Concentrated Liquidity with Leverage

Atis Elsts and Kre\v{s}imir Klas

Papers from arXiv.org

Abstract: Concentrated liquidity (CL) provisioning is a way how to improve the capital efficiency of Automated Market Makers (AMM). Allowing liquidity providers to use leverage is a step towards even higher capital efficiency. A number of Decentralized Finance (DeFi) protocols implement this technique in conjunction with overcollateralized lending. However, the properties of leveraged CL positions have not been formalized and are poorly understood in practice. This article describes the principles of a leveraged CL provisioning protocol, formally models the notions of margin level, assets, and debt, and proves that within this model, leveraged LP positions possess several properties that make them safe to use.

Date: 2024-09
New Economics Papers: this item is included in nep-ban
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2409.12803 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2409.12803

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().