Liquidity

1. Providing Liquidity on Lavarage

Lavarage is designed to be a decentralized peer-to-peer platform for margin trading. We have traders on one side who borrow liquidity from lenders on the other side to trade, with leverage, on decentralized exchanges.

There are three distinct roles on the liquidity provision side:

1. Lender - Actively manage lending vaults by creating loan offers for various tokens

2. Staker - Passively stakes token(s) into protocol vault(s) to earn yield

3. Liquidator - Plays a critical role during liquidations by providing backstop liquidity. Liquidators supply token(s) to lending vaults to cover outstanding loans in exchange for the collateral assets of the liquidated positions.

This design ensures that lenders and stakers earn interest based on vault utilization and are shielded from liquidation-related PnL (e.g., bad debt) under normal circumstances.

2. Two-Sided Platform

While our intention is to make liquidity provision fully decentralized and permissionless, we will do this progressively in order to avoid having liquidity that is too fragmented. Therefore, we are rolling out the liquidity provision functionalities in phases, starting first with staking.

Lending and backstop liquidity provision is only available for white-listed partners.

Every lending vault has a quote currency, e.g. SOL. This is the token that is staked into and could be borrowed from this vault. The manager of the vault, i.e. the lender, actively manage loan offers that dictate which collateral tokens traders can borrow the quote currency against and the respective loan terms, which includes maximum open LTV, interest rate, etc.

Lending vaults currently available

Vault Name	Currency	Open for Staking	Unstaking Period
SOL Meme Liquidity I	SOL	Yes (lstSOL)	Up to 5 days
USDC Meme Liquidity I	USDC	No	N/A

Each staking vault has its own unique staking token, primarily used as a unit of accounting—similar to a fund unit in a hedge fund. When users stake, their tokens are converted into the staking token, and when they unstake, the staking token is converted back into the original token.

This mechanism leverages blockchain technology to ensure clear, transparent accounting of staking value over time. Additionally, it enables the creation of liquidity pools between the original token and the staking token (e.g., SOL vs. lstSOL) on decentralized exchanges. These liquidity pools provide the added benefit of allowing instant staking and unstaking, enhancing user flexibility and convenience.

3. Staking Process

Staking SOL

1. In order to stake your SOL to receive lsSOL, you may first proceed to the Stake tab.
2. Simply select the amount you wish to stake and select the Stake button.
3. After confirming the transaction, you will see the corresponding amount of lstSOL in your wallet.

Unstaking lstSOL:

1. In order to unstake your stSOL to receive SOL, first proceed to the Unstake tab under the Stake page.
2. Simply select the amount you wish to unstake and select the Unstake button.
3. After confirming the transaction, the unstaking process will initiate.

Note:

• Unstaked lstSOL is burnt, reducing the circulating supply.

• Users receive SOL based on the unstaked amount, vault balance, and circulating supply of lstSOL.

• The unstaking process takes 5 days (120 hours) to complete and cannot be modified or canceled.

Claiming SOL: After the unstaking process has completed, users can send the claimed SOL back to their own wallet.

1. In order to claim your SOL, first proceed to the Claim tab under the Stake page.
2. Then, select the Claim button which will initiate the confirmation transaction.
3. After confirmation the claimed SOL will be sent back to your wallet.

4. Q&A:

I just staked my SOL into the Lavarage Vault. Do I need to stake my lstSOL?

No, you do not need to stake your lstSOL separately. By staking your SOL in the Vault, you are automatically participating in both staking and lending activities. Because this is liquid staking, the process is very similar to a swap, where you are essentially swapping your SOL for lstSOL.

How is the APY computed for my staked SOL?

The APY for your staked SOL in the Lavarage Vault is computed based on two primary sources of earnings: the yield from funds delegated to validators and the interest earned from funds deployed in loan pools.

I selected unstake, but I don’t see my SOL in my wallet. Where is my SOL?

When you select "unstake", your lstSOL goes through an unstaking process that takes up to 5 days (120 hours) to complete.

Is there any way to speed up the unstaking process?

Please reach out to us on Discord through the Support channel. We will manually review your case to see if expediting the process is possible. In most cases, a special fee will apply.

Can I be a lender or liquidator?

The protocol is designed to be permissionless, but for now we haven’t launched the interface for lending. If you are interested in being a lender, then please contact our team on Discord through the Support channel by selecting the Lending category.

Q: Is there any risk to staking?

A: The risk to staking can be categorized broadly into the following categories. The risk is relatively low but it is inherently still there.

Risk Category	Description	Mitigation
Smart Contract Risk	This is the risk of fund being maliciously drained from our liquidity provision-related smart contracts	Our smart contracts have been and will be continuously audited rigorously
Delegation Risk	This is the risk of fund being maliciously drained from the smart contract(s) of the Solana network validators where the fund is being delegated to	Fund will only be delegated to the most reputable and trustworthy validator(s)
Lending Risk	This is the risk of incurring a loss when there is bad debt	WIth backstop liquidity provider(s) in place, lenders and stakers should be shielded from bad debt risk in normal circumstances.

The above list may not be complete and exhaustive. For further questions, you can always contact our team in our Discord channel: https://discord.gg/lavarage. Please always do your own research.