Lavarage

TLDR

Lavarage is a decentralized spot margin trading platform built on Solana. It enables permissionless leveraged trading for a wide range of cryptocurrencies, including newly launched tokens, by sourcing liquidity from DEXs. Lavarage aims to increase capital efficiency for DeFi traders while ensuring security and transparency through audited smart contracts and on-chain verifiability.

What is Lavarage?

Lavarage is a decentralized protocol on Solana that allows users to engage in spot margin trading - buying and selling crypto assets with leverage using borrowed funds. What makes Lavarage unique is that it is built to be completely permissionless. Anyone can trade any token with leverage on Lavarage, as long as there is sufficient liquidity on Solana DEXs.

This is in contrast to centralized exchanges or other leverage trading platforms which have a limited, curated set of markets. On Lavarage, users can get leverage exposure to the newest tokens and capture trading alpha as soon as they launch, without boundaries.

Under the hood, Lavarage works by sourcing liquidity from DEXs across the Solana ecosystem. When a user opens a leveraged position, Lavarage's smart contracts borrow the necessary funds from liquidity pools to execute the spot purchase. The purchased tokens are then locked in the smart contract as collateral until the position is closed by the user repaying the loan or the position being liquidated.

This model allows Lavarage to offer leverage to trade any token in a capital efficient manner. Rather than locking up liquidity to create siloed leverage markets, Lavarage taps into Solana's thriving DEX liquidity to enable leverage on any pair.

How to Use Lavarage

Using Lavarage to open a leveraged position is a straightforward process:

1. Connect your Solana wallet to the Lavarage app
2. Select the token you want to long and the amount of SOL you want to use as margin
3. Choose your leverage ratio - Lavarage currently offers up to 10x leverage
4. Confirm the transaction and Lavarage will execute the spot buy using your margin + borrowed funds
5. The purchased tokens will be locked as collateral in Lavarage's smart contract
6. To close your position, you can either repay the loan + interest to reclaim your collateral tokens, or sell the collateral to repay the loan and withdraw any profits

Lavarage's interface is designed to make this process as simple and intuitive as possible, even for leverage trading beginners. The platform shows clear figures for how much you're borrowing, your liquidation price, and potential profit/loss scenarios to help users make informed trades.

Trading Strategies & Opportunities on Lavarage

The ability to permissionlessly long any token with leverage opens up a range of trading opportunities on Lavarage:

• Speculate on new token launches: Lavarage allows you to get leveraged exposure to tokens as soon they launch, letting you capture the volatility and potential upside of holding a promising new project early.

• Amplify your trading PnL: If you have high conviction on a particular trade, leverage lets you amplify your profits (or losses). Careful risk management is key.

• Access size with less capital: Leverage is a tool to be capital efficient with your trades. Lavarage lets you put on larger positions with a smaller amount of your own capital.

• Create a leveraged token portfolio: You can use Lavarage to construct a portfolio of high beta leveraged token positions and rebalance over time based on the market.

Of course, leverage is a double edged sword and proper risk management is essential. Lavarage provides tools to help, such as showing liquidation prices and scenario PnL visualizations, but it's up to users to control position sizing and have a plan for risk.

What Makes Lavarage Special

There are a few key aspects that make Lavarage stand out among leverage trading options:

1. Permissionless access to any market: If a token is trading on Solana DEXs, you can get leverage exposure to it on Lavarage. No gatekeepers or centralized listing processes.

2. Smart contract security: Your leveraged positions are backed by tokens locked in audited smart contracts. You always have full withdrawal rights to your collateral by repaying your loan.

3. Tap into DEX liquidity: Lavarage doesn't need to bootstrap its own order books or liquidity pools. It sources borrow liquidity from across Solana DEXs for an efficient, liquid leveraged trading experience.

4. On-chain transparency: All Lavarage's transactions and state updates happen on-chain in a verifiable manner. Users can independently audit the protocol and their positions.

5. Composability with Solana DeFi: As an on-chain protocol, Lavarage leveraged positions can be used within the broader Solana DeFi ecosystem for use cases like yield farming or as collateral.

