Homora V2 has officially launched on Optimism!
As the first in-house product by Alpha Venture DAO’s Build Arm, Homora V2 is excited to announce its launch on Optimism, being the first leveraged liquidity-providing protocol to build on top of Uniswap v3! This will be the first time we expand to layer-2 solutions and we can’t wait to share what we’ve been working on behind the scenes.
During the past few months, we have seen significant adoption and growth in L2s, especially with DeFi and protocols focusing on interoperability between chains. Homora V2 has also been eyeing the next promising chain to expand to.
As of August 2022, Optimism has already surpassed 1 billion TVL, accounting for over 50% TVL in all chains using rollup combined, gaining a lot of momentum and traction. With this, we are ready to join #OPSummer and bring new, innovative yield opportunities to Optimism.
When Two Innovations Meet
Ever since Uniswap first launched, Uniswap Labs have continued to bring the best solutions to iterate and improve AMM even further each time with each version. Uniswap v3 has since been considered to be one of the furthest innovations possible for an AMM. Thus, we hope that by integrating with Uniswap v3, we will unlock more potential on how users can interact with Uniswap v3 in terms of capital efficiency and liquidity providing.
Homora V2 on Optimism will launch first with pools from Uniswap v3, allowing users to earn even higher trading fees on top of the concentrated liquidity mechanism. We will start off by listing the pool with the fee tier that meets our pool listing guidelines (ie. pools with high liquidity depth and sustainable yields). To open the launch, we will be launching with 3 pools from Uniswap v3 and 3 lending pools (with LM rewards at launch - more details coming soon):
- USDC-DAI 0.05%
- wETH-DAI 0.03%
- wETH-USDC 0.05%
Initial credit limits for leverage will be set at $500K for ETH and $300K each for USDC and DAI and will increase over time based on demand.
What’s New on Homora V2 With Optimism Launch?
As Uniswap v3 is not like any other DEX, our team carefully curated a few new features to ensure users can still farm with leverage smoothly without the manual complexity.
For the pools listed from Uniswap v3, there will be a slight change to the name. Each listed pool will be attached to the associated fee tier so users will be able to identify the fee tier directly by the pool name.
More details about Multiple Fee Tiers here
Recommended Active Price Range
In order to improve the UX for Homora V2 users, our research team has identified the optimal set of price ranges for users to farm in. In a sense, we are bringing a certain degree of convenience in exchange for full flexibility.
Homora V2 offers a middle ground where users will be able to reach higher levels of capital efficiency while maximizing the chance of earning trading fees. Our research has carefully researched the optimal values. Users can read more about what it is and how we came up with them here.
For all pools, users will be able to pick from one of the three price ranges depending on the user's risk appetite. Each price range is assigned a number unit (price ratio) to calculate the upper and lower bound of the price range:
Wide price range [low risk with lower capital efficiency]:
- 2X for stable-volatile pools
- 1.0002X for stable-stable pools
Medium-wide price range [med risk with medium capital efficiency]:
- 1.5X for stable-volatile pools
- 1.0005X for stable-stable pools
Narrow price range [high risk with higher capital efficiency]:
- 1.3X for stable-volatile pools
- 1.001X for stable-stable pools
To understand better, please read details about the Active Price Range here.
1-Click Reinvest Feature
Since trading fees earned from Uniswap v3 pools are not auto-compounded, we have added an additional feature that allows users to compound accrued fees in one click depending on the frequency needed.
Since trading fees are not auto-compounded, your debt from the borrowing interest(s) will continue to add up. As such, reinvesting regularly is highly recommended as not only will it help increase your position value (and earn more fees), but it will also help maintain a healthier leveraged position.
Concentrated liquidity is one of the newly introduced concepts in Uniswap v3 that enabled higher capital efficiency. Uniswap v3 allows you to customize the price range and concentrate where you would like the liquidity to be, as compared to providing liquidity at the price range from 0 to infinity.
However, in order to earn trading fees, the selected price range must be in an active liquidity state. If the traded price goes outside the selected range, then users will not be earning any trading fees.
Risks & Prevention
As always, becoming a LPer on AMM comes with the risk of impermanent loss. With Uniswap v3’s new mechanisms, it increases the IL risk even further should the users’ position go outside the active liquidity range in correlation with the risk of liquidation.
For more details, please refer here.
To help our users mitigate the risks as much as possible, we have added a few adjustments on Homora V2:
- Increase Liquidation Buffer Before Opening Position
- Since it’s much easier to be liquidated as Uniswap V3 LP position is not auto-compounded to user's position, we have adjusted the debt ratio to 85% before opening a position. This will enable a larger buffer for price fluctuation before reaching the liquidation point. In our previous versions, Homora users are able to leverage a maximum of up to 95% debt ratio on default based on the leverage and supplied assets the user input.
2. 1-Click Reinvest Button
- As the trading fees on Uniswap v3 are not auto-compounded to your LP position as compared to normal v2, the user's debt ratio will only be increasing if the position’s value does not increase accordingly until it reaches 100%. Thus, we have added a reinvest button so users can easily compound their trading fees to lower liquidation risk.
To kick off the launch, users who participate in lending on Homora V2 Optimism will be eligible for our LM rewards. Once we have gained some organic traction and TVL, we will actively work with the Optimism community and apply for Optimism’s Grant Program afterward. For the next phase, we’d love to hear more from the community to see what other pools we should list or DEXes we should integrate with (Velodrome? BeethovenX? 👀).
We hope you are as excited as we are about the new launch! Happy farming!
Watch our launch trailer here: https://twitter.com/Alpha_HomoraV2/status/1559899188523331586
About Alpha Venture DAO (Previously Alpha Finance Lab)
A Builders’ DAO. We explore and innovate at the fringes of Web3 and drive significant value to Web3 users, and ultimately, alpha returns to the Alpha community.