LevF is an Ethereum based DeFi protocol that bridges the risk limitations and the capital limitations of DeFi participants, creating additional opportunities for both.
It is a same-asset supply and borrowing solution that addresses liquidity issues for Yield Farmers and low return issues for Liquidity Holders.
Problems Levf Finance address:
1. Risk-averse crypto asset holders usually have sub-optimal returns on holdings. Liquidity Providers on Levf can receive much higher returns and utility on their investments by allocating them to interest-bearing Treasury Pool with no lock-in period.
2. Yield Farmers are looking for high Annual Percentage Yield. Those with capital limitations can access capital on Levf to leverage up on cross-protocols farming strategies. They pay interest for borrowing to increase their APY.
3. Per transaction cost (gas fee) is a barrier to entry for new participants. The leverage provided by Levf allows new participants with low capital to enter the field, where they were previously inhibited due to gas fee per transaction greatly reducing their APY on a small investment.
Concept at a quick glance
A myriad of products and services have emerged since the taking off of the Decentralised Finance scene. To capture LevF Finance in a simple picture:
At the fundamental level, Levf Finance functions like a traditional bank with its matching of depositors and borrowers.
LEVF — YIELD FARMING
At Levf Finance we offer Yield Farmers a 20x leverage on their investment capital for their exploits on Yield Aggregators, which will drastically increase the all-important APY figure that their eyes are fixed on.
Yield Farmers and Aggregators
According to a CoinGecko survey, a lot of Yield Farmers a) do not understand the smart contracts underpinning the protocols they invested, b) have to pay increasingly high gas fees while chasing for the highest yield across different platforms, and c) have difficulty coming up with the optimal strategy given the emergence of new platforms, projects and trends on a regular basis.
In light of this, Yield Aggregators such as Yearn.finance have emerged that offer optimisations through batch transactions and automated yield farming in a decentralized manner. Increasing amounts of value are locked up indirectly through such yield aggregators, as this makes it easier, more convenient, and cheaper for the average farmer.
At Levf Finance we take this one step further, by offering farmers a big 20x leverage on their investment capital for their exploits on aggregators, which will drastically increase the all-important APY figure that theirs eyes are fixed on.
Leveraged Yield Farming on Levf
Yield farmer first checks the current utilisation level of the Treasury Pool and ascertains the interest rate applicable. (interest rate varies according to Treasury Pool utilisation level, see next section LEVF — INTEREST RATE MODEL)
He deposits, let’s say, 1,000 DAI into Yearn-DAI vault 20x program (on Levf platform) and his deposit of 1,000 DAI will generate a 20,000 position in Yearn-DAI vault (on Yearn.finance) automatically.
When farmer closes the position, the resulting investment will be pulled out from Yearn. All proceed (less interest payable to Liquidity Provider, gas fees and Tax*) will be returned to farmer.
Levf platform will impose a Tax* of 10% on net profit generated. This amount shall be held in the Reserve Pool.
As of now, the platform imposes a maximum 365 days period on all leveraged positions. Yield Farmers may voluntarily close their positions at any time before this mark.
Let’s assume that the 20,000 DAI program generates a 15% return (on Yearn) and the 19,000 DAI borrowed has an interest rate of 10%.
On closing of position, a total of 23,000 DAI is received from Yearn. (20,000 capital and 3,000 from the 15% return)
Farmer gets a gross profit of 3,000 DAI for the transaction. (after returning 19,000 to Treasury Pool and disregarding his own 1,000 Capital)
The interest incurred is 1,900 DAI (based on 10% interest on 19,000). Hence his profit after interest is 1,100.
Platform will further impose a 110 DAI tax (10% of profit after interest, not to be confused with interest rate), which will be sent to Reserve Pool.
Farmer will finally receive a net 990 DAI before gas fees, achieving 99% APY (based on his own investment of 1,000)
Without Levf’s 20x leverage, his 1,000 DAI will only earn 150 DAI (using the same 15% APY based on Yearn’s return)
LEVF — INTEREST RATE MODEL
Interest rate is the crucial handshake between Liquidity Providers and Yield Farmers. It must be high enough to attract the former and yet low enough for the latter to still make a profit.
Rising Interest Rate Model
At Levf Finance, interest on borrowing is determined by a rising interest rate curve. Interest rates range from 10% to 100% according to the utilization of the Treasury Pool, the higher the utilization the higher the interest rate.
