For the yield farmer out there, there is always a trade off one has to consider. Providing liquidity and farming emissions whilst rewarding, locks up the users capital which could be used for other ventures.
What if there was a way to borrow against your liquidity, whilst it continues to farm for you? What if I told you, you could leverage yield farm your liquidity?
Look no further for the NorthPole’ first JLP vault, Platypus / wAVAX!
What is different about this offering compared to what the NorthPole currently offers?
This offering differs from our normal vault by enabling users to deposit liquidity pairs on the platform and either borrow $POLE or leverage this liquidity pair.
However, the exciting thing is this, we will farm with your liquidity deposited in the relevant farm on TraderJoe and auto-compound your rewards, growing your initial collateral deposited day by day!
What does this mean if I borrow $POLE against this collateral?
The best way to explain what happens is with an example:
Jerry wants to yield farm the PTP/WAVAX liquidity pair currently rewarding liquidity stakers with 280% APY for participating in this farming incentive.
However, in order for Jerry to profit from this, he has to spend all his money and create this liquidity pair, meaning when he begins farming, he has no free money to spend on other projects he wants to invest into.
Luckily for Jerry, he sees that this liquidity pair has a borrowing vault on the NorthPole. Additionally, not only will this vault lend $POLE to Jerry based on his deposited collateral, but the vault will farm with Jerry’s liquidity in the TraderJoe farm on Jerry’s behalf, with 85% of the rewards harvested, sold, and used to auto-compound Jerry’s deposited collateral!
So, not only has Jerry been able to borrow some $POLE and is able to invest elsewhere, his liquidity is growing day by day as it continues to farm, reinvesting 85% of rewards harvested.
Here is a diagram to help visualize this process:
What does this mean if I leverage my collateral?
The best way to explain what happens is with an example:
Jerry wants to yield farm the PTP/WAVAX liquidity pair currently rewarding liquidity stakers with 280% APY for participating in this farming incentive.
However, Jerry only has $500 and feels this is not enough to farm this liquidity pair and make a good profit. Jerry thinks this is currently safe to farm and does not expect much of a price drop.
Jerry sees that this liquidity pair is offered on the NorthPole, and offers Jerry the ability to leverage yield farm. The NorthPole offers a 75% maximum collateral ratio (borrowing power) for this collateral, and Jerry decides that he wants to leverage his position. Jerry leverages at x2.3 against his deposited collateral, meaning Jerry is providing his collateral to the platform and the platform is buying x2.3 TIMES 75% of the value of his assets (($500 x 0.75) x 2.3, minus slippage amount), being $851 of more liquidity to farm with!
As Jerry is a smart guy, he only leverages an amount that seems safe as he doesn’t expect the collateral to drop by 15.74%, and as the platform would compound Jerry’s position with each harvest of rewards, Jerry knows that if the price maintains as is, Jerry collateral will increase, thereby lowering the risk of liquidation.
To summarize what this means!
In short, the benefit of this strategy is as follows:
Users can provide their liquidity and borrow $POLE from the platform. Whilst they are borrowing $POLE, the platform will continue to farm with their deposited collateral and auto-compound 85% of the harvested rewards, with the platform taking 15% as a management fee, buying back $NORTH and sending to $sNORTH holders!
Or, users can provide their liquidity and ask the platform to buy MORE of their liquidity with borrowed $POLE, leveraging their initial collateral. Meaning, the user will be able to farm as if they had MORE liquidity, thereby increasing their potential return on investment!
To ensure all users positions have the rewards harvested and auto-compounded as frequently as possible, we have created a button labeled ‘refresh’ that will cost gas, but will reward the user with 0.5% of all harvested rewards as an incentive to pay the gas fee and harvest & auto-compound all users farming positions!
