Leveraged yield farming and liquidity provision, up to 200x leverage
Lightning-fast liquidations protecting the protocol LPs
Lower margin requirements without sacrificing security of the liquidity providers
Dynamic rates on leverage optimize capital efficiency for all participants
There are four sources of yield in Alf:
All of the components are fairly standard and represent well-known primitives:
- Liquidity pools
- Lending module
- Constant-product AMM
- DAO contracts
The future-proof flexibility is achieved by uncoupling the key components through standardized interfaces that allow enabling and disabling modules at discretion of the team and, later, the protocol DAO.
The basic risk framework of leveraged liquidity provision on AMMs is between trading volume (the amount of capital traded through the AMM pair within a time frame) and price movements (the maximal difference between quote prices on a given pair within a time frame).
Constant-product AMMs suffer from what is called impermanent loss,— a loss that liquidity providers make when the quote price diverges from the one when they entered their position. When prices diverge, impermanent loss starts to accrue, which is amplified with leverage for a leveraged position, until the position is exited, de-leveraged, or liquidated.
Another solution (offered by Alf) would be to shift the borrowed capital into other types of positions when the market is moving, or automatically exit the position before a loss can grow out of proportion. This is maintained through oracle connections (to monitor prices on external markets and compare them with the AMM prices) and a flexible pool of alternative strategies that the risk-seeking investors can subscribe to.
For select position types, Alf enables additional collateralization of leveraged positions with assets that are not entered into the position itself.
To provide margin, Alf borrows either LP tokens, or underlyings, of the targeted positions, primarily using its own internal liquidity pools (built by AlfMM and the lending solution). But in addition, Alf can tap into external liquidity of overcollateralized lending solutions (such as Solaris), offering the users to provide collateral in additional assets (that are used to collateralize these external borrowing positions).