Solana-based platform provides higher APY for investors with DeFi protocols for leveraged yield farming

Published at: Jan. 13, 2022

Many have recognized that on the path to achieving real and long-lasting financial freedom is earning passive income, a way to make an investor's wealth work for them. The key is that as soon as an income stream can supplement your income, users can retire earlier and have more time to explore their passions. 

Financial freedom used to mostly include those who have come to retirement age and have worked stable jobs with a steady income, as they slowly began saving and putting their wealth away in long-term investments to grow over 40 or 50 years. While this model is not yet obsolete, the DeFi world has since introduced alternative ways to achieve the same outcome, financial freedom. At perhaps, what might be a fraction of the time.

Interest rates earned in a traditional savings account have since dwindled, making the concept of decentralized finance or "DeFi" ever more appealing. By eliminating intermediaries and providing more profitable opportunities for investors, the demand for leverage growth and associated annual percentage yield (APY) has increased as well. The result is that by locking funds up in a smart contract instead of the bank, any user can earn a passive income of more than the standard 0.5% offered by the bank.

As new platforms and other earning opportunities are made available, investors now face a new challenge of optimizing their returns. While some have taken to switching between networks and platforms in search of the highest payoff, others have taken to leverage. 

To prove this benefit to investors, the Alf Protocol has emerged on the Solana (SOL) chain as a medium for capital deployment and offering users liquidity provisions and yield farming. Through the use of these protocols, Alf has demonstrated a margin of up to 200x, as users participate in both short and long positions and leveraged liquidity pool (LP) yield farming.

A path for the risk-seeking and risk-averse

In practice, yield farming exists as the process by which users can receive economic incentives through their participation in a smart contract-based liquidity pool, where many investors have been profitable to date. Where the difference becomes apparent is in the ability to borrow tokens to increase a user's farming position and capture a greater yield in proportion. 

For example, if a user deposits a yield of a certain amount, they can expect an amount in proportion to their holding. However, if they were to borrow, say 5 or 10 times that amount, their profits would be 5 to 10 times more. Leveraged yield farming then becomes a strategy where users can deposit collateral, leverage loans against them, and use them for profit-earning. The major benefit is that since earnings are amplified, the clever use of a leveraged position can even help users earn significant yields in a neutral or bear market.

The protocol then comes to life by introducing its own method of an invariant-based automated market maker (AMM) protocol. Its central contribution becomes the protocol for leveraged LP positions in yield farming and AMM pools. To improve capital efficiency and a more liquid market, Alf connects investors seeking out lower risk and lower effort positions to provide liquidity to lending protocols with those investors seeking out riskier and likely more rewarding positions and are interested in taking on a more active management role.

More insights into alf protocol here

As the model outlines, a risk-averse investor may deploy capital to the Alf Liquidity pool, which can be used internally by the AMM for a baseline yield for lending in exchange for farming incentives—highlighting the two complementary protocols for unleveraged liquidity management, an overcollateralized borrowing service AAlf and AlfMM, a decentralized exchange service. Alternatively, they may take advantage of leveraged yield farming such as flash loans or other leveraged positions as a part of the leveraged custodian model a risk-seeking investor will take part in.

The project itself is already under development and has a fully signed development contract to match.

Awaiting the MVP launch

Together these protocols will provide entry points for investors to trade and provide liquidity as they earn passive income on the route to financial freedom. Over the next year, the team has shared their plans to fully develop and launch the MVP on mainnet.

Learn more about Alf Protocol

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

Tags
Related Posts
Ren price rallies 40% after adding LUNA, SOL and FTM to its ecosystem
The cryptocurrency sector has emerged as a hot topic on the global stage in 2021 thanks in large part to the growth of decentralized finance and non-fungible tokens which have caught the general public’s attention. Throughout the sector there is a need for interoperability between networks as many of the most popular projects are on siloed blockchain networks and high Ethereum fees prevent developers and investors from interacting across chains. One project focused on solving this project is Ren, which revealed on March 31 that Solana and Fantom had become the latest tokens supported by the interoperability-focused protocol. March Development …
Blockchain / March 31, 2021
Altcoins hit new highs after bulls kick Bitcoin price back above $50K
Cryptocurrency investors breathed a sigh of relief on April 26 as the sharp reversal in the price of Bitcoin (BTC) was accompanied by a marketwide recovery that has a majority of altcoins seeing green. It's likely that the breakout was aided by bullish assessments from JPMorgan Chase analysts and PayPal's announcement that demand for purchasing cryptocurrencies had surpassed expectations. Data from Cointelegraph Markets and TradingView shows that after bouncing off a low near $47,000, Bitcoin roared back above the $50,000 support level and climbed above $53,500, while Ether (ETH) reclaimed $2,500. Last week’s market pullback did little to slow the …
Blockchain / April 26, 2021
1Password integrates security API into Phantom Wallet
Digital security service 1Password has announced a collaborative partnership with Phantom Wallet to enable asset holders to amalgamate their vast accumulations of public key addresses, seed phrases and other corresponding security details into a single ‘Save in 1Password’ system. Operating primarily in the traditional financial sector at this time, 1Password has over 100,000 corporate clients from a panoply of industries, including well-recognized brands like IBM, Slack, Shopify and Under Armour. The application programming interface (API) of 1Password aims to simplify the user experience, enable asset sovereignty and assign portfolio responsibility to help investors sufficiently manage their cryptocurrencies and nonfungible tokens …
Blockchain / Feb. 22, 2022
Less than 1% of all holders have 90% of the voting power in DAOs: Report
Decentralized autonomous organizations (DAOs) have become a rage in the ever-expanding crypto ecosystem and are often seen as the future of decentralized corporate governance. DAOs are organizations without a centralized hierarchy and were intended to work in a bottom-up manner so that the community collectively owns and contributes to the decision-making process. However, recent research data suggests that these DAOs are not as decentralized as they were intended to be. A recent report from Chainalysis analyzed the workings of ten major DAO projects and found that on average, less than 1% of all holders have 90% of the voting power. …
Decentralization / June 27, 2022
Crema hacker returns $8M, keeps $1.6M in deal with protocol
The hacker who exploited Solana-based liquidity protocol Crema Finance on July 2 returned most of the funds but was allowed to keep $1.6 million as a white hat bounty. The bounty, 45,455 Solana (SOL), is worth a generous 16.7% of the $9.6 million Crema lost initially, which forced the protocol to suspend services. Crema’s team began an investigation to identify the hacker by tracking their Discord handle and tracing the original gas source for the hacker’s address. Just as it seemed the team may have been onto the secret identity, it announced that it had been negotiating with the hacker. …
Blockchain / July 7, 2022