Right out of the gate we want to make it clear, this is a risky venture with high risks and correspondingly high rewards. It involves both lending and a risk of liquidation so be sure you understand the risks.
For some quick background, we’ll be looking at Alpha Homora by Alpha Finance, who specialize in cross-chain DeFi and Liquidity. They are led by Tascha (unlike many recent projects which have been anonymous) and it seems to be a legitimate project.
Alpha Homora offers four services from the upper tabs on their website. The first, ‘Farm’, allows you to leverage your liquidity provider position in several pools at once.
Although the project is legit, the risks are still great due to the nature of the project: you’re leveraging (borrowing capital your liquidity provider position in certain pools. There’s not only the normal risk of impermanent loss that we’ve already covered before, but because you’re also borrowing, there’s the additional risk of being liquidated due to price fluctuations. To help you better-understand the potential dangers, please refer to their Protocol Risks document before you dive in, including the deep dive at the end for a more-detailed risk analysis.
This ecosystem also lets you farm alpha tokens, which are listed on Binance and other exchanges, but bear in mind these farmed tokens can only be claimable at the end of this farming period, in a couple months or so.
We will cover all four of the top tabs on their website starting with the leveraged Farm protocol.
LEVERAGED FARMING OF UNI POOLS
The core product of Alpha Homora, as stated, allows you to leverage your Liquidity Provider Position in certain Uniswap pools (see above). The protocol takes the UNI tokens generated by your liquidity providing and sells them for additional liquidity in the pool. This allows your interest to compound, and you’re able to leverage this position for additional interest.
The pop-up screen details the various yields and expenses based upon how leveraged you want to be (1, 2 or 3x). The 1x represents the normal Uniswap APYs without any leverage. You may ask ‘why would I do 1x, and not just enter the UNI Pool instead?’ Well this will automate the selling of UNI tokens to increase your position, so that’s handy. But if you move it up to 2x or 3x, you’ll see the Yield Farm APY, the Trading Fees APY and also the Borrowing Interest APY (paid by you) all increase by that factor. There is utility in using this service even without the leverage, but that’s it’s real distinctiveness. There is a minimum debt position of 2 ETH (and a maximum of 9,054 ETH).
If you’re using the leveraged aspect of the protocol, you can get liquidated, and that’s the part we’ll feature next.
LIQUIDATIONS FROM THE ‘POSITIONS’ TAB
The second feature we’ll highlight is ‘Positions’ and it’s here that you can see potential liquidations (yours and others). The key to watch here is the Debt Ratio to Kill Factor. Once the Debt Ratio reaches the mark of the Kill Factor, those positions can be liquidated, causing many of the gains made through LP and farming to be lost. Did we mention this was high risk? And anyone can liquidate any pool. So not only can you lend and borrow on this platform, but you can also liquidate, giving you a bonus as the liquidator, a portion of the liquidation fees. Once the ‘Kill Factor’ gets to 0% or negative, anyone can liquidate you at a click or a button, or you can liquidate others!
REINVESTMENT OF POOL REWARDS
The third service we’ll cover is under the Pool Status tab, and that’s where you have the option to reinvest rewards back into the protocol. This is the mechanism for how the tokens get reinvested into the pools, they allow users to do the Reinvesting (for instance, INDEX tokens farmed from the WETH/DPI pool) for the protocol. They pay you a 3% fee to do this, but many times the gas fees will exceed the 3% proceeds, but it’s worth watching and knowing about.
LOAN OUT YOUR ETH
The last protocol feature we’ll touch on is under the ‘Earn On ETH’ tab and that’s what allows you to convert ETH to ibETH and make a return (at the time of writing that return is 7.82% but it swings dramatically). This also enables you to earn ALPHA tokens, but again, those ALPHA rewards be locked until some time in November.
If you’re looking to supercharge your UNI farms, this might be the high-risk venture you’re looking for. Perhaps you want to be the one to rain on another’s party and liquidate them. Alpha Homora allows you to do both.
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