At >0–50% utilization rate of the Treasury Pool, the interest rate will be fixed at 10%.
At >50–95% utilization rate of the Treasury Pool, the interest rate goes up linearly to 25%.
At >95–100% utilization rate of the Treasury Pool, the interest rate goes up linearly to 100%.
This model ensures that there is sufficient liquidity at all times for liquidity providers to make withdrawals, because a higher interest rate attracts more liquidity, as well as discourages borrowings. When additional liquidity is attracted to the Treasury Pool, utilization rate goes down again accordingly and so does interest rate.
LEVF — LIQUIDITY PROVIDERS
We are excited about the potential that Levf brings to Yield Farmers with leveraged yield farming. For the protocol to flourish, Levf requires deep liquidity in the Treasury Pool that supports the farmers’ exploits. With a thriving yield farming market (existing pool of USD74B of yield farmers), we are seeking like-minded Liquidity Providers (LP) to grow together with Levf Finance.
LP can participate in Levf’s Treasury pool at any time, as long as they have DAI, and they can withdraw their funds (deposit plus interest earned) at any time, as long as there is sufficient liquidity balance in the pool.
As of now, the platform imposes a maximum 365 days period on all borrowings, and all leveraged farming positions will be force-closed when they hit this mark. Borrowings and interest earned will be plowed back into the Treasury Pool.
LP’s funds are deposited into the project wallet directly. The project wallet is secured by the Levf protocol, in a decentralized and trustless pool, fully automated by smart contracts.
The Levf protocol shall be audited by a reputable auditor, and the movements of the funds in the Treasury Pool is fully transparent and can easily be tracked at etherscan.io
Deposits in LevF are employed to farm only from reputable DeFi yield protocols and yield aggregators such as Yearn.finance and Aave.finance, which further safeguards LP’s funds.
Risk-averse retail or institutional investors, both crypto-savvy and newcomers, will find it worthwhile to participate as Levf’s LP, earning a return on capital starting from 10%, to as high as 100%, according to the rising interest rate model. This is a very good return compared to traditional instruments such as bank FD and bonds.
100% of the Interest paid by Yield Farmers will be paid directly into the pool for LPs, and the farmers are further taxed a 10% on their net profit which goes into the Reserve Pool. Holders of the LFI governance tokens (see next section LEVF — TOKENOMICS) own and control the Reserve Pool, and determine how much of the accumulated taxes are to be paid as dividend.
LP only have to click on Deposit on the asset type he wants and proceed accordingly. At the moment we only have DAI pool but will be adding other asset types in future such as USDT and wBTC.
LEVF — ECOSYSTEM
Let’s take a look in details at how things flow within the Levf Ecosystem, tying together all that we have mentioned so far with regards to Levf as a matching platform, Liquidity Providers and Yield Farmers.
Ecosystem full view
1) Liquidity Provider deposits DAI to the Treasury Pool.
2) Yield Farmer choose from the white-listed DAI farming pools and deposit his 1x capital into Levf’s Farming Adaptor.
3) The Farming Adaptor will deploy a 20x leveraged amount to selected Aggregator’s DAI farming pool.
4) Yield Farmer chooses to redeem and exit position when his desired yield is met, the full 20x invested amount plus gross profit will go back to Levf’s Farming Adaptor.
5) The Farming Adaptor will return the 19x borrowed capital plus interest earned to the Treasury Pool. Liquidity Provider can withdraw his deposit amount plus interest earned at any time as long as there is sufficient liquidity in Treasury Pool.
6) The Farming Adaptor will levy a 10% tax on Yield Farmer’s gross profit after interest repaid. This will be transferred to the Reserve Pool.
7) Yield Farmer gets back his 1x capital plus net profit (gross profit on 20x capital — interest on 19x borrowing — 10% tax)
8) The accumulated amount in the Reserve Pool belongs only to the LFI token holders specifically, and not all Liquidity Providers.
LEVF — TOKENOMICS
By becoming the early adopters of the project, Liquidity Providers can also mine LFI (the Governance Token of Levf Finance) in addition to earning the interest from liquidity provided.
LFI token distribution
Total LFI supply: 100,000 tokens, 10% pre-minted for IDO liquidity and initial expenses, 90% to be minted over 20 weeks (10 epochs of 14 days each) during the Governance Forming event, distributed as follows:
10,000 tokens will be pre-minted as project jump starter. It is minted for expenses such as listing fees, audits, liquidity for partnerships etc.
