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

SMART Alpha — Tokenizing asset price volatility

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 Alpha Perfectly Fits For


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.

Collateralized Borrowers

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

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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