📺 AMA with Tascha From Alpha Finance

discord we'll prioritize those questions you can also ask your question on youtube dave and i will be checking in on youtube getting your questions queued up this is really an opportunity for you guys to ask questions of tasha and uh of the alpha finance project we do this on the youtube and then we also uh put it out on the podcast too so if you prefer listening to it in podcast format you can get it that way too david we should just introduce folks to you to alpha finance and alpha hamara specifically um

what do you want to say as an intro to this exciting cool project yeah it's really exploded into the forefront recently which is and it's it's always pretty cool when a project does that when it just rises out of the the very chaotic world of defy into the forefront of people's minds um the alpha is famous for being able to provide really really really strong yields on ether above and beyond what you would get from eath staking and the way that alpha does that is what we call what they've called leveraged

yield farming so i have my questions as to what that entails how risk is controlled what the participants are in the system uh apparently alpha is originating more loans than ave which is pretty insane because obviously it's so crazy it's like the canonical uh lending platform uh so we're gonna get into all these questions uh in just a little bit but uh before we do we're gonna talk a little bit about these sponsors that make this show possible all right gemini is the world's most trusted cryptocurrency exchange i've been a customer of gemiini since i first got

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a hundred dollars within the first 30 days after sign up you'll be gifted a free 15 bitcoin bonus check them out at gemiini.com go bankless ave is a borrowing and lending protocol on ethereum and just recently released ave version 2 which has a ton of cool new features that makes using ave even more powerful with ave you can leverage the full power of d5 money legos yield and composability all in one application on ave there are a ton of assets that you

can deposit in order to gain yield and all of those same assets can also be borrowed from the protocol if you have deposited collateral here you can see me getting a 200 usdc loan against my portfolio of a number of different defy tokens and eth i'll choose a variable interest rate because it's a lower rate than the stable interest rate option but i could choose the stable interest rate option if i wanted to lock that interest rate in permanently one of ave's v2 features is the ability to swap collateral without having to withdraw your assets trade them on unit swap and

then deposit them back into ave ave does all of this for you all in one seamless transaction so you don't have to repay loans in order to change the collateral you have backing them check out the power of ave at ave dot com that's aave.com all right guys we are back with tasha from alpha finance for this community ask me anything tasha how are you doing today good thanks for having me tasha i want to get into your background actually first and and talk a little bit

about where where kind of you came from so you've got investment banker in your twitter bio so uh maybe you might be the first banker guest we've had on bankless which is kind of fun so tell us how you fell down the d5 rabbit hole and uh found yourself building a defined protocol yeah so you know since when i was studying at uc berkeley um i've always been interested in in crypto and blockchain space and you know berkeley and the bay area

are very you know tech savvy and and friendly space right so that's how i first got exposed and then just keep studying learning more about the whole space um and generally i i like finance and i like tech right so you know when i first started my career i decided to join a tech investment banking role so that means that i'm doing financial services for tech clients um across the u.s and across the the europe as well and then when dfi started to become more

you know dominant and also becoming the main use case of blockchain that's when i really got you know very very excited and and trying to learn more about it and pretty much yeah um after finance role i pivoted to more tech to product management at tencent and then pivoted to more blockchain and band protocol and then now um d5 right so it's been a journey but you know it's been quite some time that i've been interested in studying um the whole space that is super cool so did you come into

crypto by way of more defy or did you come more by way of like like the bitcoin sort of path it's uh the bitcoin pens okay gotcha so you started with bitcoin and then and then went into kind of the defy side of things okay well so uh tell us about alpha alpha really alpha finance and why you decided to to focus on the the areas that you're focusing with this d5 protocol yeah so you have to to think alpha finance as a d5 lab and what that means

is that we're incubating and innovating a number of d5 products um the goal of each of the products to be different so the problems we're solving would be particular to a particular area for each product right but then at the end of the day all of these products will work as an ecosystem and the whole ecosystem we're focusing on the main goal instead instead of focusing on one particular area of the file that we want to innovate in so the main goal that all of these products as an ecosystem will work

