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Leveraged Yield Farming

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A brief example

Alice holds USDC and wants to ‘put it to work’ for her in order to maximise yield and is aware of the risks that come with this. Using our the Eleven Finance's leveraged yield farming platform, the process is quite simple.

Alice comes to Eleven.finance. She decides she would like to ‘leverage up’ her exposure to the USDC/BTC liquidity pool pair from WaultSwap, and farm with increased leverage, so she goes to the "Leveraged Yield Farming" tab on the left side of the website.

Using the platform, she firstly selects if she wants to borrow USDC, or BTC. This is very important. If Alice expects BTC to go up in relation to the other token (in this case, USDC), and wants to be leveraged that way, she will borrow USDC. If she believes that BTC will go down in price relation to the other token, she will borrow BTC instead. Alice chose to borrow USDC as she believes it will go up in price in relation to USDC.

She then selects this pair by clicking "Open Position" and chooses her desired amount of leverage (and therefore risk) from the dashboard page. This tells the contract to borrow the additional funds she needs in addition to her collateral (in her case it’s USDC) from the eleUSD bank. Here she deposits her USDC as collateral and the contracts take care of the additional borrowing position (as USDC is borrowed from the eleUSD Bank).

Alice chose to deposit 1000 USDC with 3.5 leverage. When she entered the amount of funds she chose to deposit, a small table shows up with information about her deposited collateral, the amount of money she is going to borrow, the amount of LPs she is going to be farming with, and the fees and slippage being paid when she opens the position.

(photo of the tldr table when opening a 1000USDC position on WBTC/USDC)

When Alice acknowledges this information and opens the position, Eleven Finance's leveraged yield farming contract converts all this USDC into the amount of USDC/BTC LPs shown in the table. It does this using 50% of the USDC to purchase BTC, then adding liquidity to WaultSwap for this pair, then depositing these LP tokens into the relevant Eleven Finance vault, in this case the USDC/BTC wLP.

From here, there is no more action required by Alice. She can monitor her position and see her LP rewards grow through autocompounding (rewards being sold and additional LP tokens being automatically bought and re-staked).

All these compounded rewards result in additional value of Alice’s LPs. As this value grows, Alice’s lending and therefore liquidation risk can be reduced.

So to summarise this example, let's say the USDC/BTC wLP vault is rewarding at rates of 36.05% APY. If Alice opens a position with 3.5x leverage, the APY for her position would be ~ 128.66% APY.

At any time Alice can withdraw from the system, where she would pay any relevant fees/interest, pay back her borrowed USDC and receive the remainder of the USDC tokens (which will be inclusive of compounded LP rewards, minus 0.1% vault withdrawal fee).

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