At Stella, borrowers (or ‘leveragoors’) can take leverage on supported DeFi strategies without paying any borrowing cost. Lenders can earn real yield shared from the leveragoors as a lending APY, the more the leveragoors get, the more the lenders earn. This is made possible by Stella's ‘Pay-As-You-Earn’ (PAYE) model, designed to help leveragoors and lenders earn the highest yield potential.

Stella’s Mission to Redefine How 'Leveraged DeFi' Works

Stella strives to become the go-to destination for leveragoors and lenders to access maximum yield potential. Whatever on-chain strategies that leveragoors want to use on leverage (and safe enough to be supported), then Stella will support at 0% cost to borrow.

Stella offers a range of leveraged strategies sourced from major DeFi protocols, providing users with expanded opportunities to generate yields.

By utilizing liquidity from Stella Lend, Stella Strategy enables users (or leveragoors) to increase their positions by borrowing funds at 0% cost. This results in larger position sizes, leading to higher yields from trading fees, token rewards, or price exposure.

Unlike traditional accruing borrow interest from utilization-based IRM, Stella adopts a Pay-As-You-Earn (PAYE) model. When closing a position and realizing a profit, a portion of the net profit is deducted as a fee for the borrowed liquidity.

We are thrilled to introduce Hypernova, the latest upgrade to our DeFi protocol. This upgrade brings a host of new features and improvements, designed to offer our users more flexibility, higher yields, and a broader range of assets to interact with. Hypernova introduces 2 types of strategies: Hyper and Standard

Hyper-Strategy

The Hyper-Strategy is designed for users who are looking to maximize their yields by interacting with new and trending protocols. This strategy allows users to borrow assets from the Hyper-Lending Pool.

Users who are looking to access emerging innovative strategies with high-yield potential like the Leveraged Pendle LP Strategy on Liquid Staking Tokens (LSTs), where Leveragoors will be able to get up to 30% on the leveraged LST Pendle strategy using single-sided ETH.

• Higher Yields: By utilizing the Hyper-Strategy, users can earn more yield compared to standard strategies.

• Access to Trending Assets: This strategy provides access to new and trending assets, giving users the opportunity to diversify their portfolios.

• High Risks High Returns: It's important to note that the Hyper Strategy exposes users to higher risks compared to traditional strategies. Please exercise caution and conduct your own research before participating.

Standard Strategy

The Standard Strategy is a more conservative approach, focusing on well-established DEXes like UniV3, Trader Joe, etc. along with all the major assets in the market such as ETH, BTC, USDT, USDC, etc.

• Flexibility: The standard strategy can borrow the assets from the Hyper Lending pool in case the utilization of the Standard Lending pool of the related assets are fully utilized.

The prevalent interest rate model (IRM) is what limits users from generating real DeFi yields.

In practice, IRM creates misaligned incentives and imposes such a win-loss relationship between lenders and borrowers.

• Interest Rate Model (IRM) is disconnected from the yields borrowers can earn in the market, the quoted interest rate from the model is not reflected in the actual yield that the leveragoors can earn in the market.

  • Lenders enjoy higher yields at the cost of borrowers who pay high interest rates on borrowed funds, pressuring borrowers to generate even higher yields to justify these interest payments.

• Large position sizes of whales and institutions can spike interest rates due to high utilization, capping leveragoors' yields, resulting in negative APY and reduced incentives.

With DeFi is NOT going to have 3-digit or 4-digit yield opportunities anymore, Stella’s 0% cost to borrow and Pay-As-You-Earn (PAYE) model are the ultimate solutions for the current and future DeFi market.

Stella has replaced the utilization-based IRM with the PAYE Graph - a curve that determines the proportion of leveragoors' generated yield allocated to lenders. This aligns the incentives of both leveragoors and lenders, facilitating fair and genuine DeFi yields for all participants. This advancement sets a new fundamental standard for the next-level DeFi innovation by introducing innovative methods of leveraging and lending.

PAYE Model In-Action

Leveragoors will not experience any borrowing costs, irrespective of the asset's utilization rate. They will bear cost only when they generate yields, in accordance with Stella's PAYE Graph, wherein a yield share portion is taken from the generated yields.

These yields cut from leveragoors are shared with lenders, enhancing capital efficiency while putting no maximum cap on lending APY. It’s a collective incentive alignment between leveragoors and lenders alike.