towards is to maximize the returns for users and also minimize the downside risks so um you know once we achieve this goal then of course we would go for the bigger goal and ultimately at the end of the day we are here to hopefully change and pretty much reform traditional finance um but you know given the fight landscape now given the regulatory landscape it would be some time so so what we're doing now is pretty much trying to make a very useful um and staying at the

forefront of d5 and pretty much um grow alpha and d5 to the point where we can make you know more um and bigger impact uh later down the line so this is a theme that we've seen arise out of a number of projects that came out of defy summer and just re the most recent cohort of d5 projects uh notably yam started off as this rebasing thing but then it grew its treasury and now it produced the umbrella protocol and so it's kind of acting like a dow where that just produces products uh we're also seeing the same thing out of a sushi swap which first started with a

clone of uni swap and now has bento box which is something totally different a borrowing lending platform uh would you say alpha is is similar to that or is the the uh product side of alpha and like the dow side of alpha different well how would you compare and contrast these different organizations that are living on chain i think there there are multiple differences right like the first one is um it i think it it like how we progress and how the other progress may be different um the end goal may be the same in which that there

are multiple products as an ecosystem but for alpha we created as as the first day knowing that it's going to be an ecosystem so that means that we structure the team the way that we work the way we build are are a bit different we're always going to be on the lookout of new opportunities trying to see which market is looking for which product perhaps let's say if we come up with a new product tomorrow that we think that you know it really fits with the market landscape right now we might just ship it um before the products that we have

announced so so i think it's more of a dynamic uh workflow in that sense um so so that's the the main difference uh in terms of how we work and how we build how we evaluate the products right um the second difference is i think uh it's the goal that we're focusing on or like the area that we're focusing on so let's say if um instead of focusing on all the products that we work on we're actually focusing on the end goal that i mentioned um so let's say if one particular product allows us to achieve

that goal better then you know then that means that we have to focus on that product more right um so i think that that whole thing comes back to to the the fact that we are building an ecosystem since day one so with that under uh as like the kind of the social contract of alpha an ecosystem from day one that means that you need a team that can manage an ecosystem right that's more a more specific skill set so uh and and straight up more of a larger team so how did you how did the alpha team assemble

where did all of these people come from and who are they yeah that's that's a question that you know i got asked a lot um because you know it's been quite a a journey for us from you know end of last year to today right um so right now the team mostly is based in thailand um the talent is is pretty uh top-notch in my opinion i mean others can think differently right um and pretty much the way that we recruit are recruiting from olympics um you know candidates

and these are a lot of these are already in thailand so thai people are actually pretty um strong in computer science and quant to begin with and then you know now that we have a core strong team we're going to decentralize the whole team and expand whole team uh going forward so now we're actually recruiting globally um for various roles for tech for business development for marketing so expanding um not just limiting to thailand so when you were assembling this team of of diverse set of skills um

you had this product in mind and so how what are the core competencies of the team like what is the what is the if the team was really good at something uh and how does that relate to that what is that thing and how does that thing relate to the product that you guys are trying to build out at alpha i think there are two main i mean three main things one thing is that the team has to be really strong in math uh and and coding i mean coding is is you know a given right like smart contract solidity and everything but math is something that we really put emphasis on because in order

for us to build a cutting edge and innovative products and still be a safe protocol for people to use math is going to be a really core component let's say if you go on alpha hemorrha v1 or v2 now each of the leverage level is you know thought through nippon who's the co-founder and cto is actually ranked the third in the global mathematics olympiad um so he pretty much has done a number of research on what parameter you should go for purple for you know east

sushi pool um so it's not not a random number that we are putting out to users to use um i think that's the number one core skill that that we look for it is crazy to me i just want to make a comment it's crazy to me that defy is starting to attract this caliber of talent now this certainly was not true in the 2017 you know cycle but now it seems like it is true we're getting top talent into d5 working on this project it's super exciting yeah i think it's it's shown a lot of um

you know valuable like reasons why people want to come in right the fact that you are creating a new financial system the fact that you're you know it's in the beginning of the whole new era um you're not late it's the game you're actually creating the whole um future so i think that's that's how people get you know very excited um and and able to attract these talents in which is helpful for the holy d5 uh ecosystem i believe not just for alpha so i want to ask about what what does

