Alpha Homora - Leveraged Yield Farming

Nick Sawinyh on 01 Feb 2021

Tascha Punyaneramitdee about leveraged yield farming product and what’s coming next at Alpha Finance Lab.

Hello! What’s your background, and what are you working on?

My name is Tascha Punyaneramitdee, Co-Founder and Project Lead of Alpha Finance Lab. I studied Economics at UC Berkeley and started my career as a Technology Investment Banker in San Francisco then in London. Previously, I was working in a product management team at Tencent in Thailand before I joined Band Protocol as a Head of Strategy. Afterwards, I left to start Alpha Finance Lab with Nipun Pitimanaaree. Throughout my career, I’ve always been interested in technology and finance, so I’ve been following DeFi for a long time before starting Alpha Finance Lab after realizing a number of market gaps needed to be captured before the industry can reach the next growth stage.

Alpha Finance Lab is building an ecosystem of DeFi products that will interoperate to maximize returns while minimizing risks for users. Alpha products focus on capturing unaddressed demand in DeFi in an innovative and user friendly way. While each Alpha product addresses market gaps in the sector the product is in, the various Alpha products will then work together as an Alpha ecosystem.

The first Alpha product is Alpha Homora, the leveraged yield farming product, which is the focus of this interview.

Alpha Finance Lab’s investors include The Spartan Group, Multicoin Capital, and DeFiance Capital.

Who are your competitors?

Since Alpha Finance Lab is building an ecosystem of DeFi products, the competitors will vary across the product suite.

Alpha Homora

Alpha Homora is the first protocol offering leveraged yield farming services. While some compare Alpha Homora to yield aggregators, we believe that both Alpha Homora and yield aggregators will benefit from working together. Specifically, yield aggregators can use the leveraged functionality that Alpha Homora offers to grow the usages of their protocols.

AlphaX

AlphaX is the perpetual swap trading product and the second Alpha product (on private testnet now). However, AlphaX is also not directly competing with other perpetual swap trading products, as AlphaX is in fact expanding the TAM (total addressable market) for this DeFi segment by targeting anyone in DeFi as opposed to the current perpetual swap traders who are trading on centralized exchanges.

With these target users in mind, we have built AlphaX to bake in the funding payments into the price (so DeFi users don’t need to even understand funding rate) and to tokenize leveraged positions (so DeFi users can use these tokens in other DeFi platforms).

What’s Alpha Homora backstory?

As we don’t limit ourselves to building products in a particular sector, but rather focusing on the end goal of maximizing returns while minimizing downside exposure for our users, we were able to spot two huge market gaps and build an innovative solution to address them.

The two market gaps are:

  • Market gap 1: There are many ETH holders bearing low lending interest rates on ETH.
  • Market gap 2: There are many yield farmers searching for higher yield farming APY.

In order to capture both market gaps, we built Alpha Homora, the first leveraged yield farming product in DeFi. Since Alpha Homora was launched in October 2020, it has gained significant product market fit with more than $600M total value locked. This total value locked comes from two user groups:

  1. Yield farmers who can get higher APY by opening leveraged yield farming position on Alpha Homora
  2. ETH lenders who can get a high lending interest rate by lending ETH on Alpha Homora. The high lending interest rate comes from the borrowing interest rate that the leveraged yield farmers pay when opening leveraged positions.

Alpha Homora v2! Can you tell us more about it?

Alpha Homora V2 will further establish itself as the go-to leveraged yield farming protocol in DeFi. Given the scalable structure Alpha Homora v2 is built, by integrating and working with key partners such as Cream, SushiSwap, Curve, and Balancer, Alpha Homora v2 will capture more user bases and continue to grow to become one of the key building blocks in DeFi. Alpha Homora v2 has been audited by Quantstamp and Peckshield.

What are the key features and functionalities in Alpha Homora V2?

  • Enabling leveraged yield farming of liquidity pools that are on Curve, Balancer, SushiSwap, and Uniswap
  • Leveraged yield farmers can take leverage on many assets including ETH, stablecoins, and other assets
  • For leveraging on stablecoins, users can open up to 9x positions
  • Flexible leveraged yield farming - users can borrow multiple assets, re-leverage, and deleverage their positions easily
  • Alpha Homora V2 will not automatically sell the farmed tokens to reinvest, as we want to help strengthen our partners’ communities
  • Similar to Alpha Homora V1, users don’t need to have equal value of both tokens in order to provide liquidity or yield farm

How Does Leveraged Yield Farming Work in Alpha Homora V2?

Leveraged yield farming is done in 4 simple steps.

  1. Select the pool on Alpha Homora V2. As mentioned above, Alpha Homora V2 will enable leveraged yield farming of liquidity pools that are on Curve, Balancer, SushiSwap, and Uniswap.
  2. Supply any of the 2 tokens for that pool. For instance, when leveraged yield farming on ETH/USDT pool on SushiSwap, you can supply only ETH or USDT or both. Image below.
  3. Enter which asset you want to borrow at what leverage level. You will be able to borrow multiple assets. In the example below, you can choose to borrow ETH or USDT.
  4. Finally, confirm the strategy. After that, Alpha Homora will take care of everything for you. Image below.

What is Iron Bank in Alpha Homora v2?

To enable Alpha Homora v2 users to take leverage on many assets, instead of only on ETH in Alpha Homora v1 and without having to bootstrap liquidity for all of the assets ourselves, we are partnering and integrating deeply with Cream v2 as a source of liquidity. Specifically, Alpha Homora v2 can borrow from Cream v2 in an under-collateralized way (what Cream calls Iron Bank). In addition to being a more efficient way of lending, this integration is the first time in DeFi to achieve corporate lending and under-collateralized lending between smart contracts.

What are your goals for the future?

In addition to Alpha Homora v2 and AlphaX, we are building more Alpha products this year. For each Alpha product, we will continue to pivot until we find the product market fit that translates to significant product usages, which later translate to significant value accrual to ALPHA token holders.

Additionally, we aim to have Alpha products to integrate more with each other in order to build a strong Alpha ecosystem that helps maximize returns and minimize downside risks for users.

What are your future thoughts for the DeFi market?

In 2021, I believe we will continue to see more growth in the AMM space. As AMM continues to grow, the risk of impermanent loss will continue to become more prominent as well. While others may view it as an obstacle, we view it as an opportunity to build another Alpha product to address this market gap. In fact, the 3rd Alpha product, which is in an early product development process stage, is looking to minimize impermanent loss risks for DeFi users.

The second trend/opportunity that I see is the growth in the on-chain derivatives market. In 2020, the major building blocks for the financial system have been built, such as decentralized spot trading platforms, lending platforms, and synthetic assets. These fundamental building blocks will serve as the foundation for DeFi to reach the next growth stage that will be powered by the derivatives market, a market that is significantly larger than the spot market. At Alpha Finance Lab, we are looking to capture this significant demand and trend through AlphaX.

Where can we go to learn more?

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About the author
Nick Sawinyh
Nick Sawinyh is an LA-based crypto entrepreneur. After having spent over four years in the blockchain industry, Nick founded DeFiprime in 2019, with the idea to provide information about emerging DeFi ecosystem. He owns modest amounts of various cryptocurrencies.

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