Here is a brief introduction to Alpaca Finance before the Q&A session.
Alpaca Finance is the leading lending/yield farming project on the BSC chain, winner of the Coinan MVB project award, and the platform coin $alpaca is now live on Coinan. Alpaca integrates lending, liquidity mining, automatic reinvestment and leverage to provide one-stop liquidity mining services.
1. What is Alpaca Finance? Is it safe?
Alpaca Finance is the largest lending protocol allowing leveraged yield farming on Binance Smart Chain. We help lenders earn safe and stable yields, and offers borrowers undercollateralized loans for leveraged yield farming positions, vastly multiplying their farming principles and resulting profits.
We are a semi-anonymous team with core members located all over the world, responsible for strategy, marketing, product, business development, and technology development. For more details, please refer to this page on Binance introducing our team members: https://www.binance.org/en/blog/bsc-project-spotlight-alpaca/
Alpaca is one of the safest and most reliable projects on BSC. Our code is open source, and every line has been checked by hundreds of independent developers. We have an ongoing bug bounty program that offers high rewards to anyone who finds a tiny bug in the code. If you’re a developer, we invite you to check out our code for yourself on our Github. We also have several top security companies auditing our code. All of our smart contracts have been audited by PeckShield, and there are 17 audits so far, which I believe is the largest number of projects on BSC so far, showing how we attach great importance to security.
In addition to extensive code reviews, both internally and externally, there are built-in safeguards. For example, all contracts we deploy are owned by the Timelock contract. Therefore, any changes made by our developers will have a 24-hour delay before they take effect. This means that if the user finds a problem with the code update, you will have plenty of time to get your funds back and exit safely. With our tens of thousands of users, you can trust that every tiny change will be constantly scrutinized by many participants.
2. Can you briefly share Alpaca’s major milestones, future goals and roadmap?
Although we only launched on 2/28 last year, we have become a blue-chip protocol on BSC, consistently staying in the top 5 (currently 4th) of all BSC projects in terms of TVL. Alpaca has been recognised by many users as having the highest safety standards on BSC and we are very proud of it. We achieved most of our roadmap targets in Q4 of last year.
Alpaca Finance has been minting NFT since March last year. In our previous 50+ or so NFT activities, apart from creating brand loyalty and token lock-up, we have also tried other possibilities, such as providing NFT as proof of attendance for various online and offline events. We also launched an Alpaca knowledge test, which was executed like an academic one *laughs*. Users who successfully pass these tests and understand the knowledge of leveraged farms and DeFi will get a NFT as a reward as proof of knowledge.
At the end of September last year, we officially announced that we have entered NFT PFPs and play to earn market. The NFT series launched for the game is called Alpies, and the total revenue of the Alpies sale reached 6.3M USD. During the process, our previous NFTs can be used as a lottery ticket to be whitelisted in the Alpies sale, NFTs from different activities are also classified in different rarities. Most of the utilities of Alpies are in the game, where Alpies holders on Alpaca’s leveraged farm can have 50% higher max leverage on Alpaca Finance. Since the NFT market is very competitive, extra benefits are needed for the NFT to stand out. So here is one of the ways we tried to combine NFT/game/DeFi to stand out.
In addition, we updated the design of our webpage, launched our stablecoin AUSD and the governance vault, etc. Earlier, CoinTelegraph and FTX featured our Dauntless Alpies sales on Ethereum. Pete, our Head of Institutional Growth, was interviewed on Nasdaq and featured on Newsmax TV news reaching 75 million American households!
The next major milestones include enabling cross-chain, strengthening our work on NFTs, and enabling more firms to securely access high yields through our platform. In the first quarter of this year, the team will mainly focus on implementing the governance voting part, launching the core tools of AUSD that have not yet been launched, the performance integration of Alpies NFT, and launching the Alpaca institutional platform. The team has been preparing for the roadmap adjustment and will update the details of the roadmap in the next few days. You can view our roadmap at: https://docs.alpacafinance.org/our-protocol-1/future-development-plan
3. What is a leveraged income farm? How should users control risk?
I believe that everyone is already familiar with general liquidity mining, so add leverage to the income farm, that is, to see how many times you want to increase the asset base to earn profits, according to the assets and leverage you choose, you can enlarge the position to several times more than the base, and we will also help you to automatically reinvest the profit you earn every day into your asset base, creating a compound interest effect. At present, the pool with the highest multiple is six times the leverage of BUSD-USDT.
