Laputa - cross margin leverage yield farming

Laputa is a cross-margin leverage yield farming protocol that empowers users to maximize their capital efficiency and supports them with various strategy vaults to neutralize market exposure.

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Inspiration

Market volatility and liquidity inefficiency have been major obstacles to the mass adoption of cryptocurrency. Market participants always have to worry about the token price, and the room for infrastructural improvement is still large. When the bear market started, our team initially came up with a perpetual DEX, believing in that it is a core infrastructure to hedge against the market condition. However, it was very difficult to connect with other Defi protocols and still very complex to use for many users. The Defi space still needs more liquidity and interoperable protocols in order to proceed with the development. Therefore, our team has decided to come up with a leverage yield farming protocol powered by cross-margin collateral. We believe it could not only maximize liquidity efficiency, but it could also provide efficient market-neutral ways to contribute to the Defi space.

Currently, most dApps on TRON are Swap and/or Liquidity Provision protocols (JustMoney, SunSwap, Socialswap, uTrade, etc), which is an optimal environment for a leverage yield farming protocol can work with. Also, the TRON ecosystem currently lacks any infrastructure for leveraging.

Laputa builds on top of Liquidity Provision protocols as money legos. By partnering with such projects, we aim to provide effortless leverage yield farming & trading experience to the users in the TRON ecosystem.

Laputa is designed to give real yield to users who hold positions as well as lenders who provide liquidity with farming rewards, interest on borrowed assets, profit from positions, etc.

By stacking money legos as such, one more step towards a truly decentralized Internet and its infrastructure for all finance-related actions would become possible in the TRON ecosystem.

What it does

[Problem]

Defi Liquidity

  • Low liquidity and its consequences have always been a problem in Defi.
  • In the case of bear markets, low utilization of liquidity leads to a death spiral of liquidity provision.

[Solution] Cross-Margin Leverage Yield Farming & Lending

  • Our team focused on making a product that would maximize the efficiency of assets, even those that are provided as liquidity.

Using our cross-margin leveraged yield farming service, users can maximize yield from their existing holdings by:

  1. Depositing any supported asset they own
  2. Borrowing assets to create LP tokens and open positions with leverage, even using their provided collateral
  3. The LP tokens are turned into ib LP tokens and auto-compounded
  4. Start farming on LP tokens with leverage right away

Case 1 : Risk hedging

  • Other LYF : Users have to repay their debt, resulting in liquidity inefficiency
  • Laputa : Users can simply take an opposite position with the same amount of money but with extra APR
  • This is why developing a Delta Neutral Strategy at Laputa is easier than ever

Case 2 : Opening more position with same collateral

  • Other LYF : User has to realize PnL in order to open more positions.
  • Laputa : By simply holding a position with high profit, users can open bigger positions using the profit as collateral

Case 3 : Volatile positions

  • Other LYF : Possible liquidation, leading to inefficiency of capital
  • Laputa : Other positions can act as a cushion and help that position survive

How we built it

At the core, our team is utilizing one of the most robust lending models, AAVE. Its basic infrastructure of lend and borrow with built-in cross-collateral function is combined with our ibLP token vault to help users to efficiently provide leveraged liquidity with higher APY. ibLP tokens are basically auto-compounded LP tokens that are farmed. By collateralizing ibLP tokens, users will be able to open more positions without further deposit. Also, our portfolio functions, showing borrowing power calculated by overall collateral value and oracle system, will keep the solvency intact. Lastly, cross-collateral minimizes the cost of rebalancing against liquidation risk for delta-neutral strategy vaults. Taking and collateralizing two opposite positions enables more leveraging and maximizing APR.

Challenges we ran into

Even though cross-margin leverage yield farming offers more options and simplicity to developing delta-neutral strategies, it can still be very complex. Moreover, providing strategy vaults that automatically rebalance against the market exposure doesn’t always guarantee absolute neutral. However, we are developing automation functions that can simplify user experience and educational contents that can help users to learn what kind of risk they are exposed to. Our team is constantly running back-testing in order to minimize the risk of loss.

Accomplishments that we're proud of

Overall system layout and design are completed. We will be the first EVM-compatible protocol to introduce cross-margin leverage yield farming in the market. At the core, since we have found ways to utilize AAVE structure, which is a war-tested protocol, we could expect a safer environment for further development. Also, our branding and the name direct our destination to Tron - Leverage Any Position Utilizing Tron Assets (LAPUTA). After having launched a perpetual DEX successfully in other chains, our team is ready to expand to a bigger leverage money market. Lastly, we’ve tested other delta-neutral strategy vaults in different kinds of markets with some positive results. We believe our team can come up with multiple options for delta-neutral strategies.

What we learned

While developing Laputa, the market has become more volatile, and there has been an emphasis on decentralized finance more than ever. However, the public has lost a considerable amount of trust in cryptocurrency and its ecosystem. In times like these, we ought to focus on developing the essential infrastructure with innovation. Our team will persistently build on the Tron ecosystem, starting with cross-margin leverage yield farming. This is just the beginning.

What's next for Laputa - cross margin leverage yield farming

The road to leverage money market on Tron

  • 2022 Q4: Launch
    • Universal Leverage Yield Farming
  • 2023 Q1: Innovative Strategy Vault
    • Delta Neutral
    • 1x Long
    • Concentrated Liquidity
  • 2023 Q2: Derivatives
    • Perpetual Dex
  • 2023 Q3: Tokenized Leverage Money Market
    • tokenized strategy vaults can be traded and transferred across chains.

We believe the leverage money market is very essential to the Tron ecosystem. Laputa - a cross-margin leverage yield farming protocol can be the initiative for the next evolution.

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