As Alpha Homora has gained significant traction and has reached more than $100M total value locked, Alpha Finance Lab team would like to now share more details on AlphaX, the decentralized, non-orderbook perpetual swap trading market. AlphaX will not only allow Alpha Homora users to hedge their leveraged yield farming/liquidity providing positions, but will also bring DeFi space a new class of trading product previously unavailable on-chain.
For those who missed our previous announcement on AlphaX beta private testnet being live or want to read more on the background story on why we chose to build AlphaX, please refer to here.
For those who have not signed up for access to beta private testnet, you can still sign up here until December 17th, 5AM UTC. We will grant access to the private beta testnet in the coming days. Please stay tuned!
Let’s get into the details of AlphaX!
Sneak Peek of AlphaX User Interface
The above screenshot is how AlphaX private beta version looks like! Alpha Finance Lab team has built AlphaX user interface to be as simple, easy to use, and user friendly as possible. We believe a great DeFi product does not only need to be innovative in addressing market gaps and solving problems, but also need to be user friendly to existing and new DeFi users.
AlphaX Target Users
Who do we target as our users for AlphaX?
We got inspired by Uniswap and how it has enabled any user to easily trade on a decentralized spot trading market. Through AlphaX, anyone who wants to take a directional view on any asset by opening leveraged long or short positions can do so against the smart contract via our trader-friendly UI. There’s no custodial risk or KYC required on AlphaX as it is 100% permissionless and available to everyone.
While professional perpetual swap traders are a segment of user groups we are looking to capture, AlphaX will also capture the user base beyond professional and sophisticated perpetual swap traders, a market segment that is huge and largely untapped.
With these target users in mind, we have come up with a unique engineering and product design to better capture this large market.
AlphaX Unique Feature #1: Funding rate baked into the price (no explicit funding events)
Typically, in order to trade perpetual swap, traders need to understand the concept of funding rate payments and pay/receive these payments while their positions are opened.
AlphaX is simplifying perpetual swap trading by baking in the concept of funding rate payments into the price that traders open or close their positions at. Specifically, the price is automatically adjusted to take the funding rate payments into account, so the price should still closely follow the asset market price even without needing the long and short traders to explicitly perform the payments.
Thus, traders don’t need to know anything beyond what price they enter and exit at when trading perpetual swap on AlphaX, much like a regular spot market.
See here for more details on AlphaX's unique feature #1.
AlphaX Unique Feature #2: Tokenized leveraged long/short positions
We also chose to have leveraged long/short positions be tokenized and fungible. Both long and short tokens comply with the ERC-1155 (Multi-Token) standard, which we will wrap them to ERC-20 tokens. This makes it possible for anyone to trade, stake, or even use their open positions as collaterals on other smart contracts.
Tokenization of leveraged long/short positions will open doors to more innovation, as developers can further build secondary markets and drive more usages for these tokens in other DeFi protocols. This enables AlphaX to continue innovating in the DeFi space, drive more interoperability with other DeFi protocols, and grow our target users beyond perpetual swap traders.
See here for more details on AlphaX's unique feature #2.
AlphaX Unique Feature #3: Lower slippage through dynamic K
As AlphaX is a non-orderbook perpetual swap trading market with constant product, x*y=k model, it is important to crack out a mechanism that enables K to be dynamically adjusted. The value K determines the liquidity coefficient, which in turns defines trading slippage for opening or closing positions.
If K is fixed to be too high, while traders would bear lower slippage, they would need a lot of capital to move the price in this market, making it less efficient. On the other hand, if K is fixed to be too low, the traders would bear high slippage, making the perpetual swap market less capable of supporting large position sizes and trading volumes. Both scenarios would result in unfriendly trading experiences.
In order for AlphaX to balance between the two trade-offs and offer a better trading experience, K coefficient on AlphaX will be dynamically adjusted to avoid undesirable market conditions outlined above. At the beginning, K will be adjusted manually via admin control or community governance. In the future, we will move towards a mechanism to effectively adjust K algorithmically on smart contract level.
For those who have signed up or are going to sign up before December 17th, 5AM UTC for AlphaX beta private testnet access, you will receive access in the coming days! Alpha team will work closely with every beta private tester throughout the testing process.
Going forward, Alpha team will continue to share more details and explain the underlying mechanics that power the unique functionalities of AlphaX!
About Alpha Finance Lab
Alpha Finance Lab is an ecosystem of cross-chain DeFi products that will interoperate to maximize returns while minimizing downside exposure to users. Alpha products focus on capturing unaddressed demand in DeFi in an innovative and user friendly way.
We are also recruiting for developers and looking for passionate community members who are looking to contribute to the Alpha ecosystem. If you are interested, please feel free to reach out to @tascha_panpan on Twitter.