Alien Leverage
Last updated
Last updated
Alien Leverage provides users with the ability to gain greater capital efficiency for their assets and greater exposure without additional capital. It can also be thought of as margin trading on the Alien lending protocol. Users can create leverage positions based on any combination of the collaterals available on Alien Finance.
To create a leveraged position, you need at least one collateral that Alien Finance supports, then you can long and short any asset supported in Alien Finance. Leverage currently only supports Blast Pool (ETH, USDB, BLAST). Leverage in Dapp Pool will be available soon.
With Alien Leverage, you can create a leveraged position of 3x or more, to borrow/short a token or supply/long another token.
All these actions can be done by the contract in one transaction. The extension contract would put your collateral asset in Alien Finance on your behalf, and use it to borrow the token you want to short, swap them into the token you want to long in AMM, and supply the token back in Alien Finance.
Here is how it works in execution:
User decides the amount of collateral token(s), long token(s) and short token(s)
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Extension borrows the short token(s) from Alien Finance on user's behalf
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Extension swaps the borrowed token(s) in AMM into the long token(s)
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Extension supplies the long token(s) and collateral token(s) in Alien Finance on user's behalf
For example, you have 1 ETH in the wallet and you want to long ETH and short USDB, where ETH is $1,000 and its collateral factor = 75%. The extension could help you borrow $3,000 USDB from Alien Finance at max, and swap them into 3 ETH in Thruster (ignoring trading fee and slippage) to put into Alien Finance along with 1 ETH from your wallet. The result is that you have 4 ETH / $4,000 supply and $3,000 USDB debt in Alien Finance. The debt/collateral ratio is also 75%, which means it is using all of your borrow limit by ETH collateral.
In this max leverage case, you would not be liquidated right away, because Alien Finance has a higher liquidation threshold than collateral factor in every market, which means there is a buffer for price fluctuation.
In a typical lending protocol, users would not have sufficient borrow power to begin a tx with borrowing that much (borrow $3,000 USDB before you put $4,000 worth of ETH as collateral). With Alien Finance's Deferred Liquidity Check, users can freely use the liquidity as long as there is sufficient borrow power at the end of the transaction. This is why Alien Leverage is efficient in opening long/short positions.
There are two fees when you use Alien Leverage:
Trading fee (AMM) Trading fee is an incurred expense when you swap tokens in Thruster. The fee could be 0.05%, 0.3% or 1%, depending on the swapping route.
By creating a leveraged position in Alien Finance, users can earn Supply APY (plus any Reward APY) based on the amount of long assets from its market, and pay the Borrow APY aforementioned.
The amount of slippage is affected by the route and liquidity in Thruster. Lower liquidity trading pairs may result in higher slippage.
Borrow interest (Lending Protocol) The borrow interest / Borrow APY is the incurred expense per block if you have borrowed assets from Alien Finance. Borrow varies each block, depending on the utilization rate (total borrow/total supply of a market) based on the. You can check out the current annualized borrow APY in.