LeverFi ($LEVER) Overview
Aug 15, 20224 min read
The past year has been a significant loss for the crypto market. Digital assets were rapidly losing value, negatively affecting the capital of passive investors who received income from holding and farming cryptocurrencies. Considering this, the RAMP project team rebranded into LeverFi to open up new earning opportunities for users.
What Is LeverFi?
LeverFi is a decentralized finance platform launched on Ethereum, which also supports trading opportunities for EVM-compatible networks, such as Binance Smart Chain, Avalanche, Polygon, Optimism, and others. The platform allows users to trade with a leverage of up to 10x using yield-bearing tokens as collateral. Traders can deposit various tokens as collateral, ranging from major assets such as BTC, ETH, or BNB and ending with multiple LP tokens of protocols such as Curve, Uniswap, Aave, and others. Further, the tokens deposited as collateral are sent to third-party farming pools to generate additional profit. Thus, traders get the opportunity to trade with leverage and passively earn on their yield-bearing tokens. At the same time, the platform’s lenders receive interest from traders who borrow tokens deposited from the Lending Pool. If some part of the Lending Pool tokens is not used, the protocol sends them to other DeFi protocols to generate profit for the lender. All transactions take place within the framework of LeverFi, which acts as a reliable intermediary between traders and lenders.
LeverFi for Traders
LeverFi allows traders to trade with leverage to profit from the price movements of cryptocurrencies. To access leverage of up to 10x, a trader is required to deposit collateral. The Collateral Manager smart contract manages all issues related to the deposit. The value of assets deposited as collateral (Collateral Liquidity) is calculated in USD using Chainlink oracles. For example, if a user deposits $1,000 worth of WBTC and $1,000 worth of WETH, the Collateral Liquidity is $2,000.
At the time of writing, the list of supported collaterals includes four major stablecoins, WETH, WBTC, and various Curve LP tokens. The deposited collateral is redirected to third-party protocols to generate passive income. 10% of the farming profit received is charged as a protocol fee.
The trader gets leverage from the Lending Pool with a flat 1% borrow rate on all borrowed assets. Suppose a trader achieves a net negative profit and loss (PnL) portfolio. In that case, the protocol imposes an arrest on the withdrawal of collateral until the trader repays the debt to the Lending Pool.
Risk Manager smart contract determines the LTV ratio and the amount of leverage (Leverage Factor) and also calculates the Liquidation Threshold. Thus, to calculate what amount (Leverage Liquidity) a trader can borrow from the Lending Pool, it is necessary to multiply the Liquidity Collateral, LTV, and Leverage Factor. For example, let’s say a trader receives 50% LTV and 5 Leverage Factor. Continuing our example:
- ($1000 * 50% + $1000 * 50%) * 5 = $5000
All trading positions a trader opens are stored and executed within the LeverFi platform. For each trade, the user pays a 0.1% fee. However, the platform is not a trade counterparty. The protocol executes all transactions using various DEXs, providing traders with the most optimal prices. All issues related to trade execution, such as buying, selling, settlements, multi-dex routing, tracking trader PnL, profit withdrawal, and so on, are managed by the Trading Manager smart contract.
It should be noted that the borrowed assets do not pass into the trader’s possession. That is, a trader can go short or go long using borrowed assets but does not have them in the wallet. If trading with leverage leads to profit (the trader gets a net positive PnL portfolio), the trader can withdraw his profit. However, if a trader has suffered significant losses that have exceeded the liquidation threshold, he loses both his collateral and his trade portfolio.
LeverFi for Lenders
Users can deposit certain assets to Lending Pools and receive passive income. The Lending Manager smart contract manages all issues concerning Lending Pools. At the time of writing, Lending Pools for the following assets are presented: USDC, USDT, DAI, WBTC, and WETH. Traders borrow assets from Lending Pools and are charged a floating borrow rate based on the utilization rate. The utilization rate is calculated as the fraction of borrowed assets over total deposited assets. Thus, if the share of borrowed funds exceeds the share of deposited funds, the utilization rate increases, as a result of which the borrow rate increases. If the deposited funds are idle, they are sent to other DeFi protocols to generate profit for lenders.
LEVER token is a governance token of the LeverFi ecosystem. The token has a total supply of 35 million, of which 12.92B are in circulation. Token holders can vote on protocol governance issues (listing or removing supported collateral, lending pools, tradable assets, and so on). To participate in the governance, users must lock up their LEVER tokens for a period from six months to two years. After the lock-up tokens, users receive xLEVER tokens that display their shares. Depending on the duration of the lockup period, the user can get more or less xLEVER for the same amount of LEVER. In simple words, if you lock up 1000 LEVER for two years, you will get more xLEVER than if you lock up the same amount for half a year. One xLEVER represents one vote. In addition to voting power, stakeholders also receive income in ETH and LEVER.
LeverFi is a promising crypto project that can help crypto users earn income even in times of a bear market. Thanks to the use of Ethereum smart contracts, the platform provides honest, transparent, and safe conditions for both traders and lenders. LeverFi is the brainchild of RAMP developers who have gained extensive experience in developing a DeFi project and are using it to build a revolutionary project that will be able to provide users with the opportunity to maximize their profits.