Adding ETH Asset with Highest Yield

[Falcone]

Alt season is right around the corner and giving users the ability to EARN the HIGHEST YIELD on ETH, will attract a lot of positive attention to IDLE and at the perfect time.

And the good news is, this can be completed very quickly and with ease, by just plugging into smart contract to deposit the IDLE users ETH.

There’s a platform called Alpha Homora, by Alpha Finance. Its a project that’s on Ethereum and Binance Smart Chain, but their main ecosystem, Alpha Homora, is ran on Ethereum.

They are the first platform to offer leveraged yield farming, and because of the way they’ve designed their ecosystem, it allows users to deposit ETH in vault and earn extremely high APY. Usually it remains the highest across all DeFi platforms. At the time of writing this proposal, ETH APY is at 17%.

They are able to do this because the ETH deposited from users goes into a vault (They are considered lenders for their platform). This allows other users (Yield Farmers) to partake in Leveraged Yield Farming by borrowing the ETH. The users who deposit ETH into vault, DO NOT have to worry about losing their ETH because of the way they’ve designed their protocol. It consist of Yield farmers, lenders, liquidity providers, liquidators, and bounty hunters. More detailed info can be found in the link below

https://alphafinancelab.gitbook.io/alpha-homora/protocol-users

Also, their vault/deposit contract is already audited (can be viewed in the link below). They have over 158k ETH in vault already.

Alpha Homora's Risk Analysis ✨❗️

Since IDLE will be the face of DeFi for normies, this is a good solution that will benefit both protocols.

[Coinballers]

This is an excellent idea Falcone, would be great to add ETH as a high yield asset and would bring a lot of positive focus to the project.

[william]

Hey @Falcone, thanks for this. You are proposing to allow ETH deposits in Idle and use Alpha Homora as one of the lending providers right?

I think that ETH would be a great addition to the Idle offering, but while adding any ERC-20 is easy because the IdleToken is the same deployed for all other tokens, for plain ETH the contract needs to be modified. If we use WETH instead, then only lending wrappers contracts for Aave and Compound needs to be partially rewritten (a wrapper contract can also be used to present ETH to end users instead of WETH).

Regarding Alpha Homora they may be a good fit, but more research is needed, the link you posted is a security review not an audit, which hopefully they have somewhere else.

[unicorn]

regarding Alpha Homora I will share this anonymous security review:

AlphaFinanceLab.pdf

There is a twitter thread about this if ppl want to know more.

[william]

At a first read does not seems so encouraging given the conclusions of the second review, not sure if they changed something (probably) in the last 2 months since the last review

[Davide]

Thanks @Falcone for sharing this!

If we work only with protocols already embedded in Idle and that support ETH, according to Defi Rate we have as a 30-day average APY:

• Compound: 0.05% ($ 1.1B TVL, 3% used)
• Aave V1: 0.20% ($ 554M TVL, 12.5% used)
• Aave V2: 0.12% ($ 77M TVL, 10.7% used)
• dYdX: 0.02% ($ 78M TVL, 1,1% used)

That means that the yields are very low, but the market size is very big ($ 1.8B). If we can provide the best APY (in this case 0.20%) and we assume 5% as our expected total achievable market (90M), we can expect to generate approximately 18,000/year from the current performance fees.

Only getting more than 20% of the market and reaching 360M+ in value locked, fees amount to at least 70,000/year.

ETH seems to be a nice addition, but we have to define the costs in developing the wrapped contract and implement the ERC-20. If those costs are extremely high, the return on the investment might not be so fast.

[idal]

Wow, doesn’t look good at all.

Apparently, another audit is in progress. Let’s see what it shows.

Nipun | Alpha (nipun_pit)

[idal]

2 audit reports for Homora v2 are in.

Cannot say I am reassured. Complicated code and lack of tests, comments and coverage - sounds like rushed development, to be honest. Perhaps they are trying to beat Maker and others in the race for LP tokens. But see for yourself: homora-v2/audits at master · AlphaFinanceLab/homora-v2 · GitHub

[Seppo0x]

Reading into the thread and code it appears like the code is very complex and super advanced. Even Andre took their IL solution as inspiration for his. Kinda says a lot. All relevant issues have been cleared according to the audit.

Aave, cream, balancer, curve had partnered with Alpha Homora (Alpha Finance Lab) and also endorsed them publicly.

Besides that it originates currently the same loan value like Aave did in the last week which comes from a strong borrow demand and usage of their platform. https://twitter.com/jpurd17/status/1353039260539088896?s=21

I feel like we could utilize this leading APY rate here properly as it’s in fact one of the highest native out there via ibETH. As far as I know there are or will be also proposal adding their interest bearing token to curve and Aave as asset.

[idal]

@Seppo0x

All relevant issues have been cleared according to the audit.

Thank you, @Seppo0x, though I respectfully disagree. Quantstamp’s report says their audit was impaired by complexity of code, inability to report test coverage and inadequate documentation.

Auditors can only catch what they can see in the limited time they have. Every responsible auditor will warn you about this. This is why murky code, like murky water, is risk - there are more bugs in it than meet the eye. Ideas and algorithms can be genius and inspiring, but if implementation is buggy and unsafe - you’re next to make the Rekt headlines.

Don’t get me wrong, that wouldn’t be an issue if Idle aimed to be another Harvest or Pickle. But its motto is “maximize profits and minimize risks”, not just “maximize APY”. Idle products are split by risk; risk score is a prominent feature of UI.

To me the risk of AH, compared to currently supported lending protocols, is higher from several points of view. So I would like to focus this discussion less on aping and more on due diligence and risk mitigation.

Many protocols have parameters that are adjusted according to risk. For Idle I think we still have to figure them out. There was a discussion about built-in insurance purchase; this could be a good solution to let Idle move fast on AH integration while controlling the risk.

By the way, the APY reported for ibETH by DeBank is consistently 5%-7% lower than numbers reported by AH dApp (I hold some ibETH). You seem knowledgeable about AH, maybe you can explain why.

[unicorn]

getting back to this with a question to @william and the rest of the community
what you guys think of the business case to add not only WETH but also “staked ETH” deposits in Idle?

[william]

You mean through https://lido.fi/ ? Are there other providers?

[8bitporkchop]

Rocket Pool Is another stakedETH pool, they are supposed to release on mainnet in Q1 2021.

[unicorn]

I know rocket are og’s even if they are not yet on main net yet… There are others… Lido…
I just wanted to point out that there is a ton of staked eth out there ( 2B?) and not much you can do with it… If idle could provide a solution it would be great marketing and biz opportunity.

[idal]

There is Lido’s stETH; Curve has a pool for it. Proposals are being pushed through to get it onto Maker and Aave.

There is also Stkr’s ankrETH; Curve pool is going live in “coming hours/days”.

Rocket Pool took a principled stance and waits until ETH2 progresses enough to avoid any need for private key custody; as @8bitporkchop says, it should happen soon enough.