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

Liquidity provision on Lavarage is fully decentralized and permissionless for both lending and staking. Lending is open to anyone holding a Lava Rock NFT, while backstop liquidity provision remains available only for whitelisted 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.