Here's the deal:
Need to leverage your trade? Worried about liquidation risk
Want to provide LP? Unsure about impermanent loss
Imagine if we could address both simultaneously with @LimitlessFi_ and enjoy no-liquidation with highest possible leverage!
Let's get into it! š§µ
Disclaimer:
Please note that this thread is solely intended for the purpose of sharing information and should not be interpreted as financial advice. It is advisable to conduct your own personal research.
Disclosure:
This thread created in collaboration with @LimitlessFi_
Table of Contents
ā Leverage or Not To Leverage?
ā Introducing @LimitlessFi_
ā No-Liquidation Mechanics
ā Liquidity Aggregation and Cross-Colalteralization
ā Limitless for LPs
ā Limitless for Trader
ā Limitless for Borrower
ā Why Choose @LimitlessFi_ ?
To Leverage or Not To Leverage?
Users have a decision to make when it comes to maximizing profits. Leverage involves the risk of liquidation, whilst LP exposed to with impermanent loss. This risk creates ongoing concerns.
So, how do we deal with this situation?
There are two main types of users in DeFi: Liquidity Providers and Traders.
They face significant problems:
- Liquidity Providers experience "Impermanent Loss", undermine their potential profits
- Traders face "Liquidations" issues and the inability to leverage any asset.
The solution? Introducing @LimitlessFi_ ā
Limitless allows traders to borrow liquidity from LPs in @Uniswap V3 so that leverage can be democratized.
- LPs: More fees, IL mitigations
- Traders/Borrowers win: No liquidations, capital efficiency, leverage any asset, etc.
No-Liquidation Mechanics
Recall, Traders/Borrowers take liquidity from the AMM. But how does the no liquidations work?
Let's illustrate.
Essentially...
The entire position (the collateral + borrowed liquidity) are swapped to the desired asset to long, and the position is now held in escrow.
i.e $USDC is posted and borrowed, then swapped to $ETH
In the case of $ETH/ $USDC Pool:
If the price goes higher than the borrowed ticks, the escrowed asset ($ETH) will be converted into the corresponding trade pairing, which is $USDC in this case.
The opposite will happen when the price drops below the borrowed ticks.
In @LimitlessFi_ LPs are absorbing the liquidations in the form of Impermanent Loss.
Except now, LPs are being compensated for taking on IL risk compared to conventional AMMs mechanism.
LPs benefit from using @LimitlessFi_ because it combines liquidity from trading and lending.
This allows for more efficient use of capital and enables the highest possible leverage for any token pair through cross-collateralization in the Limitless pool.
Liquidity providers can add liquidity to @LimitlessFi_'s internal AMM, @uniswap LP position, or IOU token from other protocols like @compoundfinance and @AaveAave.
If there is no liquidity available for traders/borrowers, the external liquidity will be lent out.
It's important to mention that these external liquidities still generate fees or yield from the corresponding protocols.
The extra yield from @LimitlessFi_ premiums is only earned when the liquidity is utilized, and the paid premium helps reduce impermanent loss.
Traders can utilize the LimitlessFi platform to maximize leverage by offering collateral that is secured with borrowed liquidity from LPs.
To ensure that a trader's position remains open once initiated, they are required to pay a premium within a specific time frame.
As a borrower, you can use @LimitlessFi_ to borrow with the highest Loan-to-Value (LTV) available (over 90%) without the risk of being liquidated.
To maintain an open position after initiating a trade, borrowers need to pay a premium within a specified timeframe.
Why Choose Limitless?
- You can reduce impermanent loss.
- Oracle free design, which lowers the risk of exploitation.
- Safely leverage your position without worrying about liquidation.
- Enjoy unlimited leverage (up to 2000x).
You can check out my friend @ayyyeandy's thread for a detailed explanation of the mechanics of @LimitlessFi_.
It provides an easy-to-understand explanation and includes a case study.
twitter.com/ayyyeandy/status/1694727708041982453?s=20
Tagging Fellow #DeFi Educators
- @rektdiomedes
- @JiraiyaReal
- @blocmatesdotcom
- @NickDrakon
- @crypto_linn
- @Dynamo_Patrick
- @DefiIgnas
- @0xCrypto_doctor
- @stakedqueen
- @crypthoem
- @ayyyeandy
- @defitrader_
- @CryptoShiro_
- @DeFiMinty
- @Flowslikeosmo
Tagging Fellow #DeFi Educators (2)
- @0xSalazar
- @rektfencer
- @0xCrypto_doctor
- @2lambro
- @BringMeCoins
- @louiscooper_
- @CryptoStreamHub
- @CryptoKoryo
- @0xsurferboy
- @DAdvisoor
- @stacy_muur
- @WinterSoldierxz
- @jake_pahor
- @Hercules_Defi
- @arndxt_xo
You can read the unrolled version of this @LimitlessFi_ thread here: typefully.com/eli5_defi/2Ja10Jq