The Target Leverage Ratios for BNB2x-ALI is 1.7x-2.2x, which is the balance between the underlying asset and the borrowing asset. To prevent liquidation in the case of volatile markets, ALI products are programmed to continually adjust and rebalance towards the target ratio.
Depending on the performance of the underlying asset, the Target Leverage Ratio for a typical ALI token shows you the range of your expected returns. In other words, when the price of an underlying asset fluctuates (increases or decreases), the Leverage Ratio ranges between 1.7x-2.2x. The corresponding gains or losses depend on the underlying market price action of BNB, coupled with the Target Leverage Ratio determined by ALI.
The BNB2x-ALI operates on the Binance Smart Chain (BSC) and uses Cream Finance as its underlying protocol.
Here’s a simple run down of how it would flow if you used the BNB2x-ALI:
- 1.The strategy accepts BNB from the user and deposits to Cream Finance to mint crBNB
- 2.Deposited BNB is used as collateral to borrow USDC
- 3.Borrowed USDC is swapped to BNB and deposited into Cream Finance, thus leveraging the position
- 4.Leverage is maintained between 1.7x to 2.2x
- 5.In profit conditions, you can withdraw more BNB than the deposited amount
- 6.During withdrawal, the USDC debt is paid by selling the BNB to USDC and remaining BNB is withdrawn
- 7.If the price has decreased, you will withdraw less than the deposited amount as your BNB is sold to repay the USDC debt
- 8.When the price of BNB increases, the leverage percentage will decrease, thus more USDC can be borrowed to increase the leverage and vice versa
Here’s an example: In more specific terms, if BNB price goes up 5% in a day with a leveraged ratio of 2x, the user's revenue should go up about 10% in a day, and vice versa. Remember, ALI is not a staking or liquidity mining app.
The final ROI largely depends on the market price of BNB, which is dependent on the market forces. BNB2x-ALI helps to leverage the price action, whichever ways it goes.
With BNB2x-ALI, you pay a 1% deposit fee only. There are no withdrawal fees.
Ideally the higher the TVL, the higher the leverage ratio. However, currently there isn’t enough BNB to borrow and deposit.
Under normal circumstances,
- 1.A user deposits BNB, the backend uses it as collateral to borrow USDC
- 2.Backend buys BNB using the borrowed USDC
- 3.Backend deposits the newly purchased BNB in Cream Finance
Note: For Cream Finance and gas reasons, there’s a minimum amount that must be borrowed
Scenario 1: The user deposits a sufficient amount that allows loans to be taken i.e. $100 facilitates a $50 loan, $50 facilitates $25, $25 facilitates $12.5 etc. until it reaches the minimum loan amount. This way, the target leverage ratio can be reached.
Scenario 2: The user has deposited a very small amount of BNB which can only facilitate 1 loan. This limits the leverage ratio at 1.5x.
- 1.Out of range 1.7x - 2.2x,
- If below the target range, more USDC is borrowed and swapped for BNB as a means to increase leverage
- If above the target range, some amount of BNB is withdrawn and swapped for USDC as a means to pay back the loan and thus deleverage
2. Price Change - fluctuation in prices could also trigger a leveraged ratio change
The staked amount is only a deposited value from specific users. It should update after the user has deposited or withdrawn. The staked amount is updated every 5 minutes.
Not necessarily. It largely depends on the price and the current leverage ratio.
Yes. There are high chances of liquidation in volatile markets, especially during black swan events. In that case the Emergency Withdrawal is called to deleverage the ratio, thus drastically reducing the debt amount in time.
This function is only used when liquidation is imminent or your leverage ratio is above the max range. For example, if the real leverage ratio for BNB2x-ALI is 2.3x, the Emergency withdrawal can be called to aggressively deleverage the product. However, this is only considered as a last resort to avoid liquidation.
We use PancakeSwap.
Whenever USDC is borrowed from Cream Finance to lever up BNB2x-ALI, the Smart Contract swaps USDC for BNB via the BNB/USDC pool on PancakeSwap. In the case that BNB2x-ALI needs to be deleveraged, the opposite is applicable.
This is beneficial because the smart contract automatically handles all the complex processes involved with swapping, thus making the product easy to use.
To establish fully collateralized, leveraged positions, ALI uses Cream Finance to deposit collateral assets and borrow USDC, which can be used to get more collateral assets.
For example, when a user deposits into BNB2x-ALI, the BNB is automatically deposited as collateral into Cream Finance by smart contracts to borrow USDC, which can be swapped for more BNB Via PancakeSwap, and added to the collateral balance in the Cream Finance.