🌊Dynamic Liquidity
Last updated
Last updated
Self-Lending Pods automatically adjust interest rates and liquidity ranges based on market conditions, ensuring optimal capital efficiency without the need for external intervention.
When a Self-Lending Pod is created, the utilization of the lending pair is set to 100%, meaning that the abstracted pairing asset receipt has no redeemable liquidity. This effectively creates a single-sided liquidity range that extends from the current price to infinity.
As the Pod token (pTKN) price increases, arbitrage bots inject paired asset liquidity into the lending pair to capture arbitrage opportunities. This additional liquidity reduces utilization, which in turn decreases interest rates, making borrowing more affordable.
Conversely, if the pTKN price declines, the lack of external liquidity suppliers means that there is no immediate arbitrage path to lower its value further. This protects the downside liquidity range, preventing excessive depreciation and ensuring stability in lending markets.
Unlike traditional full-range LP positions that provide liquidity from $0 to infinity, Self-Lending Pods dynamically activate custom liquidity ranges by adjusting the amount of liquid assets in the lending pair. This allows borrowers to only rent liquidity as needed, significantly reducing interest costs while maintaining 2x effective leverage for volatility farming.
In contrast to Uniswap V3 LPs, where liquidity providers must manually adjust ranges, Self-Lending Pods automate this process. When liquidity moves “out-of-range,” interest rates rise to attract new suppliers, and when liquidity is in range, rates decline, minimizing unnecessary borrowing costs.
This dynamic reverse auction of liquidity rates makes LVF Self-Lending Pods the first true liquidity rental market, allowing users to deploy highly efficient, soft-leveraged, yield-generating liquidity positions.
