Alpha Finance is an ecosystem of products focusing on interoperability, high returns, and low risk for users in the DeFi space.
The decentralized finance (DeFi) space has expanded from mere simple token swapping platforms to complex offerings such as derivatives. But the problem is that most of these DeFi protocols are only cloning other more-reputable networks for malicious gains. To make matters worse, there have been many instances where anonymous founders of a new DeFi platform pull the rug on its users. Therefore, transparency is crucial in vetting the integrity of these platforms.
One way to increase transparency is by having a group of known individuals come together to build applications targeting different sectors of DeFi, which is what Alpha Finance aims to do. In this guide, we look at the platform and why it’s suddenly making heads turn in the DeFi world.
Table of Contents
Background
Developed by Alpha Finance Labs, Alpha Finance is a collection of DeFi products funded by reputable names in the industry including The Spartan Group, MultiCoin Capital, and DeFiance Capital. The three are leading investment firms focusing on state-of-the-art crypto-based products.
To elaborate, The Spartan Group, through its Spartan Capital subsidiary, concentrates on “unique investment opportunities in the emergent crypto asset class.” However, it doesn’t do so blindly. Instead, it conducts an in-depth analysis to ensure high-end risk-adjusted returns.
Tascha Punyaneramitdee and Nipun Pitimanaaree lead Alpha Finance Lab where Punyaneramitdee is the project lead, and Pitimanaaree is the lead blockchain engineer. The two have vast experiences and rich educational backgrounds. To elaborate, Punyaneramitdee has a Bachelor’s Degree in Economics from US Berkeley and has held key roles such as investment banker. In the cryptocurrency and DeFi world, she headed the Band Protocol strategy department where she was responsible for the network’s adoption.
On the other hand, Pitimanaaree has a Master’s Degree in Electrical Engineering and Computer Science from MIT. His previous works include developing sophisticated prediction algorithms for the stock market. In the cryptocurrency sector, Pitimanaaree has curated an algorithm to power automated arbitrage trading. Before joining hands with Punyaneramitdee, he was the chief researcher at OZT Robotics.
What is Alpha Finance?
Alpha Finance is an ecosystem of products focusing on different aspects of the DeFi space. Notably, they aren’t just products for the sake of it. Alpha Finance focuses on interoperability, high returns, and low risk for users. Being known as Alpha products, they bring a new dimension to user-friendliness in applications addressing uncaptured demand in the industry.
The Alpha projects are built on the Binance Smart Chain (BSC), which the team had decided upon due to its scalability, speed, and cheaper transactions compared to the Ethereum chain.
When tackling these projects, the team first researches glaring problems in the space to get a deeper understanding and then offers an answer. For the solution to perfectly fit in the gap, the team evaluates and iterates different approaches before bringing a product to the market. The team calls this the problem and solution statement.
Alpha Finance’s mission is to solve problems and encourage more people to join the DeFi train.
The Problem
DeFi Usage and Demand Is Limited
The demand in DeFi is capped because developers have flocked to the Ethereum blockchain to build DeFi networks. While these projects can interact within Ethereum, they’re locked from their friends on other networks such as Cosmos and Polkadot (unless a bridge is available). Furthermore, scalability issues haunt Ethereum further reducing the demand and usage of DeFi applications.
Supply Is Restricted
DeFi is meant to be decentralized, but most assets live on centralized platforms restricting supply to these protocols.
A closer look at assets’ flow into DeFi projects reveals conditions such as impermanent losses that hinder users from supplying liquidity to the current breed of DeFi networks.
Major Alpha Finance Products
Alpha Homora
This brings a new approach into the world of leverage trading through leveraged yield farming and liquidity mining.
AlphaX
Here, DeFi users have the opportunity to interact with perpetual swaps easily. Moreover, it connects with Alpha Homora to allow yield farmers and liquidity providers to hedge their leveraged positions, allowing them to neutralize market positions.
Simply put, the connection between the two products is that Homora maximizes returns while AlphaX reduces the downside risks.
AlphaX draws inspiration from Uniswap, a leading DeFi network that enables decentralized spot trading. With this inspiration, Alpha Finance Labs built a product that allowed anyone to take a leveraged short or long position. In addition, it uses a very friendly user interface.
The protocol sets itself apart from other similar projects in existence today since it’s non-custodial and doesn’t coerce users to go through the Know-Your-Customer (KYC) procedure.
Unique AlphaX Features
The Funding Rate Is Connected with The Price
Those familiar with perpetual swaps know that open positions must be funded at a given rate after a given period of time, mostly hours. To remove the hassle of remembering the rate for users, AlphaX combines the funding rate and the price.
The funding rate payments are captured by automatically altering the price. As such, the price diligently tracks the underlying asset’s price without traders having to fund their long or short positions constantly. This simplifies trading perpetual swaps by making them take the shape of spot trading.
Open Positions Can Be Tokenized and Fungible
Tokenized shorts and longs use Ethereum’s multi-token standard known as ERC-1155. The tokens are then wrapped into conventional ERC-20 tokens. What’s the need for all these? Good question.
ERC-20 tokens are more comfortable to trade and stake, unlike ERC-1155 coins. Additionally, the wrapped tokens can be used as collateral on other products provided that the user has an open long or short position.
Reduced Slippage
Note that AlphaX doesn’t use an order book. Therefore, its formula for determining price slippage is constant. The disadvantages of this approach are that it can cause traders to encounter low slippage but yet they to pump in more funds to impact the market.
In addition, the slippage can be too high, which discourages traders from opening large positions. To prevent traders from experiencing any of the two extremes, AlphaX dynamically adjusts the formula’s outcome.
Alpha Finance Native Token (ALPHA)
Since Alpha Finance is a collection of DeFi applications lighting different corners of the DeFi industry, the ALPHA token is designed to interact with all of its products. For example, the token can be used for governance purposes on Alpha Homora and AlphaX.
Uses of The ALPHA Token
The ALPHA token can be utilized in three distinct ways.
- One, and the most prominent, is as a governance token at the product and Alpha Finance levels. At the product level, the token unlocks governance capabilities for critical aspects of each Alpha product.
In the Alpha Finance ecosystem, the base asset allows its holders to make critical decisions concerning the interaction of different portfolios in the broader Alpha Finance ecosystem.
- Two, ALPHA is designed as a utility token. Here, holders can earn a section of fees charged on the network by providing liquidity or staking to receive staking rewards.
- Three, it’s a work token unlocking more functionalities for users interacting with Alpha Finance products.
Conclusion
Led by an experienced and extensively educated team, Alpha Finance brings a new revolution into the DeFi ecosystem. From leveraging Binance Smart Chain to wrapping ERC-1155 tokens, Alpha Finance takes a unique approach of powering different spheres of the DeFi world.
The ALPHA token gives its holders a voice when making critical project decisions. Furthermore, the token powers the staking and liquidity provision sectors, giving its holders more value.
