Alpha Homora V2 - Using LP Tokens As Collateral

Alpha Homora V2 - Using LP Tokens As Collateral

As we covered in our blog post earlier this week, the hotly anticipated relaunch of Alpha Homora V2 on Ethereum will bring new features to the table for all lenders and leveraged yield farmers. Today, we’ll dive into one new core function on the leveraged yield farmer side -  using LP tokens as collateral.

Specifically, leveraged yield farmers will be able to Bring-Your-Own-LP (BYOLP) token from the 4 base AMM protocols, Uniswap, SushiSwap, Curve, and Balancer, to use as collateral on Alpha Homora V2 to then borrow assets to yield farm. This BYOLP feature will significantly improve capital efficiency and user experience, as existing liquidity providers and yield farmers the 4 base AMM protocols will be able to leverage yield farm on top of the current farming or liquidity providing positions users may already have on the base AMM protocols.

What will the user journey look like when using our BYLOP feature on Alpha Homora V2, and what are the associated benefits and risks for yield farmers to note? Read on to find out.

User Journey For Using LP Token as Collateral

The above infographic shows the high-level overview of how this feature works. To understand this flow better, we have outlined a detailed step-by-step guide below on how to open a yield farming position using LP tokens as collateral.

1) Select a Pool

As the relaunch of Alpha Homora V2 on Ethereum will enable leveraged yield farming of liquidity pools that are on Curve, Balancer, SushiSwap, and Uniswap, users need to first select the pool(s) they wish to farm on our dashboard.

2) Supply Liquidity Including LP Token

For the second step, yield farmers need to supply liquidity as collateral - which farmers will be able to do with LP tokens from Uniswap, SushiSwap, Curve, and Balancer.

In the example below, users can supply only UNI-ETH LP token, only UNI, only ETH, or any combination of these assets. 10 UNI LP tokens are provided as liquidity in the example shown below.

Note that yield farmers don’t need to have equal value of tokens required in order to farm on Alpha Homora v2. Alpha Homora V2 will automatically and optimally swap your assets provided as liquidity to arrive at an equal value of both tokens needed to begin the yield farming process.

3) Select Leverage Level, Assets to Borrow, and Proportion of Assets to Borrow

Next, leveraged yield farmers then select the leverage level they wish to open a farming position at. Once the desired leverage level has been selected (e.g. 1.77x shown below), users need to specify which asset(s) the user wants to borrow and for how much.

Using the image below as an example, if the user wants to borrow only ETH, he needs to select 100% ETH.

4) Confirm Strategy

Finally, leveraged yield farmers need to confirm their strategy. After confirmation of strategy is complete, Alpha Homora V2 will take care of the yield farming process for you. Note that users need to monitor all open positions for liquidation risk. See our additional Alpha Homora V2 project document for more information on how to manage your open positions.

Benefits and Risks

Alongside this step-by-step guide on how users can utilize their LP tokens on Alpha Homora V2, we’re highlighting the benefits and risks of yield farming on leverage. As experienced Alpha Homora users know, and a recap for new users, yield farming on leverage allows users to multiply potential benefits (e.g. yield farming APY, trading fees APY) while simultaneously multiplying the inherent risks. It’s vital to understand both concepts, so, let’s unpack the specific benefits and risks leveraged yield farmers need to be aware of on Alpha Homora V2.


The core benefits to leveraged yield farming on Alpha Homora V2 on Ethereum will be:

  • Earn farmed tokens from yield farming process (and higher APY from leverage).
  • Earn trading fees APY for providing liquidity to pools (and higher APY from leverage).
  • Earn additional liquidity mining rewards (ALPHA).
  • Optimized and automated yield farming process for users.


As is the case with any borrowing on leverage, it’s equally important for users to understand the associated risks.

‌For leveraged yield farmers and liquidity providers who use LP tokens as collateral to borrow other assets to leveraged yield farm, the associated risks are below:

  • Users are exposed to impermanent loss risk. The impermanent loss risk is amplified by the leverage level that users enter at.
  • Note that impermanent loss risk is minimal in a pool with all stablecoins (e.g. Curve 3pool that consists of USDT, USDC, and DAI).
  • The leverage users take on + the impermanent loss risk means that users’ positions also have liquidation risk and require monitoring.

Closing Thoughts

Supporting LP tokens as collateral is one of many new functionalities that will be a part of the Alpha Homora V2 on Ethereum relaunch. All unique features that will comprise Alpha Homora V2, on both the borrowing and yield farming side of the protocol, will boost:

→ adoption and growth for the Alpha Homora V2 platform.

→ expansion of the Alpha Homora V2 protocol through various partners in the pipeline.

→ accrual of more protocol fees for ALPHA stakers. 🚀

Stay tuned for more details, as we continue to update our Alpha Wolf community on the ramp up towards the relaunch of Alpha Homora V2 on Ethereum!

About Alpha Finance Lab

Alpha Finance Lab is a DeFi Lab and on a mission to build an ecosystem of DeFi products (the Alpha ecosystem), consisting of innovative building blocks that capture unaddressed demand in key pillars of the financial system. These building blocks will interoperate, creating the Alpha ecosystem that will be an innovative and more capital efficient way to banking in DeFi.

Alpha Homora is Alpha Finance Lab’s first product and DeFi’s first leveraged yield farming product that captures the market gap in lending, one of the key pillars of the financial system.

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