What is Alpaca Finance?

Alpaca Finance is a lending protocol that enables leveraged yield farming on the Binance Smart Chain and Fantom. It strives to provide lenders with stable yields and borrowers with undercollateralized loans for leveraged yield farming positions. This approach aims to increase their farming principals and resulting profits. Alpaca Finance is a community-driven project with no pre-sale, no investors, and no pre-mine, embodying the ethos of a product built by the people, for the people. As a fundamental building block within the decentralized finance (DeFi) ecosystem, Alpaca Finance aims to amplify the liquidity layer of integrated exchanges, improving their capital efficiency by connecting liquidity provider (LP) borrowers and lenders.

How does Alpaca Finance work?

Alpaca Finance operates by allowing users to deposit their base assets into lending vaults, which then become available for yield farmers to borrow. These borrowed assets enable yield farmers to open leveraged farming positions, aiming to increase their farming annual percentage rate (APR), minus borrowing interest. However, these higher yields come with larger risks, including liquidation and impermanent loss. Alpaca Finance's smart contract takes care of the mechanics behind the scenes, optimally switching assets to the right ratio, providing liquidity to the pool, and staking the liquidity provider (LP) tokens for rewards. The protocol also includes a liquidation bot that monitors the health of each leveraged position and liquidates the position when it goes beyond designated parameters, aiming to ensure the safety of lenders' capital.

What are the potential use cases for Alpaca Finance?

Alpaca Finance seeks to provide value to the Binance Smart Chain and Fantom communities through leveraged yield farming. It provides a range of products for users to participate in the decentralized financial (DeFi) ecosystem based on their risk appetite and expected return. These products include lending, leveraged yield farming, automated vaults, and a perpetual futures exchange. Alpaca Finance also has a governance vault, allowing users to participate in the decision-making process of the protocol. Furthermore, Alpaca Finance has integrated with several decentralized exchanges, expanding the range of farming pools available to users.

What is the history of Alpaca Finance?

Alpaca Finance was born out of the need for an on-chain leverage protocol on the Binance Smart Chain, which was missing compared to other chains like Ethereum. Since its inception, Alpaca Finance has grown as a lending protocol allowing leveraged yield farming on the Binance Smart Chain and Fantom. It has undergone multiple audits as part of its efforts to secure its protocol and has integrated with several decentralized exchanges to expand its offerings. Alpaca Finance has also implemented a fair-launch model with no pre-sale, no investors, and no pre-mine, emphasizing its commitment to being a product built by the people, for the people. The protocol continues to develop and expand its product offerings, with the intention to improve capital efficiency for its users and introduce products in new verticals.