One point I want to emphasize here is that when choosing a platform, a relatively healthy situation is that the user’s income should not mainly come from the tokens issued by the platform itself. If the products are really used, the rate of return for users should be real and sustainable, rather than relying on the platform to print your own banknotes in exchange for your truly valuable assets. From this perspective, the income performance of Alpaca is quite healthy.
As for the risk section, the risk of the lender are bad debts and asset recovery time, but our parameter setting and interest rate model are very cautious, which can effectively avoid this situation. The user risk of opening a leveraged position is the impermanent loss faced by liquidity mining in DeFi, the correctness of the investor’s own judgment on the market situation, and the slippage in and out of the pool, etc. For the reduction of slippage, we will suggest users can first open a large number of funds into several smaller positions, or open a small position first and gradually increase the margin. When closing the position, it also provides the function of minimizing transactions. Users only need to convert the necessary amount of assets. We also created a tutorial that allows users to open and close positions with 0 transaction fees and 0 price impact!
4. Are there any mining methods in Alpaca that can maximize users’ profits?
We have compiled a few simple strategies for users to maximize mining earnings. We have included the strategy of maximizing income, that is, opening leveraged long/short positions while obtaining farm income, so that you can efficiently leverage. As a simple long position example, if you are confident in a crypto asset (eg ETH), on Alpaca Finance you can deposit $10,000 worth of ETH, borrow $20,000 worth of USDT (3x leverage), and build a position consisting of $15,000 in ETH and $15,000 in USDT — complete with one click (Alpaca will automatically swap tokens to form a 50:50 LP pair; in this example, $5,000 worth of USDT is exchanged for ETH). The user’s ETH leverage is now 1.5x because the user now holds $15,000 worth of ETH, whereas he originally held $10,000 worth of ETH.
Apart from having a 1.5x leveraged long position on ETH, users will also earn 63% APY on their $10,000 stake due to higher farming yields on positions that are 3x the size of their stake. Therefore, if ETH goes up, users can double the income on ETH, and also double the farming income.
On top of that, leveraged yield farms typically have lower borrowing interest, around 10–20% APR, compared to perpetual contracts (Perps) with 20–100% APR. These advantages make leveraged yield farms a powerful and excellent tool in leveraged trading and can multiply your returns.
Conversely, you can also short/hedge, which is less common in DeFi, on our platform. With these tools, you can maximize your profits in both bull and bear markets, and these strategies are available in instructional videos on our youtube. https://www.youtube.com/channel/UC8xBPBPgRD-xe_ZfyOwV_Dg
We also encourage you to read the documentation about other low-risk/robust strategies we have written for our users:
5. Can you tell us more about your play to earn games and NFTs?
We started working on the Alpaca game concept in the Q2 of last year, and made the news public and released the Alpies NFT sales in Q4. We plan to launch Alpies in Q2 of this year and it will play important roles such as heroes in the game.
Not only do Alpies have a play-to-earn utility, they can also be used to unlock features on our leverage farm platform, such as allowing you to increase your maximum leverage by 50%. While you will need to own 3 Alpies to play Alpies, owning just one Alpies also gives you a lot of exclusive benefits and features:
· Presale allocation of future Alpaca game project token
· 50% higher max leverage on Alpaca Finance
· Future NFT airdrops/giveaways
· Beta access to Alpaca game
· Higher game stats
· Exclusive free game items
· High-quality NFT Breeding
· Access to exclusive Discords (Illamanati for Dauntless, Knights Tempaca for Dreamers, and both can access The Paws That Be)
· Exclusive access to Alpaca physical merch
Last month, we also conducted a Christmas canvas activity with reference to The Million Dollar Homepage on the Alpies exclusive channel and on 1000blocks. We will continue to launch more activities in the exclusive channel before the official launch of our game as warm-up activities. Please feel free to join and play with us if you are an Alpies holder! For more details, please check: https://docs.alpacafinance.org/alpies/introduction-to-alpies
6. Recently, Alpaca launched the stable coin AUSD. Can you briefly introduce how to obtain AUSD and what are its functions?