math unlock so like you know we you see i said that you know coding is a given right so all of these teams can code right and so all the coding isn't really the competitive advantage it sounds like what you're saying is math is the competitive advantage that the alpha team has what does that enable what kind of products does that enable you guys to access because you guys are good at math um so to speak on alpha homo first right um the way that it can offer high leverage um and pretty much still uh

be on the safe side uh is that everything is processed and and all the loans and all the funds are held on the smart contract um the way that we do it and the way that we make sure that the parameters are still safe allowing for buffer even at liquidation there's still another buffer um to allow for more price swing you know what's that buffer is going to be like how are we going to be comfortable building a leveraged new farming product while still having you know a comfort to ourselves right so i think that's for our fakumora for alpha

x it's the fact that we are capable of making in the funding rate payments into the quoted price so when building alpha x which is a decentralized non-order book um per pressure swap trading product we have in mind since day one that we are targeting anyone in d5 who wants to trade for pressure swap without having to know that they're trading for pressure as well let's say that you want 10x returns if each price goes up and each price goes up by a hundred dollars

and now you're getting 1000 right so that's the end goal that you're getting you don't have to understand anything in between you didn't have to understand funding rate or rebalancing or anything that is complicated you know in in professional stop trading right so that's the end goal now it determines on it how do we get there so math is going to be really important how do we figure out a funding rate mechanism that just simplifies everything and makes it just into the quoted price so when people trade on alpha export stands it

will be similar to a trading on spot market in which the only prices that matter are the entry price and the x price so you can just take the two prices and calculate your mid gains and losses without having to um you know taking into the account of finding payments in between as well so that's an example of you know math in alphabets so so tasha let's um let's maybe zoom out for a minute and talk high level about these products right so you mentioned two you mentioned alpha amora and alpha x um and i'm not sure if alpha

x is out yet but uh maybe we'll get into that i i know alpha hamora a bit better and so that that is basically a way to get get like some sort of leverage yield farming uh sort of opportunities could you maybe describe that and before you do i'm going to ask a non-matthew question so alpha hamora what's with the harry potter stuff is are you guys big harry potter fans yeah nippon is a really big harry potter fan um and you know with v2 we're

generalizing the theme um a lot more so if you go to alpha homora v2 site you can see that the only harry potter reference is the o with the um the lightning okay okay so it's like bulkiness is more generalized very cool all right cool um so tell us about the product then what does it do yeah so as a user you can use as a two-way for for you know to maximize your your yields on alpha homora

if you are a lender then you can lend your assets and get high yields on alpha homora v1 the lending assets is limited to just e and that's because all the loans that leverage new farmers are taking are based on eve so that's why you know the lending asset is limited to just it and that's why it can generate really high lending apy for ethoders because once you lend these eve it's the leverage you farmers who are borrowing these e to your farm and get the high apy and hence they are

willing to pay the borrowing interest rate because they're gaining a lot higher apy on leverage farming on v2 the difference is that with the lenders you are not limited to just e we're expanding you know the the list of assets uh in lending pool to be a lot larger so right now if you go on v2 you can see that e usdp uscc and die are assets that you can then um and then going forward there will be more assets that you can lend as well like wi-fi snx dpi and the list goes on right so

alpha homework v2 will continue to grow from the lending aspects and also continue to grow from the leveraged new farming pools as we continue to add more pools um aspects to so that's from the the lender's side in a bit more detail on the leveraged eu farmers side so once you come in there are pretty much two main like several three main things that alfa homura simplifies for this the leverage you farmers number one is of course you get to unlock that leverage so that means that

you don't have to manually borrow loans from one place and then which is also over collateralized loans um and then put uh compiled at loans with your liquidity to begin with and then you farm right so we simplify that uh by having you to take on leverage that is under collateralized loans as well so let's say if you take one ease to supply you can borrow like 1.5 east so it's even more than what you supply so that's the the one thing that our

