What Is Yield Leverage, And Why Is It Important To DeFi?

What Is Financial Leverage?

Financial leverage involves taking a loan, using the borrowed funds to generate extra profit, then paying back the loan while keeping the extra profit.

Borrowing To Multiply Gains

In the buy-and-hold stock market scenario you start with $50,000 and invest it in the stock market. Fortune smiles on you and your stocks go up 20%. Your investment is now worth $60,000 for a profit of $10,000.

The Dawn Of DeFi Lending

With a home loan, the lender is willing to lend because he can always take ownership of the house and sell it to pay himself back. The house is the collateral that guarantees the loan can be repaid. How is repayment guaranteed in DeFi, where all parties are unknown to each other?

Total DeFi loans industry-wide have grown from $3.5B to $7.7B in the first two months of 2021 (DeFi Pulse)

Liquidation Risk Of DeFi Borrowing

Of course there’s a catch. The lending smart contract is always watching the value of the loaned funds and comparing it to the value of the collateral. If the value of the collateral begins to drop below the value of the loaned funds, the contract hits the brakes and automatically grabs the collateral, allows it to be liquidated, and pays back the lender. That’s bad news for the borrower because they may have been depending on having that collateral in the future. To make matters worse, it may cause the borrower to pay taxes when they didn’t want to. They might even have to sell another investment to raise cash for those taxes. It’s not a good situation. The message here is that careful management of collateral is critical to making DeFi lending work.

The Explosion Of Yield Farming

While DeFi lending services were growing, automated market maker exchanges were exploding, with Uniswap leading the way.

Over $4B in liquidity is locked in Uniswap as of March 2021

Powers Combined

Impermax unleashes the power of permissionless lending on Uniswap tokens to create leverage in yield farming. If your 10 LP tokens are earning 1,000% interest, you can leverage them 10x so you now hold 100 LP tokens and you’ll effectively earn 10,000% interest (minus lending fees) until such time as you de-leverage (pay back the loan).

Highest Performance In The Category

Impermax is the best-performing yield leverage platform in DeFi. It allows liquidity providers to easily leverage LP tokens and earn much greater multiples of rewards for the same risk when compared to other platforms.

Amplifying Gains

If there’s a surge in a certain Uniswap yield, Impermax lets liquidity providers multiply their positions within seconds and exit those positions just as easily. The ability to transfer risk to amplify gains in moments will have a lasting impact on the entire liquidity providing industry. There’s little doubt the liquidity providing industry is still in its infancy, and as it grows, providers will be able to use Impermax whenever they need to tune, adjust, or respond to surging markets.

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Impermax Finance

Impermax Finance

We're developing a DeFi ecosystem that will enable investors to leverage their LP Tokens