Two weeks ago, we launched the stable coin AUSD (Alpaca USD), an auto-farming stablecoin that earns passive yields for you in the background. Now, instead of paying for loans, you can get loans while earning on your collateral.
AUSD is overcollateralized, decentralized, and reinforced with multi-layered pegging mechanisms so that it does the one thing stablecoins are supposed to do — remain stable at $1.
Lenders in Alpaca Finance can collateralize their deposits(ibTokens) to borrow AUSD, which they can use inside and outside Alpaca Finance to earn additional yields. Lenders are thus able to continue earning Lending APR and Staking APR, while also borrowing AUSD to use as they see fit, unlocking even higher profit potential and greatly increasing the flexibility and use cases of their capital.
Some potential uses of AUSD include:
- Staking AUSD to earn additional yields
- Selling AUSD into lending assets to leverage up lending positions (can also borrow more AUSD)
- Selling AUSD into other assets to open high-yield leveraged yield farming positions
- Selling AUSD into other assets to deploy in external protocols
AUSD is fully backed with robust risk management parameters. The stablecoin is overcollateralized by a collection of top digital assets including ETH, BNB, USDT, BUSD, BTCB and TUSD.
AUSD is a fork of the battle-tested MakerDAO, with many improvements. Some of the key features are Farmable Collateral Module, Efficient pegging, Robust and Gentle Liquidation and Handling of Bad Debt.
As a user, you can participate in Alpaca Finance’s AUSD ecosystem in four ways, such as Position Owners, AUSD Holders, Arbitrageurs and Liquidators. The diagram below shows how each participant works together in our AUSD ecosystem.
AUSD makes lending in Alpaca Finance more capital efficient and flexible than in any other lending platform, fortifying Alpaca Finance’s place as a leading DeFi 2.0 protocol.
A small fee associated with AUSD will be paid to ALPACA holders via buyback and burn/protocol APR, and will also be paid to the development fund to support the continued growth of the platform. It is now the third week of AUSD launch, and the collateral locked in AUSD has exceeded $10 million, which is only the amount of a single collateral (BUSD), and we will also be launching collateral pools for other assets this week. For more information about AUSD, please refer to this page: https://docs.alpacafinance.org/ausd/introduction-to-ausd
7. For those who want to experience AUSD in-depth, can you give an example of how AUSD can actually be used?
We will write out the main use cases for AUSD, which I will describe below in order of most to least frequent among users (Strategy A → C)
Strategy A: Borrow AUSD for Staking: Mint AUSD and stake in AUSD-BUSD or elsewhere
In this use case scenario, users hardly need to care about the AUSD price, because when closing the position, they will be returned to the platform with the same amount of AUSD that they borrowed in the first place, regardless of the price. The only impact AUSD price has on borrowers is impermanent losses in LP trading pairs, such as our existing AUSD-BUSD trading pair. However, even if AUSD depreciates sharply to 0.89 when the user closes the position, the loss of impermanent loss is only 0.17%
Strategy B: Circular Borrowing AUSD: Minting AUSD multiple times to increase collateral leverage.
This is the use case when a user deposits collateral such as BUSD, mints AUSD and sells it for more BUSD. New BUSD can then be re-deposited to mint more AUSD, and so on. Borrowing AUSD to pledge strategy A can be said to be neutral to AUSD pegging. And the strategy B of cyclically borrowing AUSD is shorting AUSD, which is the main reason why it is crucial to keep AUSD below $1 on the seller’s hard peg. In order to close a position, users who circulate AUSD will have to buy back AUSD. If the price of AUSD rises significantly after they open a position, they will pay more to buy AUSD and suffer losses. That’s why their positions have short exposure. As a leveraged strategy, Strategy B is theoretically riskier. Therefore, combining this seller’s hard peg of less than 1 USD with a liquidation protection mechanism similar to the alpaca guard that AUSD has, enables users who cyclically borrow AUSD to minimize the seller’s risk and is easy to estimate.
