High LTV and high leverage
More information on Loan-To-Value
LendBook offers higher leverage than other lending protocols.
To understand how, let’s examine how borrowers leverage their position. As in other protocols, they can borrow Y and swap them to amplify their position in X, or they can borrow X and swap them to short X. Borrowers can easily do loops of borrowing and swapping to amplify their leverage. High LTV translates into high leverage. Abstracting from gas and swap costs, the n-loop maximum leverage factor is:
Assuming borrowers could infinitely loop at the same limit price, their maximum leverage would be :
As the limit price gets closer to the market price, the maxLTV tends towards LLTV (Liquidation Loan-To-Value). We can then calculate the theoretical maximum leverage for each type of asset pair :
| Asset tier | LLTV | pool step | MaxLTV for pool closest to market price | Theoretical Max leverage | Examples |
|---|---|---|---|---|---|
| Pegged assets | 99% | 0.03% | from 98.9% to 99% | x100 | DAI/USDC, wstETH/ETH |
| Correlated assets | 98% | 1% | from 97% to 98% | x50 | USDM/USDC, FRAX/USDC |
| Volatile assets | 96% | 10% | from 87.3% to 96% | x25 | ETH/USDC, WBTC/ETH |
| Long-tail assets (in V2) |
94% | 15% | from 81.7% to 94% | x16 | MKR/ETH, LINK/ETH |