75,000 tokens will be distributed to Liquidity Providers who joined during the Governance Forming event. Tokens are minted by LPs proportional to how many DAI per second (dsec) they provided to the system for the duration of the event. The mining phase for this portion will be over 10 epochs i.e. 7,500 tokens distributed each epoch. (see next section LEVF — HOW TO MINE LFI)
15,000 tokens will be allocated to the team and operational treasury (including but not limited to liquidity creations in Uniswaps and DEXs etc). These tokens will be unlocked alongside liquidity mining across the 10 epochs.
LFI will IDO (Initial Dex Offering) on Uniswap at launch.
LFI Special Feature (RFI-Static Reward)
Whenever an LFI holder sells his tokens, 10% of the tokens will be taken and re-distributed to all existing LFI holders in a pro-rated manner (the seller will only receive 90% of his sale value).
LFI token utility
LFI is the encoded token used to vote on the Levf Improvement Proposal System (L.I.P.S.), and to decide on how features are added to the Levf ecosystem (and other matters) when the project is handed over to Governance.
LFI token holders are also the owners of the Reserve Pool, where the 10% taxes on yield farmers’ net profit are accumulated.
Other utilities include:
1. Create governance proposals and decide on new initiatives.
2. Decide on changes in interest rates, lending period and lending features.
3. Vote on new aggregators and asset types to adapt to.
4. Own the smart contracts.
LEVF — HOW TO MINE LFI
As mentioned in Tokenomics, 75,000 LFI tokens or 75% of total supply is held in the staking contracts for liquidity mining distribution over 10 epochs (20 weeks). This translates to 7,500 LFI rewards for liquidity mining per epoch, distributed in the following two pools:
1. DAI asset supply pool (6,000 LFI reward per epoch)
2. DAI/LFI UNI LP Token pool (1,500 LFI reward per epoch)
Liquidity Providers can claim their LFI reward at the end of every epoch. The LFI reward is based on the amount of liquidity staked relative to the total amount staked in the pool. This is a time-weighted calculation to ensure the fair distribution of rewards. If an LP stakes halfway through the epoch, they will receive LFI proportional to the time staked. LP also has to stay staked till the epoch ends to be able to claim LFI rewards for the epoch.
Redeemable tokens can be checked after each epoch.
1. To participate in the DAI asset supply pool, participants simply stake DAI (i.e. Deposit DAI in DAI pool). They will receive interest-bearing LFI-DAI in return to account for DAI yield when redeemed. LFI rewards can be claimed together with DAI upon redemption of LFI-DAI.
2. To take part in DAI/LFI UNI LP Token pool, participants have to provide liquidity on Uniswap’s DAI/LFI pairing.
Click on the ‘ i ‘ icon on the top right-hand corner of the DAI/LFI UNI LP Token pool, and then click on ‘here’ on the info box that appears. This will lead to the Uniswap interface for pairing DAI/LFI.
Input the amount of DAI and LFI to be supplied and click ‘Supply’ and you will receive UNI-V2 tokens in your wallet.
Now go back to Levf and click ‘Deposit DAI/LFI UNI LP’ and you will be able to stake the UNI-V2 for the current epoch so as to mine LFI.
You can always go to Dashboard on Levf and check out your Estimated LFI to be mined for the current epoch.
LEVF — L.I.P.S. AND GOVERNANCE
Governance of Levf is handed over to the LFI token holders once the Governance Forming event is over, and L.I.P.S. is the system for voting on all manner of governance issues.
What is L.I.P.S.?
L.I.P.S. or Levf Improvement Proposal System is how features on the Levf ecosystem are added or changed. Users start a proposal on the forum, discuss it and gauge the sentiment of the public to see if the proposal will be accepted. If a lot of users agree with it then it can be posted on-chain officially for everyone to vote on.
How many people need to vote to pass a Levf Improvement Proposal (LIP) proposed on-chain?
- The quorum is 20%. This means that 20% of the staked LFI needs to vote on a proposal for it to pass through for voting. After that, it has to have at least 50% of the votes for proposal to be accepted.
- You can post your proposal on-chain first but if people haven’t talked about it, they probably won’t vote for it.
How do I make a proposal?
