Alpha Homora v2 in Yield Farmers’ Perspectives
To prepare for Alpha Homora v2 launch that is around the corner, let’s get comfortable with how Alpha Homora v2 works from yield farmers’ perspectives.
Recap of Alpha Homora v2 From Yield Farmers’ Perspectives
- Yield farmers can open leveraged yield farming positions of liquidity pools that are on Curve, Balancer, SushiSwap, and Uniswap
- Yield farmers can take leverage on many assets including ETH, stablecoins, and other assets
- Yield farmers can open up to 9x leveraged yield farming positions for selected pools
- Once positions are opened, yield farmers can easily manage their positions
- Add more collateral (to deleverage)
- Remove some collateral from a position (to re-leverage)
- Pay back some debt (to deleverage)
- Claim farmed tokens
5. Similar to Alpha Homora V1, yield farmers don’t need to have equal value of both tokens in order to yield farm
Yield Farmers’ Perspectives: Opening a position
There are 4 simple steps to open a leveraged yield farming position on Alpha Homora v2:
1️⃣ Select a pool
2️⃣ Supply liquidity
3️⃣ Select leverage & how much of each asset you want to borrow
4️⃣ Confirm strategy
Let’s take a look into the details.
1️⃣ Select a pool
As mentioned, Alpha Homora V2 will enable leveraged yield farming of liquidity pools that are on Curve, Balancer, SushiSwap, and Uniswap. Users can select these pools on Dashboard page.
2️⃣ Supply liquidity
Yield farmers don’t need to have equal value of both tokens in order to yield farm on Alpha Homora v2 (similar to Alpha Homora v1), as Alpha Homora v2 will automatically and optimally swap the assets to arrive at equal value of both tokens before taking care of the yield farming process for our users. In the example below, users can supply only DAI or only ETH or both.
3️⃣ Select leverage & how much of each asset you want to borrow
Because users can take leverage on ETH, stablecoins, and many other assets (e.g. YFI, DPI, etc.), Alpha Homora v2 uses the concept of collateral credit and borrowing credit. While we hide this complexity from the app’s user interface, we will go through the concept here for users who are interested.
Collateral credit: Each asset has its own collateral credit value. A collateral credit value determines how much credit is gained from collateralizing an asset.
Borrowing credit: Each asset also has its own borrowing credit value. A borrowing credit value determines how much credit is consumed from borrowing an asset.
The collateral credit and borrowing credit of an asset depend on the volatility of the asset price. If an asset is volatile, the collateral credit will be low and the borrowing credit will be high. With this mechanism, Alpha Homora v2 can set parameters according to the volatility of each asset and set different buffer parameters for different assets to ensure security of the protocol.
Multiple borrow: Once users select leveraged level, users will be able to decide which asset they want to take the leverage on. In the image above for the DAI-ETH pool on Uniswap, users can decide whether to borrow ETH or DAI or both.
💡 Hint: This is the step where ALPHA tokenomics will come in to help users get more from their yield farming positions. Stay tuned!
4️⃣ Confirm strategy
Finally, confirm the strategy. After that, Alpha Homora will take care of the yield farming process for you.
Yield Farmers’ Perspectives: Once positions are opened
Once users have open positions, they can view all the important information on Your Info section of the Dashboard page by clicking on the dropdown arrow of a particular position (right side of the image below).
To do more actions with their positions, including Add, Remove, Harvest, and Close, users can go to Your Positions page.
Add: Add action will allow users to add more collateral to the existing position.
Remove: Remove action will allow users to partially withdraw the collateral from a position as well as payback the loans.
Harvest: Harvest action will allow users to claim the farmed tokens.
Close: Close action will close the whole position, automatically repay all the debt, and return users the remaining assets.
Risks
Like any borrowing with leverage, Alpha Homora V2 has its own risk. The below has outlined risks yield farmers may face.
For yield farmers and liquidity providers with no leverage (or opening a position with 1x)
- Users in this category are exposed to impermanent loss risk. See more about impermanent loss here.
Note: This is the same risk as participating in other yield farming or liquidity providing opportunities in AMM pools.
For yield farmers and liquidity providers with leverage (or opening a position with more than 1x)
- Users in this category are also exposed to impermanent loss risk.
- Additionally, users in this category also take the risk of being liquidated, since users are borrowing assets from Alpha Homora v2 when taking more than 1x leverage. Liquidation takes place when Debt Ratio reaches 100%. Debt ratio is a ratio that represents how much a user has borrowed to how much a user has as collateral.
About Alpha Finance Lab
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