Author: Andrey Sergeenkov
Summary
Liquidity mining in the DeFi industry is usually completed by providing liquidity to decentralized exchanges (DEX) such as Uniswap. In return, users receive a portion of the fees generated by the trading pairs for which they provide liquidity.
Alpha Homora can increase the leverage of your liquidity mining positions up to 2.5x. It also allows you to earn returns based on your personal preferences and risk appetite. This way, you can increase your overall liquidity mining returns. However, as is often the case with leverage, risks are magnified. Let’s understand the specific principles.
Introduction
The more successful projects in DeFi allow users to participate in liquidity mining by providing liquidity. Much of this work revolves around the Ethereum ecosystem, which, as historically, has been the dominant network for decentralized financial tools and applications. Binance Smart Chain (BSC) also supports this type of functionality, which is why the Alpha Finance Lab team decided to build a DeFi ecosystem on BSC and Ethereum.
What is Alpha Homora?
Alpha Homora is the second working product developed by Alpha Finance Lab. It is specifically designed to allow users to leverage their liquidity mining exposure. More specifically, users participating in DeFi liquidity mining can “zoom in” on their positions. This may be the first time that the leverage function has entered the vision of DeFi miners, and it also makes Alpha Homora a unique project in the field of decentralized finance.
Liquidity mining isn’t the only option worth exploring. Alpha Homora supports ETH lending and allows participants to become special users called "liquidators" and "bounty hunters." We’ll explore this in detail later. Best of all, all of these options allow users to earn based on their personal preferences and risk appetite. All of these options come with high APY rewards, making Alpha Homora attractive for DeFine enthusiasts.
Alpha Homora Liquidity Mining Options
The first option to explore in Alpha Homora is liquidity mining. Once users connect their wallets, they can deposit funds, determine leverage, and start mining immediately.
Currently, the mining pools supported by Alpha Homora include:
WETH/WBTC(Uniswap)
WETH/USDT(Uniswap)
WETH/USDC(Uniswap)
WETH/HAI(Uniswap)
WETH/DPI(IndexCoop)
An important aspect of liquidity mining with Alpha Homora is how the ALPHA tokens obtained from mining are reinvested on a daily basis. According to the team, this will result in higher profit potential in a completely passive manner.
Detailed explanation of ALPHA token
ALPHA is a utility and governance token that is used not only on the Alpha Homora protocol but also other products in the Alpha Finance ecosystem. ALPHA token is also the first project to be launched on Binance Launchpad and new coin mining at the same time.
Its use cases include providing liquidity, staking ALPHA to receive a portion of protocol fees, and unlocking interoperability features between different Alpha products.
For governance, there are two aspects to consider. First, ALPHA token holders can manage key indicators of specific assets, including interest rates, value ratios, forced liquidation penalties, etc. The second layer involves broader protocol-level governance. According to Alpha Finance Lab, ALPHA owners will be able to decide how different Alpha products work more smoothly together in the future.
Benefits of Alpha Homora
innovation
Alpha Homora brings a new way to engage in liquidity mining, which is beneficial to miners and the entire DeFi industry. Alpha Homora allows users to earn higher APY without trusting any middlemen.
security audit
Smart contract auditing is an important issue for investors. Many DeFi projects are launched without proper security audits. In contrast, Alpha Homora’s smart contracts have been audited by Peckshield. You can view the Alpha Finance security audit report here.
Governance Token
Adding Alpha Homora to the Alpha Finance ecosystem brings additional synergies to the ALPHA token. Like other Alpha products, the token is used as part of the governance of the Alpha Homora protocol. Community involvement is an important step towards long-term sustainable development.
Risks of Alpha Homora
Forced liquidation
Just like other strategies that include leverage, you need to be extra careful. You should only deposit funds if you fully understand the risks of liquidation. In Alpha Homora, miners face the risk of being forced to liquidate their positions. As long as users keep Uniswap's solvency above 80% and IndexCoop's solvency above 60%, positions will not be liquidated. That is, leveraged positions can be liquidated on Uniswap once the debt value exceeds 80% of the position value (excluding interactive spreads).
Potential vulnerabilities
It should be noted that auditing the code does not mean that using the contract is completely risk-free. Bugs and bugs are always an integral part of any software, and you need to keep this in mind when interacting with any smart contract.
Ethereum Interest-bearing Vault
With Alpha Homora, you can earn interest on your Ethereum holdings through interest-bearing positions. You can deposit ETH into Alpha Homora Bank and receive ibETH tokens in return. These ibETH tokens are tradable assets, earn interest continuously, and represent your share of ETH in the bank pool.
Interest paid by ETH borrowers will be paid to ETH lenders in proportion to their share of the bank pool. The interest rate is determined by the bank's usage rate. The higher the usage, the higher the interest rate. Simply put, the higher the demand for borrowing, the higher the interest rate.
A portion of the interest paid is stored in the vault as an insurance fund to protect against black swan events.
Liquidators and Bounty Hunters
Alpha Homora offers some other unique features. Special users called "liquidators" can liquidate risky positions. This happens when the value of a user's position falls below the corresponding platform's liquidation rate. This means that positions that fall below the liquidation threshold are at risk of being manually liquidated. The liquidator will receive 5% of the forced liquidation value as a handling fee.
Bounty hunters are another special type of user. They can call a function in the contract to sell all the liquidity mining tokens in Alpha Homora's portfolio in exchange for ether. In this way, bounty hunters can reinvest the collected ETH into liquidity mining pools, netting 3% of the total revenue. This, in turn, reduces the returns for ibETH token lenders as their overall share of the total pool value decreases. You can find more details here.
➟ Want to start your digital currency journey? Welcome to buy Bitcoin (BTC) on Binance!
Summarize
The launch of Alpha Homora is an important milestone for the Alpha Finance ecosystem. Being able to enter leveraged liquidity mining positions is a major innovation for the entire DeFi field.
While liquidity mining is the main selling point, its Ethereum interest-bearing account could also attract more advanced users. This coupled with the ability to become a liquidator or bounty hunter gives the blockchain community a variety of ways to interact with the platform.