Based on volatility and other market factors, the underlying assets of Stella Strategy can be broadly categorized into three types:

1. Stable: These assets exhibit minimal price fluctuations over time. They are considered low-risk investments, often preferred by conservative investors seeking steady returns.

2. Major: Major assets are well-established and have a significant presence in the market. While they might experience some fluctuations, they are generally less volatile than newer or less established assets.

3. Volatile: As the name suggests, these assets are characterized by significant price swings in short periods. While they offer the potential for high returns, they also come with increased risks.

Users can use Stella Strategy to execute a liquidity providing strategy with exposure within a few clicks. By using an exposure strategy, user can gain more from asset price volatility on top of trading fees.

Long Strategy

If leveragoors are bullish on Asset X (i.e. believe that the price of Asset X will increase against Asset Y) in the future, they can execute Long Exposure Strategy on X. Their position value will increase when X price rise, allowing them to gain in addition to trading fees.

To give an example on ETH/USDC.e strategy, a leveragoor who believes that ETH price will rise (relatively to USDC) will borrow USDC when opening a position to maximize their LONG exposure on ETH. As ETH price gets higher and the LP is rebalanced, original debt amount remains the same. This leads to extra yield when repaying debt at position closure.

Short Strategy

If leveragoors are bearish on Asset X (i.e. believe that the price of Asset X will decrease against Asset Y) in the future, they can execute Short Exposure Strategy on X. Their position value will increase when X price drops, allowing them to gain in addition to trading fees.

To give an example, on ETH/USDC.e strategy, a leveragoor who believes that ETH price will drop (relatively to USDC) will borrow ETH when opening a position to maximize their SHORT exposure on ETH. As ETH price gets lower and the LP is rebalanced, original debt amount remains the same. This leads to repaying debt at discount at position closure.

Neutral Strategy

If leveragoor believes that prices of all assets in a strategy will remain the same relatively to one another, they can use the Neutral Strategy to minimize net exposure by simultaneously having the same level of LONG and SHORT exposure on both assets.

Price Range

Uniswap V3 pioneered the concept of "concentrated liquidity" where users can specify a price range they want to provide liquidity to. This means instead of all user LP positions receiving a share of trading fee every time an AMM swap occurs regardless of asset price, the LP position will be active and earn trading fee only when the asset price is in a selected price range. Trader Joe V2 has also implemented this concept.

In the integration with Uniswap V3 and Trader Joe V2, Stella Strategy simplifies the process of providing liquidity by creating 3 different instant price ranges: Wide, Medium and Narrow. Each price range has different minimum and maximum asset price resulting in different risk and return within the same strategy. The more narrow range will be more likely to earn higher trading fees but can potentially experience more ‘Impermanent loss’ when an asset price moves.

Liquidity Shape

Trader Joe's Liquidity Book offers users opportunities to provide liquidity with higher levels of flexibility and customization. Users will be able to deploy liquidity in a shape that fit their strategic goals to the capital efficiency. Stella users can provide liquidity in either Spot or Curve shape. Each shape serves different purpose for different market condition and has different risk level.

Collateral Credit

A Collateral Credit determines how much credit is gained from collateralizing an asset. The collateral credit is derived from the collateral factor which depends on the volatility of an asset. The higher volatility of an asset, the lower the collateral factor.

TotalCollCredit= LPValue⋅LPCollFactor+∑ExtraCollTokenValue⋅ExtraCollTokenCollFactorTotalCollCredit=​ LPValue⋅LPCollFactor+∑ExtraCollTokenValue⋅ExtraCollTokenCollFactor​

Stella uses the concept of LP token as collateral to enable undercollateralized loans. Thus, the LP collateral credit comes from the minimum collateral credit within the asset pair.

For example, $1 worth of ETH has 0.8 collateral credit while $1 worth of DAI has 0.95 collateral credit as ETH is considered a higher-volatile asset. Moreover, when performing leveraged yield farming on the ETH-DAI asset pair, 0.8 (the lower of 2 values) will be used as collateral factor.

Borrow Credit

A Borrow Credit determines how much credit is consumed from borrowing an asset. The borrow credit is derived from the borrow factor which depends on the volatility of an asset. The higher volatility of an asset, the higher the borrow factor.

