Below is the transcript from our Chinese Community Manager Ariel’s AMA session with BNB48 Club on May 9th, 2021.
Can you tell us more about what is Alpaca Finance?
Sure. Alpaca Finance is the largest lending protocol allowing leveraged yield farming on Binance Smart Chain.
Our ALPACA token is fair launch, with 87% of total supply going to platform participants. The team is only getting less than 9% of tokens, and that’s vested over 2 years. We also had no presale, no pre-mine, and no investors, so there’s no one to dump on token holders.
We have made the platform rug-proof. We burned our LP tokens in the ALPACA-BNB PancakeSwap pool so they can’t be withdrawn. We’ve also locked up our LP tokens from the sALPACA-ALPACA pool in Wault Locker so they can’t be withdrawn until the pool closes. So our users know that with us, there will never be any “unwanted surprises.”
From the beginning, this has always been a product built by the people, for the people. Or as we like to say: by the Alpacas, for the Alpacas.
We help lenders to earn safe and stable yields, and provide undercollateralized loans to borrowers for LYF positions. For example, if you had 20,000 USD to farm with, you could borrow up to 5x that much from us and farm with 120,000 instead, earning 6x the yields. In short, we allow you to maximize your profits.
Furthermore, within all of BSC, we’re a blue-chip project, one of the leaders across all metrics; We have 2 billion US dollars in TVL, tens of thousands of user wallets, and have always been top 5 in trading volume, even though we’ve only started to list on some small exchanges.
Is it safe to use Alpaca Finance?
In short, yes, Alpaca is amongst the safest and most secure projects on BSC, and here’s why:
Besides what I mentioned above, in terms of security, our code is open-source with every line having been combed through by hundreds of independent developers. We even have an ongoing bug bounty program to offer them high rewards if they spot as little as a minor issue. If you’re a developer, we invite you to have a look through our code yourself on our github.
We’ve also had multiple top security firms provide audits for our code. All our smart contracts have been audited by PeckShield. We also have an audit with Certik that should be finished this week.
Then, besides extensive code reviews having been conducted both internally and externally, there are also built-in safeguards in place. For example, all the contracts we deploy are owned by a Timelock contract. Thus, any changes made by our developers will have a 24-hour lag before becoming effective. That means users will have ample time to withdraw their funds and exit safely in the case of any questionable update to the code. With tens of thousands of users, you can believe that every small change is under constant scrutiny from many participants. At times, it’s a tough job dealing with all their questions, but it’s honest work. 👨🌾
Why did you name it Alpaca Finance?
We love Alpacas and why wouldn’t we? They’re magical creatures. Well, if you’ve never gotten the opportunity to enjoy seeing a real one, that’s okay. If you collect enough of our NFTs, it’s almost as good! 🤣
NFT on roadmap Q2, can you give us more details on this? What are the benefits to NFT collectors?
The thing about NFTs is they can have different uses, because in essence, it’s a technology centered around non-fungibility. This is useful in some areas in DeFi, which you can see now with UniV3 using NFTs as LPs for example. For the most part though, most projects have been approaching NFTs as collectibles. In Alpaca’s case, we think about NFTs differently.
Our primary focus with NFTs is engagement. Yes, there is a collectible aspect to all our NFTs because they’re only minted once, and people speculate on their value. However, the collectible aspect is really only the tip of the iceberg with our approach to NFTs.
When we decided to create NFT campaigns and to integrate NFTs into our protocol, we weren’t thinking, “How can we create some trendy collectibles?” We were thinking, “How can we build engagement, a brand, a universe?” That’s why our NFT animated series exists, because there is a story behind the designs, an entire world of lore to explore, and each episode will reveal a little more of that.
By the end of the fourth episode, people will begin to see the bigger picture. After that, this world will continue unfolding more and more in front of their eyes. And it’ll be something they can continue to explore not only through this animated series, but also other forms of media we have planned that will add additional dimensions to the Alpaca world.