- The default template for proposals can be found on Github + on the forum if you make a post under proposals or discussion it will auto-fill in the template as well.
- The process is roughly the following:
- forum discussion
- promote to LIP (usually done by mods), add LIP to Github, put on-chain
Who can make a proposal?
- Anyone can post a proposal both on the forum and on-chain.
How do I vote?
- Stake your LFI and then you can cast your vote for LIP that are on-chain on the voting dashboard
Can I vote if my LFI is in the LFI vault?
- No, your LFI must be staked in the governance contract in order to vote.
Where can I view the LIPs?
- You can view them on the voting dashboard if you login to your web3 account or at lips.levf.finance.
Why should I stake? What is the APY (Annual Percentage Yield)?
- You should stake if you want to vote on LIP. The APY for staking is currently not listed on the UI. You can ask on the chat what the rate is.
Does staking my LFI matter for voting?
- Yes. You have to stake your LFI at lgov.finance/stake in the tab under Governance to have your vote counted. As of now, your vote can be submitted without staking but it will not count so it will only be wasting gas fee, so make sure you have staked first if you want to vote validly.
How long is my LFI tied up if I stake it?
- Your LFI is locked for 3 days after you vote.
What if I want to take my LFI out before the end of the vote lock?
- You can’t, the lock lasts 3 days after you last voted, until then you cannot unstake your tokens.
- If you try to unstake your tokens before the lock ends you be notified of a very high gas cost, this is actually an error, you will not be able to unstake until the 3 day lock has ended.
I know the vote lock is 3 days, is there anywhere I can see exactly how long I have left till I can unstake my LFI?
- Yes. You can read the contract directly at lgov.finance staking contract, go to 28 votelock and input your eth address. This will give you the eth block number on when you can unstake.
What’s the difference between voting for a poll on the forum and an on-chain vote?
- A poll just gauges the sentiment of the community on how it feels on the proposal, while an on-chain vote will be binding and will take effect if it passes.
What about the new gas-free voting thing?
- We now have an off-chain signaling system that uses staked balances from lgov. This replaces the older, informal forum polls which were vulnerable to sybil attacks. It can make multiple choices and doesn’t cost gas to use, you just sign in with your wallet instead. We still use the normal on-chain voting system for LIPs.
LEVF — UPCOMING
The future for Levf is an exciting one. Much remains to be done but the team will hand over a well-thought-out plan and various proposals to the Community Governance for the continuous development of this DeFi project.
Work in Progress
1) Linking up with other reputable aggregators like Harvest, Aave, CREAM so that Yield Farmers have more choices, and Levf can ultimately attract more users.
2) Opening up to other farming asset pools like USDT, USDC, ETH and wBTC. Again, this will open up the range of farming choices and hence attract more users. The community can vote on differential interest rates and lending criteria for different asset types.
3) Listing LFI token on exchanges like Coinbase and Binance.
1) Adaptation to DeFi insurance protocols, for users (or even the ecosystem itself) to obtain coverage for financial losses incurred from smart contracts or protocols.
2) Introduce a Feeder program to team up with real-life Funds and other fiat liquidity brokers, for growing the Treasury Pool.
3) Launching a utility token to enable cross-chain liquidity from other blockchains.
Since Levf Finance is community-governed, we are also eagerly awaiting brilliant and creative proposals to come out from the Levf community.
LEVF — RECAP
Yield Farmers have limited methods to leverage up small capital to generate higher returns. Levf is a matching platform that generates an unprecedented 20x leverage on initial capital for Yield Farmers, whilst providing 10–100% lending returns for the participating Liquidity Providers.
Based on the example presented, Yield Farmers can generate up to 6x or more of their usual APY thanks to the generous leverage. The leverage provided by Levf also allows new participants with low capital to enter the field, where they were previously inhibited due to gas fee per transaction greatly reducing their APY on a small investment.
For Liquidity Providers on the other hand, a starting 10% return for a risk-averse investment far outpace FIAT instruments like bank deposits, corporate bonds and treasury bonds. Early participants can also gain LFI tokens which provide governance status as well as access to the retained taxes in Reserve Pool.
We believe that this is a DeFi project that can grow from strength to strength, benefiting all stakeholders involved. It has exciting potential in an increasing Treasury Pool size, an expanding range and types of farming pools and aggregators, and the addition of new features like insurance and external liquidity feeders, all under the transparent system of community governance.