Strategy C: Buy AUSD to pledge in AUSD-BUSD or elsewhere.
Buying tokens for staking is a common DeFi use case, which is why users are more used to this practice, and of course it is reasonable in some cases. Strategy C is the only one of the three strategies that is bullish on AUSD, so it will care more about the link to the buyer. However, it is also the least commonly used strategy.
In the early days of stablecoins, which is now the stage of AUSD, the use of buy collateral is not as much as the other two strategies. Most buying is from arbitrage. However, as the utility of the stablecoin ecosystem increases, so will purchase and staking scenarios, such as DAI now.
Another important thing to know about buy-side pegs is to be aware of the long-term peg guarantee implicit in economics, as net market purchases are always greater than/equal to 0 across all strategies. When AUSD is sold, it must be bought back by the user later in order to successfully close the position.
Does it sound complicated? Let’s wrap it up — AUSD can only be sold after minting.
• Users who borrow and pledge in Strategy A do not buy or sell
• AUSD cyclers will sell, but must buy back later
• Users who purchase and stake must purchase first
Therefore, for all strategies, the net buying of AUSD will be greater than or equal to 0, which will be the long-term $1 peg guarantee
One last point I’d like to add is that another buyer-pegged mechanism is interest rate control. If the AUSD price falls too low, we can increase the lending rate to encourage users who recycle AUSD to buy back AUSD, which creates positive net buying pressure and corrects the price. As we continue to roll out other use cases, more users who buy and stake (Strategy C) will emerge, which will also generate buying pressure to offset the temporary selling pressure of the Cyclers (Strategy B) and even push the peg higher to above $1, which will establish a BUSD reserve vault for the stablecoin exchange module to further stabilize this mechanism. Stablecoin pegs become tighter over time as utility and circulating supply grow. AUSD is safe and secure, but still in its early stages; we have launched more than a third of our core tools. If you understand these principles above, you can earn more than 20% by minting AUSD.
8. How can we participate in your governance vault, and how long should I lock it for?
The governance vault we launched two weeks ago now has 25.49% of the circulating Alpaca tokens involved in governance lock-up. The average lock-up period is 8 months. The minimum lock-up period we provide is one week and the longest is one year. This also means token holders are optimistic about the long-term development of Alpaca. We currently have around 64,000 token holders in total, and the Alpaca token has entered a deflationary phase. The total supply of Alpaca tokens is 188M, 91.8% of which are currently in circulation (87.9% after deducting the unminted $ALPACA tokens in the Warchest project pool), which means that holders of $ALPACA will not suffer from severe inflation. The inflation rate of many tokens is 100%+ per year, so that the price of tokens held by these people will fall by 50%+ per year in a neutral growth scenario. You can lock ALPACA tokens in the governance pool by following the steps below.
· Go to the Governance page
· Connect to your Web3 wallet (such as MetaMask) and make sure your network is set to Binance Smart Chain. Click here if you do not have the network in your wallet yet.
· Click “Create lock”
· Specify the details of your lockup
- Amount of ALPACA
- Lock duration
· Click “Confirm Lock” and you should get a pop-up notification in your MetaMask to accept the transaction
· On the governance page you will see your xAlpaca balance and be able to claim weekly rewards
$ALPACA has entered a deflationary phase, with buybacks and burns higher than emissions at this stage. You can even lock your $ALPACA in governance pools without impermanent losses to get up to 73.14% APY. This APY is reliable because most of the gains are from the protocol APR that has been stable for six months; in other words, it’s like a super high-yielding savings account! Details can be found in this tweet from our Director of Strategic Marketing：https://twitter.com/SamsaraCrypto/status/1477838147950108673
Thank you so much for today and you can join Alpaca Finance on ✔
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