Beyond that, we also thought, “How can we tie this into our lending platform through utility, so that the NFTs are more than just a gimmick, so they provide something tangible in the form of profits for users?” That’s why we’ll have NFTs that do certain things in our platform, that users can use to stretch certain parameters such as lowering borrowing interest, raising lending interest, boosting APY in Grazing Range pools, etc. Then, we even took it one step further — can we do this in a way that isn’t arbitrary?
This last part is hard but it makes the integration more meaningful, and we’ve started coming up with solutions. For example, lots of people ask for more leverage, but the max leverage is set to protect new users from exposing themselves to too much risk. For experienced users, it’s probably okay to offer them more leverage, but how can we tell who’s experienced and who isn’t?
Well, one way is if they own some particular NFTs. That would mean they’ve been using Alpaca for a while, long enough that they should understand the finer points. Even if they buy the NFTs on a marketplace, it shows they at least have more advanced knowledge of NFTs, BSC, and DeFi, and the drive to pay for such an item, suggesting that they should be more responsible in how they interact with leverage. In this case, you could say this NFT is like a license.
Of course, this is only one example. More information will come out gradually. Even though we’ve already done some unique things such as the first NFT animated series with a story, event-oriented airdrops for AMA, and introduced NFT farming, it’s important to realize it’s only been a few days since we’ve deployed our first NFT. The NFT arm of Alpaca is only in the very beginning.
What are the original intentions and vision/future mission of Alpaca Finance?
The key to understand about Alpaca Finance is we’re not just a yield farming platform or an aggregator like most of the largest projects on BSC. Alpaca is different because we offer a unique utility that other platforms can’t match, not just to users, but to the entire DeFi ecosystem as a whole. What’s that? Leverage. Specifically, leveraged yield farming through undercollateralized loans, and I’ll explain why that’s important.
One thing most of you know is that within DeFi, the AMM model is the crux. Decentralized exchanges allow users to trade peer-to-peer in a non-custodial fashion, which made them popular over old-school centralized exchanges, leading to this DeFi boom we’re now in. Yet, in order for trading on decentralized exchanges to be possible, they need liquidity, which is where the current AMM + liquidity provider model came from.
Decentralized exchanges incentivize LPs through trading fees and yield farming rewards, and users add their assets as liquidity to enable the exchanges to have pools for trading. Without this relationship, most of DeFi would not be able to exist. Now, the reason Alpaca Finance is doing so well and will continue to do even better for a long time, is because our lending + Leveraged borrowing model amplifies the benefits from this AMM + liquidity provider model, which amplifies DeFi as a whole!
By offering leverage to farmers, users can farm with much higher APYs, creating stronger incentives for more of them to provide liquidity to AMMs. The exchanges also benefit, because they now have much more liquidity, allowing for lower price impact which makes for easier trading. This is the AMM model+++. This is DeFi boosted and magnified.
Yet, this can only happen with our tech, which is difficult to replicate, maintain, and grow, which is why we have so few competitors, and why Alpaca has grown so fast — because we build faster than others.
So, our model is unique. Alpaca is an amplifying liquidity layer for all of DeFi, and we aim to become an irreplaceable one. Right now, we have 2 billion TVL but we’re only on PancakeSwap. What’s going to happen if we integrate more exchanges? How about more blockchains?
Please talk more about the effect and strategies for lending both sides of a pair?
So this is a unique feature that we’ll be releasing in about a week and no other platform has this. In essence, you’ll be able to choose which token of a pair to borrow.
So for example, in BNB-BUSD, you’ll be able to borrow BNB or BUSD. This is significant because when you borrow above 2x leverage, you’re actually shorting the asset that you borrow. So if you borrow BUSD at 3x, you are long BNB (shorting BUSD is effectively the same as being neutral). But if you borrow BNB at 3x, you are short BNB. This means that you can customize your long or short exposure while earning yields through farming.
