Risks

Alpha Homora has its own risks. Below outlines the risks users may face.

1.Yield farmers (1x position, no leverage) are exposed to impermanent loss risk.

  • See more about impermanent loss here.

  • Note: This is the same risk as participating in other yield farming or liquidity providing opportunities on AMM pools.

2. Leveraged yield farmers (more than 1x position) also take the risk of being liquidated because Alpha Homora will borrow BNB to yield farm on leverage for you.

  • Liquidation takes place when Debt Ratio (debt / position value) reaches Liquidation Debt Ratio, e.g. 80% for BNB-BUSD pool, which can take place when your position value falls.

  • Position value falls when the price of another token, such as BUSD in BNB-BUSD pool, drops significantly compared to BNB or BNB price increases significantly compared to BUSD.

*See Key Parameters section to learn what the Liquidation Debt Ratio is for each pool is.

3. Similar to lending risks elsewhere, BNB Lenders share the risk of debts accrued by underwater positions in case liquidators did not liquidate in time.

  • Note: This has not happened before.

4. Liquidators & Bounty Hunters take the risk of being front-run by other competitors, to get reward bonus from liquidations or reinvest bounties. If front-run, liquidators and bounty hunters pay gas fees for free (likely at high gas prices).