BorrowCredit=TotalDebtValue⋅BorrowFactorBorrowCredit=TotalDebtValue⋅BorrowFactorTotalBorrowCredit=∑iBorrowCreditBorrowedAssetiTotalBorrowCredit=i∑​BorrowCreditBorrowedAsseti​​

For example, $1 worth of ETH has 1.14 borrow credit while $1 worth of DAI has 1.05 collateral credit as ETH is considered a higher-volatile asset.

🧧 Leverage with 0% Cost to Borrow

Stella Strategy empowers leveragoors by enabling them to borrow supported assets from Stella Lend to execute DeFi strategies with a bigger position at a 0% borrowing cost. This effectively eliminates the problem of high borrow interest rates associated with the previous lending model during periods of high utilization. Leveragoors can have peace of mind knowing that borrowing costs will never surpass the yields generated from their strategies.

🏄🏼‍♂️ Pay-As-You-Earn (PAYE) Model: “No Gain, No Pay” Motto

Unlike the traditional accruing borrow interest model, Stella's PAYE model requires leveragoors (borrowers) to share their strategy yields with lenders. If leveragoors do not generate profits, they are only responsible for repaying the borrowed amount (their debts) without any additional payments. In simpler terms, it follows the principle of "No gain, no pay!"

Additionally, Stella's model is designed to reduce the percentage cut deducted as leveragoors generate more yields. This creates a mutually beneficial arrangement where lenders will benefit as leveragoors gain more from their positions.

🛍 Multiple Selections of Leveraged Strategies

Stella strives to serve as the gateway for users to access a wide range of leveraged strategies by prioritizing quick responsiveness to meet the evolving needs of users, especially in the DeFi world. With varying levels of knowledge and backgrounds, users will find a leveraged strategy in DeFi that aligns with their individual approaches.

🛡️100% Safe Undercollateralized Loans

One of the key features of Stella Strategy is its ability to achieve undercollateralized loans and increase the capital efficiency. This is made possible by using the LP Token of the position as collateral within its contract. By doing so, Stella Strategy effectively protects itself from potential losses due to underwater positions and minimizes the risk of bad debt.

🤝 PAYE Model: Incentives Aligned

The Stella Pay-As-You-Earn (PAYE) Model employs a decreasing percentage cut based on the leveragoor's yield. This incentivizes skilled leveragoors to aim for higher yields by making strategic moves, maintaining vigilance, and timely profit-taking. As a result, the active participation of proficient leveragoors increases the likelihood of lenders achieving elevated yields.

👍 Simply lend and earn

From the perspective of lenders, Stella Lend operates similarly to a standard lending protocol in the Web3 ecosystem, with the distinction of not offering a borrowing feature. Lenders are not required to acquire new paradigms or concepts to participate; they can seamlessly lend their assets and earn yields without the need for additional learning or adaptation.

🚨 Robust Precautionary Measures

By lending assets on Stella Lend, user funds benefit from comprehensive precautionary measures implemented to safeguard against potential losses. Stella Lend's objective is to mitigate risks within each lending pool and maintain an overall risk-controlled environment, actively countering smart contract risks to the greatest extent possible. For instance, each strategy operates with its own specific borrowing cap, in addition to the underlying asset's borrowing cap.

Stella core contributors have built in ‘leveraged DeFi’ since 2020. These developments include building the first leveraged yield farming protocol, Alpha Homora, that has a peak TVL of $1.9B, coming up and implementing key fundamental concepts such as tokenization and collateralization of LP tokens, and incubating a number of DeFi projects that went on to raise from top-tier VCs and list on tier-1 exchanges.

Under the new name (Stella) and the same token (ALPHA), the same core development team aims to double down on the expertise in building an on-chain leveraged product. With Stella’s 0% cost to borrow and Pay-As-You-Earn model, for the first time, align incentives between borrowers (or “leveragoors”) and lenders, presenting a whole new and better way of how leveraged DeFi should be – a way that one party does not lose when the other party gains.

Given that the PAYE model allows leveragoors to borrow assets without any costs and repay when closing their positions, there is a potential issue of prolonged 100% asset utilization. This situation may hinder lenders from withdrawing their funds as desired. To tackle this challenge, Stella has implemented a Slow Mode mechanism.

By triggering this mode, funds returned by leveragoors upon closing positions cannot be immediately borrowed for new positions for a period of up to 12 - 24 hours.

As a result, the mechanism ensures that lenders are guaranteed to access their funds in their entirety within a maximum period of 30 days. This measure provides increased confidence to lenders, assuring them of the prompt and complete withdrawal of their invested amounts.

