Isolated Markets

Overview

Alto Isolated Markets are based on ERC4626 standardized vaults, and are unified with Mint Markets into the same contract. Isolated Markets pair one asset with one collateral and a yield strategy (if applicable). This means that every market’s risk is isolated from another. On one side of the trade, lenders supply USDO for a fee; on the other side of the trade, borrowers can open leveraged positions to gain exposure to a specific asset and enjoy the yield. Alto DAO's unutilized USDO from Uniswap LP positions is supplied into Alto's lending markets via Uniswap V4 hooks.

Leverage

Users can multiply their collateral exposure in an isolated Alto market up to the set max effective leverage which is limited by the market's max LTV, using the following equation:

(1/(1-LTV)) * 0.95

When leveraging, the user will end up with no USDO in their wallet. Leverage on the Alto Protocol uses an “over-borrow”, whereby the protocol allows the user to borrow more than normally allowable to avoid manual “looping”, or requiring several transactions to obtain the user’s desired leverage. Alto’s swapper will then take care of swapping this USDO into more of the constituent collateral asset, and depositing the collateral back into the ERC4626 vault associated with the market. Once completed, the user can monitor the position in their Portfolio.

Rewards

The ALTO protocol features in-the-money call option incentives for users who pay interest through maintaining debt positions on the Alto protocol, as well as lenders within its isolated markets. For more information on Alto’s call option incentives, refer to oALTO.

Available Isolated Markets

Ethena sUSDe

This section will be updated when the protocol is live.

Parameters

• LTV: Isolated markets have a maximum LTV of 98% in correlated market pairs, which offers capital efficient borrowing and leverage.

• MCR: The Maximum Collateral Ratio or MCR is the point at which collateral will begin to be liquidated, typically above the LTV. When the user passes the MCR, the user will be brought down to the max LTV.

• Max Leverage: The maximum effective leverage obtainable is dictated by the max LTV per market. No leverage ceiling is enforced external to the limitations imposed by the market's LTV.

The max leverage per market is calculated by:

(1/(1-LTV)) * 0.95

• Liquidation Fee: This is the fee charged upon liquidation being triggered due to a user’s CDP going above the market’s defined LTV. This fee is defined per market as a base + liquidator speed bonus.

• Borrow Fee: The borrow fee is set to 0.5%.

• Interest Rate: Interest rates in the Alto protocol’s isolated markets utilizes an adaptive curve based on lend / borrow utilization.