Leveraged Yield Farm - High Risk, High return
As part of our development plan, EXO-LeFARM is a Leveraged Yield Farm protocol, which allow users to deposit and obtain more interest and help liquidity farmers obtain higher returns through leveraging and optimized reinvestment strategy.
The main mission is to continuously improve the utilization of deposit users’ fund. Leverage farming is one of the high-frequency scenario in the DeFi Sector.
As compared to traditional yield farming, Liquidity providers can get even higher trading fees APY from taking on leveraged liquidity providing positions. By taking leverage, it would borrow LP pairs on users' behalf to provide liquidity.
Leveraged yield farming is a mechanism that allows farmers to lever up their yield farming position, meaning to borrow external liquidity and add to their liquidity to yield farm. As a result of having more liquidity, leveraged yield farmers gain more rewards in Token A and a larger share of the trading fees than otherwise. For leveraged yield farming pools (all pools under Yield Farming Pools section that support more than 1x leverage), the APY comes from yield farming APY on leverage + trading fees APY on leverage.
This implementation will automatically reinvest the farmed tokens for leveraged yield farmers. All of the APY earned will be accrued to the position value. Additionally, users will be incentives with tEXO.
In the event that your debt ratio has reach maximum (when the risk ratio of the position reaches 100%), your position will be liquidated.
- 1.The liquidation mechanism adopts DEX+CEX double price verification, liquidation will execute only when the error is within 5%.
- 2.Two price verifications (with an interval of 2 minutes), to prevent attackers from profiting by price manipulation in the same block through flash loan.
- 3.Participates in position liquidation, and liquidation is not executed by bounty hunter, to prevent attackers from obtaining liquidation benefits through flash loan.
(Position value - Debt value (include interest) - Liquidation fee)
Below outlines the risks users may face.
1. Impermanent loss
Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.
This risk applies to all LPs.
Leverage farmers take the risk of being liquidated.
- Liquidation takes place when Debt Ratio (debt / position value) reaches Liquidation Debt Ratio
- Position value falls when the price of another token, such as BUSD in BNB-BUSD or MATIC-USDC pool, drops significantly compared to BNB/MATIC or BNB/MATIC price increases significantly compared to BUSD/USDC.