ALPHA Tokenomics: Fee Accrual in the Alpha Ecosystem

ALPHA Tokenomics: Fee Accrual in the Alpha Ecosystem

As the hotly anticipated launch of ALPHA’s tokenomics is right around the corner, we want to take a deep-dive into staking and Alpha ecosystem’s fee accrual.

Alpha’s innovative fee collection process is a key reason staking will enable numerous unique benefits for ALPHA token holders and the Alpha ecosystem as a whole. ALPHA stakers will not only earn protocol fees from Alpha’s entire product suite, but will also unlock product specific benefits by utilizing them as ALPHA stakers!  

What Makes Alpha’s Fee Accrual Distinct?

  1. As Alpha is building a robust, interoperable ecosystem, fees accrual is enabled on all of Alpha’s innovative products
  2. As the Alpha ecosystem has a multi-chain backbone (only to be further developed across chains and layer two solutions), ALPHA stakers will collect distributed fees from all chains and all layer two solutions Alpha products operate on

Given ALPHA token holders will have the opportunity to be the original stakers on the ground floor of the Alpha ecosystem, we’ll cover Alpha’s fee accrual mechanisms comprehensively.

Which Products Are Accruing Fees in The Alpha Ecosystem?

Since Alpha Homora’s inception as the first leveraged yield farming platform in October, 2020, demand for Alpha’s initial product has skyrocketed - with TVL reaching an all-time-high  at $1.26B in February, 2021.

As demand for Alpha Homora v1 on Ethereum grows, Alpha has subsequently launched Alpha Homora v2 on Ethereum and Alpha Homora vBSC to provide additional leveraged yield farming and liquidity providing opportunities. Fees accrued so far are generated from all three current versions of Alpha Homora, and future fees will only increase as they start to agglomerate from all future Alpha products - such as AlphaX.

What’s The Total Value of Fees Collected and Where Do They Come From?

While future fees accrued are set to increase alongside impending product launches (and high demand for Alpha Homora) we want to give a snapshot of fees collected to-date. In just the first six months, the Alpha Homora protocol has accumulated $1.7M in fees. These accrued fees are collected by Alpha taking 10% of the borrowing interest rate on the Alpha Homora protocol.

For context in the market, the below table shows fees accrued on the Alpha Homora protocols and on two other established lending protocols:

In each protocol’s first six months of operation, Alpha Homora, Compound, and AAVE accrued $1.7M, $1.4M, and $85k in fees respectively.

As demand for leveraged yield farming and liquidity providing continues to increase, we anticipate a corresponding rise in fees accrued by Alpha. Given Alpha will also accrue fees from all products, the impending launch of AlphaX and other future products is set to bolster Alpha’s reserves.

How Will Accrued Fees Be Distributed to ALPHA Stakers?

Now that we’ve covered how Alpha collects fees, we’ll go over how accrued fees are distributed - including the rewards to ALPHA stakers!

  • 75% of the total fees accrued by the Alpha Homora protocols will be distributed to all ALPHA stakers in a form of ALPHA tokens. ALPHA stakers will receive tokens in proportion to the amount of ALPHA personally staked vs. total ALPHA staked.
  • 5% of current fees collected by Alpha Homora are set aside for long-term developer grants, as Alpha continues to innovate and decentralize the project
  • 20% of fees accrued by the Alpha Homora protocol will repay outstanding debt owed to C.R.E.A.M. (additional details here)
  • All fees from Alpha’s current and future product suite (not just Alpha Homora) will be collected and distributed proportionally to ALPHA stakers. As Alpha launches new products, further details on the distribution of fees from new products will be released
  • The ALPHA staking contract will launch on Ethereum, however, fees will accrue across all chains - keeping with Alpha’s chain agnostic vision

What Are The Risks to ALPHA Stakers?

Staked ALPHA tokens will serve a critical role in helping to insure the entire Alpha ecosystem in case additional insurance is needed. While Alpha products have built-in mechanisms in place to combat market swings, there are systemic risks with staking your ALPHA. However, there is no impermanent loss or liquidation risk associated with staking ALPHA tokens.

Closing Thoughts

With the kick-off of Alpha’s tokenomics rapidly approaching, we wanted to give the community insight into how our fee accrual process provides unique opportunities to ALPHA stakers, and the Alpha ecosystem as a whole! ALPHA stakers will not only start receiving portions of fees accrued, but will also immediately unlock product specific features as ALPHA stakers. The launch of Alpha’s tokenomics will truly have a cataclysmic impact on the Alpha ecosystem.

Stay tuned over the next week as we continue to delve into ALPHA’s upcoming tokenomics!

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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