farmer does for leveraging farmers the second thing is that when you take your liquidity to supply in the first step you don't have to have equal value of both so let's say you want to provide liquidity or you farm on each sushi you don't need to have eth and sushi you have any proportion we're going to take care of that for you either through stop swapping optimally um or other ways right and then third thing is that we complete the whole you farming process for you so once you

supply liquidity once you determine what assets you want to borrow in what proportion what once you determine the leverage level everything is y'all taking care for you which means that you know taking the lp token to stake collecting the farm token all of those things are pretty much all done by alpha hamora so where i would like to know where the yield actually comes from and so in my mind uh i'm getting an image of like the the urine vaults right where there are different strategies that

return different amounts of yield based on what those strategies are uh and you know the if you want to go peek under the hood you can go find out what those strategies are how does where does the yield actually come from with with alpha like where is that are there vaults are there strategies like what is the the gener the yield generation mechanism so there is one main strategy which is that it's taking the liquidity you supply and the borrowed funds that you determine to enter at so let's say 2x leverage then it's you know half of your position is

going to be the debt that you borrow so take all of that and supply to the liquidity providing food that you select let's say you select um eat sushi for instance then it will supply to eat sushi on sushi swap and then it will take the lp token to stake um in the liquidity mining pool uh for you to claim sushi so that's you know the main strategy for for all the pools on alfa homora the difference would be you know which pool you want to provide liquidity or you farm so let's say the apy on eve

sushi will be different from the apy from curve 3 pool which is providing usdp dye usdc on curve farming crv token so so that's you know the high level and then the apy for each of these pool will pretty much be coming from three parts uh with also minus the borrow apy so three minus one right so the first part is the you farming apy which is on leverage so let's say if you were to

provide liquidity or you farm on each sushi let's say you would get 15 and if you take 2x uh position on alpha homora then that means that you're getting 30 um because you're providing 2x more liquidity hence you can you farm with 2x more of the liquidity and get more sushi right the second thing is trading fees apy which is also on leverage so let's say if you were to get 10 trading fees api on a pool and you do 2x then it would be 20

the third thing is alpha apy which is the current liquidity mining program that we're running uh making sure that we help migrate b1 to v2 smoothly and then you know those are all the positive api the negative apy is the borrowing interest rates that you have to pay uh based on what assets you borrow and how much you borrow so the yield comes from uh issuing other protocols issuance of their like equity token right so the so then the the sushi eath pear that comes from sushi being uh

distributed from the sushi protocol and then when you talk about curve you're you're talking about yield farming the crv token so my metal my mental model has now gone from just urine and vaults but urine and vaults plus dydx which has margin and leverage right so if you slap these things together do you are we generally pretty close to what alpha is yeah cool or for a home ride is yeah cool and then what are the what are the risks so can we talk about a risk and who's taking risks yeah yeah the the risk for someone who's

doing this kind of you know leverage yield farming so you know smart contract risk is always going to be there we try to mitigate as much as possible doing various audits having other builders in the space reading through the codes so that's by everyone who's using the product bearing that risk right for the leverage you farmers your risks are on um pretty much making sure that you your position will not get liquidated because if your debt is too

high comparing to the collateral that you put in then you will reach a liquidation point so you can monitor um with your debt ratio number so if your debt ratio is at 100 then that is the liquidation risk that you're you're um you're in which means that other liquidators can come in and liquidate your position uh what that means is that liquidators will get five percent of your position value and then 95 depending on how much debt you have right will be used to pay back the debt

that you owe and then whatever is left is sent back to you as a user um so that's the risk that users have to be aware especially when prices swing and can make the position be closer to liquidation risk one one thing to note is that for the curve 3 pool because all the components are stable coins so if you if you supply stable coin and you're also borrowing stable coins um then the risk is actually lower than the other pools let's say eat sushi that you are

providing eat or sushi and borrowing ease so you can see here that the stable coin pools assuming that the stable coins are you know to their peg um then the the position is less likely going to be moved towards liquidation because the dead portion doesn't really move that much because of the the peg system of the stablecoin so that's for the you farmers right on the lenders the risk is that you know if if the

