English
SMART
Alpha
BarnBridge’s SMART Alpha application gives users more control over their exposure to the performance of a specific digital asset.
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.
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:
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
wBTC-USD
SMART Alphs Perfectly Fits For
01
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.
02
Collateralized Borrowers
Senior positions with sufficient secondary liquidity could be a source of low-volatility collateral across DeFi lending markets.
03
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.