Collected shared yields from leveragoors aren't distributed immediately to lenders, but instead are accumulated to an intermediate vault where everyday 3% of the remaining rewards will be distributed to each lending pool as lending APY.

This process generates smoother streams of yields to lenders, making it harder to game the system by instantly making a large deposit to become a major contributor and receive a large shared yield portion when seeing a large amount of yields coming in from monitoring positions on Stella Strategy side.

1. Strategy Cap

This cap limits the number of tokens each strategy can borrow from lending pools.

For example, an ETH/DAI strategy on Uniswap V3 fee 0.3% has caps of how much it can borrow ETH from ETH lending pool and DAI from the DAI lending pool.

1. Pool Type Cap

This cap limits the number of tokens borrowed by a pool type. In the context of Stella Strategy, a pool type represents a method by which Stella integrates with smart contracts of other protocols. A pool type can encompass multiple strategies, and each externally integrated protocol (such as Uniswap v3, GMX, Camelot, etc.) can have several pool types.

For example, Stella may support several leveraged strategies that build on top of Uniswap V3, several on top of GMX, and several on top of Camelot. If all integrated Uniswap v3 strategies fall under the same Pool Type, there will be one Pool Type Cap limiting the number of tokens all Uniswap v3 leveraged strategies can borrow in aggregate.

1. USD Cap

This cap restricts the overall value, denominated in USD, that each strategy is allowed to borrow.

For instance, consider an ETH/DAI strategy in Uniswap V3 with a 0.3% fee. This strategy has a cap on the combined total of borrowed ETH and DAI, measured in USD.

1. Token Exposure Cap

This cap restricts the total amount and the percentage of the lending pool that can be borrowed by all strategies with exposure to a specific token. Its purpose is to mitigate potential losses in the event that the value of the exposed token drops to zero.

For instance, consider strategies involving the PEPE/USDC pair from Protocol A and Protocol B. Stella will enforce caps on:

1. The total amount of USDC that both PEPE-related strategies can borrow from the USDC lending pool.

2. The percentage of the USDC lending pool that both PEPE-related strategies can borrow

It's important to note that Stella allows for flexibility by considering the maximum borrowed value between the token amount cap and the percentage cap.

Q1: What will happen to $ALPHA with this rebrand?

A: No major changes will happen to $ALPHA. Additionally, after the launch of Stella, $ALPHA will accrue protocol fees from Stella from all L1 and L2 that Stella will launch on.

When borrowers (leveragoors) from Stella generate yield from their leveraged positions and Stella takes the yield cut through the Pay-As-You-Earn model, 20% of these yield cuts are collected as protocol fees.

Q2: Will your project be rebranded/updated on Binance/Coingecko/CMC?

A: All platforms are going through their internal process of making this change. This may take a while to process on their end.

Q3: Are the team members still the same as Alpha?

A: Yes, core contributors remain the same with Tascha as Project Lead, Nipun as Tech Lead and Arin as Product Lead.

Q4: What is the purpose of rebranding Alpha to Stella?

A: Alpha is adapting its mission to better drive forward the DeFi industry that has changed drastically the past few years. Instead of being a DeFi lab, experimenting, building DeFi products, and incubating external DeFi projects, Alpha's new mission is to redefine how 'leveraged DeFi' works and build a good leverage system through Stella in order to drive the next growth phase of DeFi.

DeFi needs a good leverage system in order to drive more usages on DEXes and money markets, the fundamental building blocks of DeFi. With growing usages on these fundamentals, more protocols and new innovations can arise and tap into the deep liquidity and robust foundation. Stella’s 0% cost to borrow and Pay-As-You-Earn model, for the first time, align incentives between borrowers (or “leveragoors”) and lenders, presenting a whole new and better way of how leveraged DeFi should be – the way that one party does not lose when the other party gains.

Q5: What impact will this rebrand have on current Alpha holders and stakers?

A: There will be more fee accrual to staking system as product gain traction and leveraged positions are making yields.

Q6: Is there a change in token allocation to team members as part of the rebrand?

A: No, token allocation has not changed since inception. You can always refer to Binance research page.

Q7: Is there a possibility of an airdrop for early users?

A: No promises on airdrop, but we will be announcing a NFT giveaway campaign soon. Stay tuned.

Q8: Where can I look into more details of how this model will work?

A: Users can refer to our gitbook for the full documentation details.

