Leveraged Yield Farming on Solana with ALF Protocol

ALF Protocol
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A step toward DeFi 3.0

Alf is a Solana-based protocol seeking improved conditions for investors looking to maximize capital. Designed as a tool for market makers and traders to create independent capital pools for leveraged yield farming and liquidity provision. Alf can be considered as a dapp designed to facilitate decentralized markets for capital origination and high-leverage position products. 

The Pre-IDO (Initial DEX Offering) round of the ALF Protocol is currently open and running. A total of two percent of the token supply (200,000,000 Tokens) will be created during this offering and sold at USD 0.004 per token. 

The Solana ecosystem creates lower barriers to entry than those seen on Ethereum dapps, primarily due to costs. The Alf protocol is empowered by the advantages of Solana’s fast and low-cost blockchain technology to provide leveraged positions up to 200x, with a high level of security and capacity. Alf also offers more comprehensive services to serious traders looking for leverage and interoperability compared to other leading Solana-based DeFi dapps.

Complex instruments with simple controls  

Alf’s goal is to make sure that the user can easily navigate the platform and take full advantage of its capabilities. Although the design is not finalized, the preview gives an extensive overview of what the team has planned. The final version of the user interface may alter somewhat in appearance but retain the same functionality.

The dashboard for the Alf Protocol will provide a brief snapshot of the market’s performance. Users will see the value locked in the Alf protocol, the total supply and demand, the top-performing pairs, and other information to ensure that they are always up to date. 

Once users get an overview, the farming panel provides farming options on token pairs. The panel will allow leveraged and unleveraged farming options with detailed balance information and expected APY. Essential information to help investors make decisions before committing funds. The real kicker for Alf users comes from access to high leverage farming options from within the same dashboard.

Leveraged liquidity provision 

The basic risk framework of leveraged liquidity provision on Automatic Market Makers (AMM’s) is currently between the amount of capital traded through the AMM pair within a time frame and the maximum difference between quote prices on a given pair within a time frame. For example, Standard AMM’s such as Uniswap or SushSwap suffer from impermanent loss— a loss that liquidity providers make when the quoted price differs from when they entered a position. When prices diverge in this way, impermanent loss starts to accrue, which is amplified with leverage for a leveraged position until the position is exited, de-leveraged, or liquidated.

The 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 by monitoring prices on external markets and comparing them with the AMM prices.

ALF Protocol

What is leveraged yield farming

Standard yield farming is a process in which users receive additional incentives, typically in the form of another token for providing liquidity to a liquidity pool on a particular AMM protocol, such as PancakeSwap, or UniSwap. 

For illustration, if you were to provide liquidity of 1 SOL and 200 USDt (assuming 1 SOL = 200 USDt) to an SOL-USDt liquidity pool, then you will receive rewards in another token, e.g., Token Z, in addition to a share of trading fees that the protocol gains. E.g., the 10% APY, which you would typically receive for being a liquidity provider on any AMM.

Leveraged yield farming is a mechanism that allows farmers to level up their yield farming position, meaning to borrow external liquidity and add to their liquidity to yield farm. As a result of having more liquidity to yield farm, e.g., borrow two more SOL, adding up to 3 SOL and 600 USDt, leveraged yield farmers gain more rewards in Token Z and a larger share of the trading fees in exchange for taking on increased risk. 

Four ways to earn with Alf

Once live, Alf hopes to offer its users four key ways to earn a yield on its platform. Firstly, interest rates will be collected from borrowers who want short-term access to liquidity, such as those employing a flash loan. Secondly, like other platforms, rewards can be auto compounded, helping users gather rewards without manual labor.   

ALF Protocol

Thirdly, the platform’s internal decentralized exchange AlfMM will collect trading fees on all token swaps taking place on the platform, distributed to liquidity providers. Finally, to incentivize the growth of certain vital pools on Alf, the protocol will use its native ALF token to reward specific liquidity provisions heavily. 

Alf Protocol Summary

Yield farming has become a popular way for traders and investors to maximize gains from their token holdings while still technically HOLDING. It also dramatically assists projects in gaining exposure through offering token rewards for liquidity provision on Alf. Arguably, there is no better way to get a person interested in a project than handing them a small investment within it.  

Taking it a step further, leveraged yield farming is not for the faint-hearted as it involves a higher level of risk when making decisions. Users should always research the token pairs and what the specific risks to them may be. Of course, there is no absolute requirement to try and leverage up to 200x. Users can start small and test their ideas before taking more significant leaps. 

ALF Protocol

The Alf protocol is hard at work with plans to roll out the testnet in phases across the system to test its efficiency and functionality on a larger scale. As mentioned, the Pre-IDO (Initial DEX Offering) round of the ALF Protocol is currently open and running. A total of two percent of the token supply, or 200,000,000 tokens, will be minted during this offering and sold at USD 0.004 per token. Importantly, this is not much higher than the price paid by initial investors. 

Find out more about Alf protocol at the following links:

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