- Solana-based protocol, Alfprotocol implements an invariant-based AMMs protocol.
- It is a money market for short-term loans for exchange activities.
- Alfprotocol increases capital efficiency and allows more liquid markets.
Alfprotocol — Solana-based protocol for the capital deployment of liquidity provision and yield farming with or without leverage. The protocol aims to provide AlfMM and AAlf — a decentralized exchange service for all of its users. It hopes to also have an over collateralized borrowing service alongside.
Alternatively, leveraged liquidity is governed by one of Alfprotocol’s modules. The module acts as an interface with external protocols, including; Solaris, Jet Protocol, and others to deliver leveraged products up to 200x.
In many ways, Alfprotocol will implement an invariant-based Automated Market Maker (AMM) protocol and a simplified money market for short-term loans for exchange activities. To go further into detail, the Solana ecosystem’s primary contributions are powering liquidity providers’ positions in AMM pools as well as yield farming procedures.
Alfprotocol Implementing Arbitrary Curves
One of the most recent developments in DeFi is the evolution of decentralized exchanges (DEXs). This is because of the autonomous system of managing conversions between different crypto assets without an intermediary.
Of note, Solana’s decentralized exchange protocols contain a liquidity pool (LP) consisting of two or more assets. These assets are required to maintain a mutual mathematical relationship at all times, as defined by a definite function or curve. Its functions comprise constant-sum and constant-product AMMs.
The aforementioned actions can decrease the liquidity pool. Mostly, market price changes can affect lower liquidity for one or more of the assets. This, therefore, reduces the total value of the Liquidity Pool.
According to the Alfprotocol team, the concept of dynamic curves is to create the AlfMM in a way that would modify the mathematical link between the assets, using data from a market price oracle. Hence, ensuring that the pool price remains constant and similar to the market price.
By using the Solana blockchain, Alfprotocol will implement arbitrary curves that apply liquidity and assign it accurately. With this method, more liquidity is allocated towards the current reference price and less towards the price extremes.
On the whole, Alfprotocol allows more liquid markets by linking secure, low-effort investors who supply liquidity to loan protocols with risk-seeking, active management investors who concentrate on leveraged liquidity provision and yield farming positions.
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