Alternatively, users can check out the introduction blog on the PAYE model directly on our Medium:

Q9: What is included in this rebrand? Token change too?

A: Project name, project mission, protocol name, project logo, project branding change. Token will remain the same ($ALPHA token).

Q10: Will there be any changes to the staking system?

A: No, the staking system will remain the same. After the launch of Stella, $ALPHA will accrue protocol fees from Stella from all L1 and L2 that Stella will launch on.

When borrowers (leveragoors) from Stella generate yield from their leveraged positions and Stella takes the yield cut through the Pay-As-You-Earn model, 20% of these yield cuts are collected as protocol fees.

Stella offers multiple lending pools for lenders to passively earn real yield shared from the Stella Strategy

Stella Strategy offers users the ability to open leverage positions across a variety of strategies. The leverage level associated with each strategy is determined by two key factors:

1. Collateral Factor (CF): This factor represents the value assigned to each unit of assets used as collateral in the position.

2. Borrow Factor (BF): This factor determines the value assigned to each unit of assets borrowed in the position.

The factor value is carefully tailored based on the historical volatility and risk profile of each asset by Stella research team to ensure that the users and protocol are safe.

The maximum achievable leverage through the smart contract is determined by the following formula

MaxLeverage=BFBF−CFMaxLeverage=BF−CFBF​

However, the maximum leverage displayed on the Stella App is calculated using the following formula as a precautionary measure against excessive exposure to liquidation risk.

MaxFELeverage=11−threshold⋅CFBFMaxFELeverage=1−threshold⋅BFCF​1​

Normally, the threshold variable is set to 0.97-0.98.5 based on each strategy

Price impact refers to the effect of your trade on the price of an asset within a pool. When a large order is executed, it can cause the price of the asset to increase or decrease, respectively, due to the AMM algorithms.

Price impact is important as it affects the execution price and slippage of your trade. Stella provides you the following:

1. Price Impact on Supplied Asset.

   This refers to price impact on your supplied asset/ input only

2. Price Impact on total position

   This refers to price impact on the total position after leverage and swap through Stella

You can adjust your slippage and transaction deadline in the settings. In the scenarios where a large slippage occurs, it is recommended to review your transaction carefully. In the case of large price impact on supplied asset, Stella will require some extra confirmation before execution.

As the leveraged strategies protocol without the Interest Rate Model (IRM) or borrowing interest, Stella works under the Pay-As-You-Earn Model (PAYE) which focuses on the yield sharing between Lenders and Leveragoors.

The protocol is made up of two parts: Stella Strategy and Stella Lend.

Stella Strategy

Leveragoors can access multiple selections of leveraged strategies built on top of various defi protocols. Instead of paying a borrow interest quoted from the lending side to levered up the position, the leveragoors just have to share the yield they earn when closing the position which means No gain = No pay

Stella Lend

Lenders can lend assets to the lending pools on Stella and earn real yields. Yields generated from Stella Strategy are shared to lenders. Given that the lending APY is the yield shared from leveragoors, there is no maximum cap on the lending APY.

Due to the daily distribution of yields, Stella has implemented a strategic measure in order to mitigate the potential risks associated with a sandwich attack. To achieve this, an intentional withdrawal delay of 2 days has been introduced on the lending side subsequent to the deposition process.

During this period, lenders cannot withdraw or transfer assets (ysToken) for 2 days. Adding additional assets during the withdrawal delay will restart the countdown period.

A risk framework is crucial because it helps identify and manage potential risks, protect funds, and enhance the overall protocol’s resilience. Besides multiple smart contracts audits by trustworthy entities

But in the end, It's crucial for users to understand these risks before participating in any lending pool.

• Underlying Smart Contract Risks: The Lending Pool is built on top of integrated/underlying contracts of various protocols. If an unfortunate event occurs, there are implications for the lenders.

• Risk Separation: The Hyper and Standard Lending Pools operate with distinct risk profiles. While the Hyper Pool is associated with higher-risk assets and strategies, the Standard Pool is more conservative. Changes/events in one pool won't affect the other.

• Loss Socialization: In the event of such a bad debt, the loss will be socialized among all the lenders in the pool. This means that all lenders share the burden of the loss.

Both the Hyper and Standard Lending Pools offer unique opportunities and risks. It's essential for users to assess their risk tolerance, understand the nuances of each pool, and make informed decisions.