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

Dear Alpacas,

We published an article last month on the early withdrawal feature for the Governance Vault Governance Vault Part 2 Is Here!

https://medium.com/alpaca-finance/governance-vault-part-2-is-here-early-withdrawal-governance-insurance-plan-ee5c4c6356eb

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The penalty for early withdrawal will be 0.75% of the withdrawn amount per week of remaining locked time.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. )

Example:

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Penalty = 0.75% * roundup(65 / 7) = 7.5% of the withdrawn amount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

AIP discussion thread: https://forum.alpacafinance.org/t/aip-3-handling-of-governance-vaults-early-withdrawal-penalty/258

Voting

Five voting choices are presented and users can vote by Ranked Choice Voting (IRV) . More info: https://docs.snapshot.org/proposals/voting-types

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