{"id":10530,"date":"2023-05-11T22:52:26","date_gmt":"2023-05-11T22:52:26","guid":{"rendered":"https:\/\/www.bitnovo.com\/blog\/?p=10530"},"modified":"2022-05-17T08:51:50","modified_gmt":"2022-05-17T08:51:50","slug":"what-is-alpha-homora-is-defi","status":"publish","type":"post","link":"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi","title":{"rendered":"What is Alpha Homora at DeFi?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Alternar tabla de contenidos\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi\/#how_does_it_work\" >How does it work?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi\/#example_of_leveraged_pharmeying\" >Example of leveraged pharmeying<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi\/#leverage_demand\" >Leverage demand<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi\/#risks\" >Risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-alpha-homora-is-defi\/#summary\" >Summary<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span><p>In\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-defi-o-decentralized-finance\/\">DeFi<\/a>, or\u00a0<strong>decentralized finance, liquidity is required<\/strong>\u00a0to operate certain protocols such as\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/cex-and-dex-what-are-the-differences\/\">decentralized exchanges<\/a>\u00a0and d<strong>ecentralized lending platforms.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>The users who provide this\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-the-liquidity-of-a-cryptocurrency\/\">liquidity<\/a>\u00a0are known as \u201c<strong>Liquidity Providers<\/strong>\u201d (LP) and \u201cyield farmers\u201d. The currencies with which they generate interest are deposited in \u201c<strong>liquidity pools<\/strong>\u201d (a kind of common exchange in which many different users deposit funds), which is not risk-free but can offer\u00a0<strong>good returns<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Alpha Homora<\/strong>\u00a0is the first DeFi product that enables\u00a0<strong>liquidity mining<\/strong>\u00a0(generating profitability by providing liquidity)\u00a0<strong>with leverage<\/strong>. To do this it uses liquidity pools from the decentralized exchange\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-uniswap\/\">Uniswap<\/a>\u00a0and the\u00a0<strong>IndexCoop<\/strong>\u00a0index protocol with the option\u00a0<strong>to borrow ETH<\/strong>, Ethereum\u2019s native currency (effectively leveraging itself).<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"how_does_it_work\"><\/span><strong>How does it work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p><strong>Liquidity pools<\/strong>\u00a0require a composition of two assets equivalent in value. For example 100\u20ac of\u00a0<a href=\"https:\/\/www.bitnovo.com\/buy-usdt-online-en\">USDT<\/a>\u00a0and 100\u20ac of\u00a0<a href=\"https:\/\/www.bitnovo.com\/en\/buy\/ethereum\/\">ETH<\/a>. Liquidity pools are managed using\u00a0<strong>Automated Market Makers<\/strong>\u00a0(AMM) which can vary greatly in design. In\u00a0<strong>Alpha Homora<\/strong>\u00a0each user has the option to\u00a0<strong>supply only one asset<\/strong>\u00a0(and the protocol takes care of holding 50% of each asset in total). But what makes it a unique DeFi solution is the<strong>\u00a0leverage.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>In Alpha Homora there is a\u00a0<strong>bank<\/strong>\u00a0where users can\u00a0<strong>deposit ETH for loans<\/strong>. These users will receive\u00a0<strong>ibETH<\/strong>, which represents their portion of the supply and generates\u00a0<strong>interest<\/strong>\u00a0from the loans. And who are the loans targeted at? To the liquidity<strong>\u00a0farmers<\/strong>\u00a0we\u2019ve been talking about, who are<strong>\u00a0looking to leverage themselves.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>These farmers borrow<\/strong>\u00a0(and pay loan fees)\u00a0<strong>to be more profitable<\/strong>\u00a0in liquidity mining (because they offer more ETH). This is, in other words, trading with leverage. But as many of you will know, leverage\u00a0<strong>comes with high risk<\/strong>.<\/p>\n<p>In order for you to understand it better, I will explain it with an example.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_604867461\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img fetchpriority=\"high\" decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi.jpg\" sizes=\"(max-width: 768px) 100vw, 768px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi-300x205.jpg 300w\" alt=\"Qu\u00e9 es Alpha Homora en DeFi?\" width=\"768\" height=\"526\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi-300x205.jpg 300w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi.jpg\" data-sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"example_of_leveraged_pharmeying\"><\/span>Example of leveraged pharmeying<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>Let\u2019s take, for example, a user named Bob who trades in the Uniswap\u00a0<strong>ETH-USDT<\/strong>\u00a0<strong>liquidity pool.