In this case, you’ll be able to farm while betting if BNB will go up or down in price. So unlike in other farms, you won’t be forced to only go long, taking a loss if the asset drops in price.
Can you imagine how useful this would be in a bear market? At other protocols, you will not be able to make money farming in a bear market because the asset prices would be constantly dropping. With us, you can profit from farming in any market conditions. Furthermore, these features will be useful not only for retail users but also advanced and institutional investors.
Typically, if an advanced investor wants to short or hedge, they will need to take out a derivative which they have to pay to hold. With us, it’s the opposite. They earn yields while shorting and hedging! We believe this unique ability will attract adoption from a number of funds and institutions. And this is only one strategic advantage among the big things we have planned.
Is the derivative market your main focus? How do you plan to boost the TVL more?
So in essence, we’re a lending platform. As you said, one unique strategic advantage our protocol has is of derivatives customization. It’s not a margin exchange where you can short at 20x or 100x for a quick profit, but Alpaca is likely the best platform for wealthy individuals and large funds that want a safe haven for their assets where they can customize their exposures and receive high and reliable yields. I’ll return to this in a bit.
Right now, we’re 2nd on BSC with 2 billion TVL with a market cap of 176 million. Venus is first with 7 billion TVL and a market cap of 1.3 billion. Compound on ETH has a TVL of 20B with a market cap of 4 billion. So we still have a lot of room to grow and our goal is to become the top lending platform on all chains. I believe we can achieve that for several reasons.
First, if we’re only talking about lending, we have the highest APYs in all our assets: BNB, BUSD, ETH, ALPACA, etc. Especially for BUSD, depending on the amount of borrowers, the APY climbs to between 50 and 80% not infrequently.
Second, unlike other platforms, we have no deposit fees, no withdrawal fees, and no hidden fees. These can be quite significant and subtract a lot from the displayed APY. With us though, what you see is what you get.
Third, we’re developing faster than others. Even with keeping our security at the highest standard, getting regular audits and such, we’ve been releasing many features one after another, and that was before our dev team expanded this week so we’ll be ramping things up soon. Actually, it scares me a little thinking about it because we had 1315 github commits in the past 2 months. I think that might be some kind of DeFi record…
Finally, and this may be the most important thing — how we think about DeFi is very different from others. We have a very different strategic viewpoint than other platforms in how we design our protocol. Rather than just adding lots of meaningless technical features, everything we do is part of a greater long-term plan.
Of course, in the short term, we focus on a few key issues:
1.How can we give our users the highest profits?
2.How can we design our product to be the easiest to use?
3.How can we build the safest and most reliable protocol?
In the long-term, however, we focus on something others seem to ignore, it’s what we call internal composability.
You see, most other platforms focus on external composability, thinking about how can they easily integrate with other protocols; AMMs, lending platforms, etc. We think about: how can we make features to allow our users to best customize their ideal financial strategies and portfolios, all while making profits from yield farming.
That’s why our pools are actually building blocks for customizable strategy creation.
First, you can customize risk. If you want low risk, you can lend or leveraged farm stable pairs. If you want high risk, you can take out leveraged positions on the assets of your choice in exchange for very high APYs.
Second, you can customize exposure. You can choose which asset to borrow to create long, short, or neutral positions. You can even use our products to hedge internal or external exposures for multi-platform strategies. We’re even working on some features that we haven’t announced that will allow for more powerful shorting and hedging while farming, creating shorts without impermanent loss or variable exposures.
So, in general, Alpaca is an asset shelter, and it’s one where you can place bets on the assets you’re bullish or bearish on, and earn yields while doing so in either direction. It will also help your portfolio thrive in any market conditions: bull or bear. No other platform in crypto offers this, and they can’t offer this.
When does the Chinese website go online?
We’re working on the docs first because we want people to have the proper informational materials available first. These are almost ready. Then we will do the website and it shouldn’t take too long.
Binance doesn’t allow teams to discuss listings in advance. 🙂