Dynamic Liquidity

Self-Lending Pods introduce a fully autonomous liquidity model where utilization, interest rates, and price movement interact to determine both the cost and availability of capital without the need for external rebalancing or manual adjustments.

This system enables highly efficient, soft-leveraged positions that respond fluidly to real market conditions.

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Utilization-Responsive Liquidity Behavior

At deployment, a Self-Lending Pod is initialized at 100% utilization, simulating a fully borrowed lending market and forming a single-sided LP position. This configuration creates a liquidity curve that extends from the current price upward, enabling full directional exposure to the Pod asset (pTKN).

As the system evolves, utilization dynamically adjusts in response to external market activity:

When pTKN price increases: Arbitrageurs inject paired asset capital to capture profit. This reduces utilization, which lowers interest rates and makes borrowing more affordable.

When pTKN price declines: Arbitrage becomes restricted due to the absence of paired capital. However, rising interest rates incentivize lenders to supply funds. This new liquidity enables downside arbitrage and gradually reduces utilization and borrowing costs.

Utilization effectively becomes the system’s real-time signal, governing both the activation of liquidity ranges and the cost of borrowing—ensuring capital flows when and where it’s needed, without emissions or manual adjustments.

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Automated Liquidity Range Management

Self-Lending Pods eliminate the complexity and manual upkeep typically associated with concentrated liquidity models like Uniswap v3. Instead of requiring users to manage price bands or reposition liquidity, range logic is embedded directly into the protocol’s interest rate model.

High utilization acts as a signal that liquidity is “out of range,” which increases the interest rate for the lending pair. This incentivizes lenders to supply capital to restore balance. Conversely, when utilization drops, it reflects that liquidity is “in range,” resulting in lower borrowing costs and more active capital circulation.

Because all Pods operate using full-range AMM infrastructure (x * y = k), liquidity is always available and tradable, even during extreme price movements. This architecture removes the need for rebalancing and prevents the realization of impermanent loss, which is common in concentrated liquidity strategies. The result is a system that is easier to use, more capital efficient, more resilient under volatile conditions and void of the risk of realizing losses through rebalancing activities.

Interest Rate Responsiveness and Position Management

Leverage and liquidation thresholds in Peapods are initialized when a position is created, based on the amount of borrowed capital relative to deposited collateral. However, because positions are fully self-managed, users can adjust their leverage over time by adding collateral, repaying debt, or overborrowing to increase exposure.

While these structural parameters define liquidation risk, the ongoing cost of maintaining a position is governed by the protocol’s dynamic interest rate model. As utilization increases, interest rates rise and borrowing becomes more expensive. When arbitrageurs or lenders supply capital, utilization falls, reducing interest rates and easing the cost of borrowing.

This responsiveness ensures that borrowers are only charged a premium when liquidity is scarce. When supply is sufficient, borrowing becomes more affordable, enhancing the sustainability of leveraged positions. The result is a flexible system where users can actively manage both their exposure and their cost over time.