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SMART
Alpha

BarnBridge’s SMART Alpha application gives users more control over their exposure to the performance of a specific digital asset.

SMART Alpha — Tokenizig asset price volatility
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What Is SMART Alpha

SMART Alpha pools are two-sided, with users taking either a senior or junior position on a specific ERC-20-compatible asset (e.g., ETH, wBTC, UNI).
  • Juniors owe the senior pool a portion of their underlying assets when price declines, but receive more of the underlying when price appreciates.
  • Seniors receive complete price protection up to a certain threshold, in exchange for fractional exposure to upside movements.
Positions in both the junior and senior pools are represented by ERC-20 proofs of liquidity (e.g., senETH, junETH).

SMART Alpha Simulator

How to Use SMART Alpha

The current implementation of SMART Alpha calculates senior rates as a function of junior-side pool dominance.

Senior rate is defined as the maximum amount of downside price movement the underlying asset can experience in a week before senior depositors suffer dollar-denominated losses.

Junior dominance is defined as the share of a given ERC-20 token’s pool that is comprised of junior depositors.

There are two things to note under the current SMART Alpha model:
  • The senior rate is calculated as 80% of junior pool dominance
  • The senior rate is capped at 35% downside protection for any given epoch


SMART Alphs Perfectly Fits For

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Project Treasuries

For project teams and DAOs with large holdings of their native asset, SMART Alpha seniors provide downside price protection while subsidizing leverage for ardent users.
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Collateralized Borrowers

Senior positions with sufficient secondary liquidity could be a source of low-volatility collateral across DeFi lending markets.
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DeFi Traders

Junior positions present a different type of leverage compared to existing solutions in DeFi, and for a longer tail of assets, it may be one of the only forms of leverage available.
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