Thread by @nipun_pit

1/ We @AlphaFinanceLab has just launched our new product #AlphaX on @avalancheavax network 💪.

x.alphafinance.io

With the new concept, here's a 🧵 on how #AlphaX actually works 👇

2/ Key components:

1️⃣ LONG & SHORT Strike Tokens
2️⃣ Mint & Redeem
3️⃣ Liquidation
4️⃣ Oracle price
5️⃣ Price peg
6️⃣ Arbitraging

3/ 1️⃣ LONG & SHORT Strike Tokens

LONG Strike Token is like **AVAX-55**

The #StrikeToken price should be pegged to ( $AVAX price - $55).

✅ As simple as that.

4/ LONG & SHORT Strike Tokens (cont.)

SHORT Strike Token is like **120-AVAX**

The #StrikeToken price should be pegged to ($120 - $AVAX price).

✅ Again, straightforward.

5/ 2️⃣ Minting & Redeeming

- Mint ➡️ Pay $USDC to mint LONG + SHORT Strike Tokens
- Redeem ➡️ Burn LONG + SHORT Strike Tokens to get the underlying $USDC back.

✅ Strike Tokens are fully collateralized.

6/ 3️⃣ Liquidation

Leverage comes with risk. The higher the leverage (the closer the strike price is to the target price), the higher the liquidation risk.

7/ 4️⃣ Oracle Price

The oracle price of #StrikeToken is based on the target asset price, which is obtained from #AlphaAggregatorOracle, with both @BandProtocol and @chainlink as the underlying data sources!

8/ 5️⃣ Price peg

This is one of the most important mechanics of #AlphaX. How does #StrikeToken maintain its price peg?

9/ Price peg (cont.)

Mint & Redeem guarantees that each pair of LONG + SHORT tokens must maintain the gap; otherwise, there will be an arbitrage opportunity.

Ex:
AVAX-55 = $30
120-AVAX = $25

Arbers can buy these two for $55 and redeem for $120-$55 = $65 (net $20 profit).

10/ Price peg (cont.)

This means that LONG + SHORT = GAP for every pair. ✅

Now, when a #StrikeToken is at liquidation risk, the strike token credit will be available for buying at a discount (~oracle price).

11/ Price peg (cont.)

With LONG + SHORT = GAP, the whole set of LONGs and SHORTs will then be at peg from the liquidation.

So, AlphaX's Strike Tokens already have a price peg mechanism in place.

12/ 6️⃣ Arbitraging

With price peg, arbitrageurs will most likely come and take profit on the off-peg opportunity (with the possibility of hedging any long/short risk exposure elsewhere).

13/ Arbitraging (cont.)

This AlphaX concept is relatively new, so personally there may be some lead time for users and arbitrageurs to understand and develop necessary tools for arbitraging. 🛠

14/ For more info on developing arbitrage or liquidation, please refer to our Developer Section on gitbook:

alphafinancelab.gitbook.io/alphax/for-dev…

Or join our discord if you have any questions:
discord.gg/cstHdXmaV2