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Alpaca Finance: Decentralized Trading + Case Study

By Bella

Feb 29, 20246 min read


About Alpaca Finance

Alpaca is one of the biggest platforms of leveraged DeFi products on BNB Chain & Fantom.

The platform aims to help crypto investors to earn on their crypto deposits. That’s beneficial for both — lenders earn yields, and borrowers can unlock liquidity from their spot positions or short tokens available on the Money Market. Investors can also earn high yields by providing liquidity to Pancakeswap through Automated Vaults using leverage, and multiplying their farming principles and resulting profits.‌ 

The platform also has unique features — Perpetual Futures exchange allowing users to capital-efficiently hedge their spot holdings, take directional bets or engage in carry trading by farming funding fees. 

The platform was designed the way an investor could quickly and easily switch between different products and diversify their portfolio by different revenue generation strategies.

How does Alpaca improve capital efficiency? It offers a real use case of leveraging through bridging borrowers and lenders; connecting people to earn more crypto and invest wiser.

Alpaca is a fair-launch project meaning no pre-sale, no investor, and no pre-mine, as it’s a product built by the people, for the people. 

Advanced Ways of  Decentralized Trading with Alpaca Finance’s Perpetual Futures Exchange

Source: Alpaca Docs

Decentralized trading is evolving and so is Alpaca. We’d like to highlight the perpetual futures role in hedging strategies and carry trading in crypto, and some innovative features of Alpaca Finance’s platform that make it truly unique in the DeFi landscape.

Perpetual Exchange: Key Features

1. Funding Rates Farming

Alpaca Finance Perpetual Futures Exchange stands out for its funding rates farming. This unique mechanism allows traders to earn by holding positions that are in opposition to the majority of the open interest on an exchange. 

"Unlike centralized exchanges offering futures contracts, Alpaca’s Perp Exchange is fully decentralized, meaning users retain control of their funds at all times. This makes the funds immune to being frozen or becoming inaccessible for any reason, with their presence always being visible on-chain," the Alpaca team. 

If most traders are long - shorts, they are paid. When most of the Open Interest is in shorts then, vice versa, longs are paid. 

Alpaca Finance funding rates are compounded hourly which amplifies the compounding effect.

Just compare. Typically, on centralized exchanges, you get funding fees compounded every 8 hours and the revenues looks less exciting:

2. Long and Short BTC, ETH, and BNB on Perpetual Futures

Users can try out the following trading strategies: 

  • longing Bitcoin, Ethereum, and BNB.

Source: Alpaca Docs
  • shorting those assets to hedge spot positions when the market is in a downtrend. 

Source: Alpaca Docs

3. Delta neutral setup. Spot and Perpetual Futures Hedge

In case, you want to achieve a stable value of your portfolio in crypto or you foresee a downtrend and you don’t want to liquidate your position you can hedge it with Perpetual Futures. 

You can create a short position of the same size as your spot position. Thanks to leverage you can do it optimally by engaging a smaller amount of collateral. 

Very often you can farm the hourly compounded funding fees which are the result of more Open Interest is on long than short. 

You can hold your position as long as the market goes down and funding rates are bringing you profit. After successfully closing a position in profit you will be able to buy more of the base asset you  intend to accumulate.hold. 

Benefits for ALPACA Holders

The protocol revenue generated will be issued to xALPACA holders and burn in the following ways:

  • 10% of 16% of Perpetual Futures Exchange Fee is used for ALPACA buyback and distributed as revenue sharing to Governance Vault stakers (as Protocol APR).
  • 6% of 16% of Perpetual Futures Exchange Fee goes towards weekly buybacks and burns of the ALPACA token.

How to Start Using Perp Exchange? Case Study 

Let’s have a look at a real example of how you can earn more with Perp Exchange. 

  1. You go Short ETH on Alpca Finance Perp Exchange 500$ with 5x leverage;
  2. Your position size is 2470$ after the entry fee;
  3. The Funding rate is 0.006% for Shorts with hourly compounding which gives you 69.14% APY on the position size (after borrowing cost);
  4. You need an opposite exposure now to make your position Deta Neutral;
  5. You buy 2470 worth of ETH on the spot at the same price and put it into the Alpaca Money Market for Lending; 
  6. Your ETH is safely earning an additional 1% APY;
  7. You engaged 2970 of your capital (500$ for the perp position and 2470 on spot) and put it to work at a 70% APY rate;
  8. The Funding rate might change over time to be higher or lower so you should monitor it. Over a longer period, this setup should produce positive results. 

Also, remember to protect your Perp position from liquidation. Sometimes you might need to rebalance the positions if the price goes up. 

Find Alpaca on Notum

You can easily try Alpaca Finance Liquidity Pools right now. Liquidity providers (or LPs) issue assets to one unified liquidity pool which acts as the market-making fund for traders. 

It is similar to an investment into a type of index fund that holds a mix of blue-chip assets such as BNB and ETH and stablecoins e.g. BUSD and USDT, and earns yields from multiple sources, which will be listed below. 

Notum offers 4 strategies on the BNB chain. Here are 2 liquidity pools to check out:




Base APY

Total APY





Base APY

Total APY


Why Use Alpaca Perp Exchange?

Trading on Alpaca Finance’s Decentralized Perpetual Futures Exchange opens a world of opportunities for crypto traders. Whether it’s for funding rates farming, hedging your portfolio or shorting top cryptocurrencies, the platform provides a secure, on-chain environment for both seasoned and novice traders. 

The ability to trade perpetual futures on the BNB chain, coupled with sophisticated hedging strategies, makes Alpaca Finance’s platform an invaluable tool in any trader's arsenal.

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Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.