Alfprotocol is, in fact, a group of protocols created to provide decentralized capital across and between investors and traders to maximize the provision of liquidity with leverage and without.
The protocol will provide unleveraged products in the form of AlfMM (a decentralized exchange service) and AAlf (an overcollateralized borrowing service). On the other hand, the leveraged liquidity is handled via one of Alfprotocol’s modules that communicates with external protocols such as Solaris, Jet Protocol, and more expected to be added in the future to provide leveraged products up to 200x.
High leverage positions were always a problem with other protocols that depended on Ethereum’s “Proof-of-Work” (PoW) blockchain to power them. Solana supports handling high leverage positions due to its robust characteristics, namely transaction volume per second, which significantly reduces transaction time (reaction time) in comparison to the Ethereum network.
The fast reaction time of Solana’s Alfprotocol will allow it to safely handle position liquidation just in time to safely cover the assets of the liquidity provider with his allotted interest. Solana’s lighting fast latency, which is 27.5 times faster than Ethereum’s, creates a safer protocol for investors and the entire system, which will depend on timely liquidation events, in case they happen, especially for instances with higher leverage. Ethereum’s network during congestions may also pose a risk for investors and traders as transaction fees and time required skyrockets, in some cases reaching $400 per transaction.
Since high leverage liquidity provisions’ viability solely depends on two factors, volatility of the assets and the reaction time of the protocol to liquidate unhealthy positions, it is imperative that the blockchain characteristics would be an essential factor in deciding on which is the most efficient blockchain. With that said, Solana handles 59,000 transactions per second (tps) compared to Ethereum’s 17 transactions per second and Cardano’s 250 transactions per second, making it capable of succeeding the requirements of nowadays and the potential needs of future demands.
Alfprotocol’s potential lies in its diversity and flexibility to meet the needs of all traders and investors in a decentralized environment, with the security and protection that the Solana blockchain offers.
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