<\/strong>\u00a0Bob uses 100 ETH of his own and borrows 150 more, which he will have to pay back later. Therefore his position has a\u00a0<strong>leverage of 2.5<\/strong>\u00a0(250 ETH is 2.5 times greater than his 100 ETH). Since\u00a0<strong>50% of his position<\/strong>\u00a0is in\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-tether-usdt-the-complete-guide\/\">USDT<\/a>\u00a0(a stablecoin) to provide liquidity, if the\u00a0<strong>price of ETH<\/strong>\u00a0rises he will be in trouble.<\/p>\n<p>&nbsp;<\/p>\n<p>Let\u2019s think about it this way, if the price of ETH goes up and you have a stable currency, you will be able to buy\u00a0<strong>less ETH<\/strong>\u00a0with it. If your value in ETH has decreased, and you owe money in ETH\u2026 bad business. In case\u00a0<strong>the money you owe<\/strong>\u00a0in ETH becomes\u00a0<strong>85% of the money<\/strong>\u00a0you have, your position can be\u00a0<strong>liquidated<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<p>The liquidator is a user called \u201c<strong>liquidator<\/strong>\u201d who takes a 5% commission. When liquidated, therefore,\u00a0<strong>about 91% of the money is lost<\/strong>\u00a0(if the leverage is\u00a0<strong>x2.5<\/strong>, which is the\u00a0<strong>maximum<\/strong>).<\/p>\n<p>&nbsp;<\/p>\n<p>There is also another type of users called \u201c<strong>bounty hunters<\/strong>\u201d who can sell all the tokens farmed for ETH to reinvest in the liquidity pools (taking a 3% commission).<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"leverage_demand\"><\/span><strong>Leverage demand<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>Alpha Homora currently has a\u00a0<strong>TVL (Total Value Locked)<\/strong>\u00a0of\u00a0<strong>over $1 billion<\/strong>. According to DeFi Pulse we would be talking about the 14th largest DeFi platform in LTV. As we can see, there is a\u00a0<strong>great demand<\/strong>\u00a0for this type of leveraged services<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_1279853782\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1.jpg\" sizes=\"(max-width: 768px) 100vw, 768px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1-300x205.jpg 300w\" alt=\"Qu\u00e9 es Alpha Homora en DeFi?\" width=\"768\" height=\"526\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1-300x205.jpg 300w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/07\/Que-es-Alpha-Homora-en-DeFi1.jpg\" data-sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"risks\"><\/span><b>Risks<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>Apart from\u00a0<strong>settlement risk<\/strong>, which is higher or lower depending on the leverage, there are other important risks in liquidity mining.\u00a0<strong>The most important is that of\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/\">smart contract<\/a>\u00a0security.<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Alpha Homora\u2019s contracts have been\u00a0<strong>reviewed by Peckshield<\/strong>, a company focused on blockchain security. However, despite this, Alpha Homora suffered in February a\u00a0<strong>hack<\/strong>\u00a0where $37 million was lost.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h3><span class=\"ez-toc-section\" id=\"summary\"><\/span>Summary<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>In short, Alpha Homora kills two birds with one stone.<strong>\u00a0On the one hand, it provides a high return in ETH to the bank\u2019s depositors<\/strong>. On the other hand, it allows<strong>\u00a0liquidity miners or farmers<\/strong>\u00a0to leverage themselves by\u00a0<strong>borrowing<\/strong>\u00a0from depositors.<\/p>\n<p>&nbsp;<\/p>\n<p>Finally, we must reiterate that caution must be exercised, firstly because of the\u00a0<strong>high risk of leverage<\/strong>\u00a0in such volatile markets, and secondly because of the inherent risk of any DeFi platform suffering an\u00a0<strong>exploit or\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-rug-pull-and-how-to-identify-it\/\">Rug pull<\/a><\/strong>\u00a0(even if it has been audited as we have seen).<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span>In\u00a0DeFi, or\u00a0decentralized finance, liquidity is required\u00a0to operate certain protocols such as\u00a0decentralized exchanges\u00a0and decentralized lending platforms. &nbsp; The users who provide this\u00a0liquidity\u00a0are known as \u201cLiquidity Providers\u201d (LP) and \u201cyield farmers\u201d. The currencies with which they generate interest are deposited in \u201cliquidity pools\u201d (a kind of common exchange in which many different users deposit funds), which is [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":7672,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[185],"tags":[],"class_list":["post-10530","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain-en"],"_links":{"self":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/comments?post=10530"}],"version-history":[{"count":0,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10530\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media\/7672"}],"wp:attachment":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media?parent=10530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/categories?post=10530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/tags?post=10530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}