LeverFi (LEVER) is a DeFi (decentralized finance) protocol that allows users to farm and trade digital assets at the same time. Additionally, LeverFi claims to offer traders leverage that is 10 times asset prices.
The LeverFi platform allows traders to deposit yield-bearing collateral and against fluctuations in asset prices. Thus, LeverFi’s platform allows users to earn yield while leverage trading.
LeverFi yield farms many assets including Bitcoin (BTC), Ethereum (ETH), Binance (BNB), and several liquidity protocols including Cake and Curve (CRV). LeverFi achieves a high-level of leverage by employing a cross margin. That means you can use the margin of any asset in your basket to leverage other trades.
Hence, a LeverFi user who deposits $100,000 worth of Curve (CRV) and $100,000 worth of Binance (BNB) has $200,000 worth collateral.
How LeverFi Works
Ultimately, LeverFi (LEVER) allows anyone to become a lender to traders. To elaborate, lenders deposit funds that are lent to traders. They draw the funds down from lending pools to cover leverage trades. LeverFi allows users to farm idle assets for yield with other protocols.
LeverFi lenders earn interest by lending funds to traders. They make all settlements in the LeverFi ecosystem. To become LeverFi lender, you must deposit $100,000 in Binance USD (BUSD) BUSDv2-CRV-LP tokens as collateral. Lenders who deposit $100,000 can receive a 5% annual percentage yield and other yields. LenderFi requires lenders to leverage trade up to $400,000 worth liquidity (with 80% LTV and five times the leverage).
Conversely, they only store leveraged trades within the Lever platform. Only the Lever platform settles trades. Lever contains a liquidator system that deploys when users are margin called. The Liquidator automatically liquidates accounts when trading losses exceed the liquidation threshold.
Documents claim LeverFi (LEVER) can support pair trading and leverage hedging strategies.
For example, a trader who suspects Ethereum (ETH) prices will rise can use Binance (BNB) to finance Ethereum purchases, creating a long-ETH/short-BNB trade. Traders can use LeverFi to hedge or arbitrage decentralized exchange (DEX) and centralized exchange derivatives, including futures and options. LeverFi also lets traders execute carry trades and create customized payoff strategies.
They claim the LeverFi Platform allows users to engage in leveraged spot trading. In leveraged spot trading, traders purchase margin-traded assets on a liquid secondary market through a decentralized exchange. Thus, LeverFi allows traders to trade through multiple decentralized exchanges, which can keep risks and fees and low. For example, LeverFi can select which DEXs offer the lowest fees or risk levels.
Additionally, LeverFi’s Medium claims LeverFi can power trading games.
The LeverFi Ecosystem
The LeverFi Ecosystem contains a Collateral Manager, a Trading Manager, a Risk Manager, and a Lending Manager.
The Collateral Manager handles deposits and withdrawals of collateral, deploys collateral for yield generation, stores a collateral ledger, and valuates collateral using ChainLink oracles to create Collateral Liquidity.
The Trading Manager executes trades with Smart Contracts. The Smart Contracts are digital robots that manage and execute trades. Some tasks the Smart Contracts perform include: calculation of leverage liquidity, trade executions, trading ledger storage, trade settlements, trade routing through multiple decentralized exchanges, Calculation of Profit and Loss (PNL) to determine profits and debts, withdrawal of profits, and repayment of debts.
Lending Manager Smart Contracts manage LeverFi’s Lending Pools. The Lending Manager also deposits lending assets, withdraws lending assets, stores lending assets ledgers, manages the accrual of borrowing fees using a utilization rate curve, and deploys idle lending assets for yield generation.
Risk Manager Smart Contracts try to protect LeverFi from bad debt by assessing and managing risk. The Risk Manager’s functions include: calculation of account health by determining the liquidation threshold, management of loan-to-value by calculating the collateral risk parameter, management of the leverage factor by determining leverage risk factor parameter, management of the liquidation threshold by calculating the risk parameter, settlement of trader profits and losses in the trade ledger, settlement of debt accrued vs. Collateral, and liquidation fee payment for liquidators.
Meet the Lever Token
The Lever Token (LEVER) is a governance token with a total supply of 35 million. To participate in governance, users must lock LEVER tokens for six to 48 months and receive xLEVER tokens. Each xLEVER token represents one governance vote.
xLEVER token holders can vote on the addition or removal of collateral to the LeverFi ecosystem. Removal or addition of tradable assets. Creation or liquidation of lending pools. Changes to risk management parameters and policies. Distribution of protocol fees to xLEVER stakers. Users can stake xLever tokens for a share of protocol rewards. They pay protocol rewards in Ethereum (ETH) and Lever (LEVER).
LeverFi (LEVER) currently operates as an Ethereum (ETH) token. They plan to deploy LeverFi to other blockchains, including Avalanche in the future.
What Value Does LeverFi (LEVER) offer?
Mr. Market has some interest in LeverFi (LEVER). For example, LeverFi was CoinMarketCap’s 10th most trending cryptocurrency on 16 July 2022.
In contrast, LeverFi was CoinMarketCap’s 2,350th largest cryptocurrency, with a Coin Price of $0.002717 on 18 July 2022. CoinMarketCap gave LeverFi a Market Capitalization of $35.116 million, Fully Diluted Market Cap of $95.126 million and a 24-Hour Market Volume of $46.799 million on 18 July 2022. They based those numbers on a Circulating Supply of 12.92 LEVER and a Maximum Supply of 35 billion LEVER.
Meanwhile, CoinGecko gave LeverFi a $0.002735 Coin Price, a $35.256 Market Cap and a 24-Hour Trading Volume of $35.922 million on 18 July 2022. CoinGecko gave LeverFi a $0.00521513 all-time Coin Price.
I think LeverFi (LEVER) is an interesting liquidity protocol and DeFi protocol that could make money. I believe LeverFi could make money because it tries to leverage existing decentralized exchanges and DeFi protocols rather than build new ones. Hence, speculators need to watch LeverFi because it could make money from trading, lending, and leverage.