positions or you know leverage positions become underwater um then partially you know the the funds in the lending pool may be um used to cover that uh that that loss right but nothing to to be too worried we actually have several mechanisms to prevent that uh the first mechanism is that even when it's at 100 liquidation uh or even when it's at 100 dead ratio which is the liquidation risk we offer another buffer scenario which

means that at liquidation risk the positions are actually not underwater yet so that's the the one thing that we do the second thing that we do is that alpha homora b2 also takes 20 percent of the borrowings borrowers uh interest rate to set aside as the insurance funds so you know if we have to cover the losses on the underwater positions to cover the debt right then um this insurance funds will be tapped first um before tapping into

um the the funds in the lending pool and a pile of insurance funds sounds like a fascinating topic that i i think there's probably a rabbit hole there but first before we go there i want to ask about the collateralization ratio did you just imply that there you could actually have an even amount of debt to collateral in the alpha system uh yes so so the way that alpha homo works it's not similar to the other uh let's say lending profile um and the key difference is that each

asset actually has a collateral credit and a borrowing credit so this is different for for the other lending protocol or like the the mechanism that has been used widely in lending protocol because in typically there is no borrowing credit there is only a collateral credit or the collateral loan to value right let's say if you take uh one e you can borrow approximately 70 value of that one ease um and then you can borrow anything within that 70 value

of that eve right what's different with alpha horror v2 and hence it's kind of harder to calculate what's the exact collateral ratio on top of you know anyone's head you need like the excel to do it um because that when you supply let's say e you would get a collateral credit value let's say you get for instance uh one collateral credit value right and then if you're going to borrow die that will consume for instance 0.5 collateral credit so which

means that you can actually borrow two die in this case so assuming that the price is one to one for simplicity right but if you collateral with one ease and you get one collateral credit and if you're actually going to borrow sushi for instance um sushi would actually uh claim and pretty much require 1.5 credit to borrow which means that if you supply one ease and you have one credit you actually cannot borrow sushi because it requires 1.5 so that's the mechanism that we do which means that

the collateral ratio depends and pretty much also the leverage ratios depend on two things what assets you bring in as collateral and which assets you're borrowing and not just which asset you're bringing as collateral and how are these parameters determined well new plan so any nippon is you know pretty much owning the the main mechanism of you know what parameters we offer um to ensure that it's safe and also still

able to offer leverage um and we have this huge excel that we also do uh to make sure that we update you know every every week um depending on the price and making sure that the parameters that we set is still within the the range that we are okay with okay would you would you characterize that as a hands-on endeavor is that something that is updated frequently or like what is the the long-term plan for maintaining this this balance it seems like a delicate balance that if someone isn't having like their eyeballs on it

all the time could get out of hand so technically you don't have to look it you know every week we just do so now because we just launched v2 so we want to make sure that everything is fine you know as the migration process has been going right and all the parameters on alpha v1 and v2 actually have taken into account the worst case scenario um so let's say uh if there's a really huge price swing um or or anything in the past that you know can

yeah can can cannot lead to a good event that is something that we also have taken into account um and the leverage that we offer um pretty much ensure that you know if that scenario were to happen again it would be mitigated also we cannot say that it would not happen because we don't know you know what else is going to happen um in d5 right so can we talk a little bit about um lending on alpha hemorrha so you could land your eth at least in version one now in version two you can

lend all sorts of other assets what are what are the typical interest rates because it was it was fairly attractive in alpha v one for eth it was something like like i don't know four to eight percent somewhere in that range uh is that about right so typically it stays around eight percent in v1 and then goes up to like in the tens in the 20s sometimes wow when when the the utilization rate goes really high and and you know i think the key thing with that is the interest rate model that we use is a

three slope curve and i think that works really really well um for for high utilization assets so let's say can we define what that is yeah so typically there is only one kink right let's say like it's here and then it's here um given whatever utilization rate you want to to set the interest rate to be higher uh what we do differently in v1 and also going to adjust in v2 as well right now the v2 is not three curve uh three slope curve yet so in v1 is that