Risk Ownership (Borrowers)

Leveraged Volatility Farming (LVF) empowers users to amplify yield and retain directional exposure, but it also requires active oversight and responsible strategy selection. Borrowers assume full responsibility for managing their own positions.

Borrowers must actively track and manage:

• LP Value & Directional Exposure: LVF positions remain fully exposed to the price of the pTKN. While users benefit from upside, they are also subject to downside movements.

• Oracle Validity: Borrowers must verify that the oracle accurately reflects the fair market value of the pTKN and paired asset, and is sourced from a liquid, manipulation-resistant market. Oracle decay (liquidity fading over time) should also be monitored.

• Utilization & Interest Rates: Borrowing costs are determined dynamically based on lending pool utilization. High utilization can drive interest rates sharply higher, especially during periods of market stress or constrained liquidity.

• Leverage Factor: Higher leverage increases yield potential but narrows the margin before liquidation. Borrowers should calibrate leverage to suit their personal risk tolerance.

• Liquidation Risk: While LVF uses a self-collateralizing structure where LPs already hold 50% of their position as the debt asset, positions can still be liquidated if the Loan-to-Value ratio (LTV) exceeds 83.33%. Liquidations are partial and aim to preserve remaining collateral but may still result in complete loss of capital.

• Pod Liquidity & Market Volatility: Illiquid or highly volatile pools may experience slippage or delayed pricing reactions, especially during fast-moving market conditions.

• Any other factors that may reasonably impact the risk profile of a borrower’s position

There are no backstops or reimbursement mechanisms in the event of misconfiguration, mismanagement, or liquidation. Borrowers must take proactive steps to monitor health ratios, review their leverage settings, and validate oracle reliability.

This is a permissionless system. If you are not fully confident in your Pod or strategy setup, consult a Peapods contributor before deploying capital.