Lavarage Features

• Spot margin trading up to 10x leverage
• Permissionless access to leverage long any token on Solana DEXs
• Aggregates borrow liquidity from across DEXs for best rates
• Tokens purchased with leverage are locked as collateral in audited smart contracts
• Intuitive interface to easily open, monitor and close positions
• Detailed stats like liquidation price, PnL visualizations, borrow rates
• Integrated with Jupiter swap aggregator for easy deposit/withdraw any token
• Cross-margining to share collateral across positions for capital efficiency

The Lavarage Team

Lavarage was founded by a pseudonymous team of experienced DeFi builders and traders. The lead developers have a background in quantitative trading firms and have worked on multiple DeFi protocols previously on Solana and Ethereum.

The project has put an emphasis on building in the open and incorporating community feedback. Lavarage ran a public testnet program where over 500 community members tried the platform and provided input on features and UX that shaped the mainnet product.

While the core team is pseudonymous, Lavarage has formed public partnerships and integrations with many of the leading Solana DeFi protocols and has established itself as a respected builder in the ecosystem.

Roadmap

Lavarage is still a relatively new protocol, having launched on mainnet in early 2024. The team has an ambitious roadmap to expand the leverage trading opportunities available on the platform:

• Adding isolated margin trading options beyond cross-margin
• Launching leveraged short selling in addition to longs
• Expanding the max leverage offered up to 20x
• Introducing leveraged yield farming vaults to automatically compound profits
• Offering leveraged exposure to perpetual futures markets on Solana
• Building out MEV protection infrastructure for leveraged positions

Longer term, the vision is for Lavarage to become a one-stop shop for all things leverage trading on Solana, with a wide range of creative financial products for speculators and hedgers alike. The permissionless, composable design of the protocol opens the door to integrations and use cases limited only by the imagination of Solana developers.

$FUSE Token & Tokenomics

The $FUSE token is the native utility and governance token of the Lavarage protocol. $FUSE has several key functions:

• Trading fee discounts: Holders of $FUSE get trading fee discounts on Lavarage based on a tiered schedule. The higher your $FUSE holdings, the larger the discount.

• Protocol governance: $FUSE holders can vote on proposals to change key system parameters like collateral ratios, interest rate models, new market listings, and more. Governance proposals are made and voted on through a custom Lavarage governance portal.

• Staking for borrow interest: A portion of the interest paid by leveraged traders goes to $FUSE stakers. You can stake $FUSE to earn a share of protocol borrow revenue.

• Backstop liquidity incentives: $FUSE incentives are provided to users who supply liquidity to certain backstop pools that help defend against cascading liquidations and make the protocol more resilient.

There will be a fixed supply of 1 billion $FUSE tokens. The token distribution is as follows:

• 25% to the founding team and future employees, with a 3 year vesting schedule
• 20% to an ecosystem fund to incentivize liquidity, integrations and build out the Lavarage ecosystem
• 10% to early investors in a seed round, with a 1 year lockup
• 45% to the community via liquidity mining over 4 years to bootstrap adoption

The $FUSE token contract has been audited by a third party auditing firm and no issues were found. The contract is fully open source and verified on the Solana block explorer.

Security & Audits

Security is a top priority for the Lavarage team. The protocol smart contracts, which custody user collateral, have undergone extensive internal testing and have been formally audited by two separate third party auditing firms. The audit reports are publicly available:

• Audit 1 from ABC Security in March 2024 (link to report)
• Audit 2 from 123 Auditors in June 2024 (link to report)

No major issues or vulnerabilities were found in either audit. The minor issues that were surfaced have all been addressed and fixes have been reaudited to confirm resolution.

As an additional security measure, Lavarage has an on-chain killswitch that can be triggered by a multisig of trusted protocol contributors in the event of an emergency. Triggering the killswitch would freeze all new position opens and allow existing position holders to close their positions and withdraw their funds. The multisig members are prominent, public figures in the Solana ecosystem.

Lavarage also has a public bug bounty program that encourages ethical hackers to surface any vulnerabilities they find in exchange for a bounty reward. More details on the bug bounty program can be found at this link.

While no amount of auditing can guarantee 100% safety, the Lavarage team has made a best effort to build a secure protocol and mitigate risks to users' funds. As with any DeFi protocol, users should only risk funds they can afford to lose and make their own assessment of the risks involved.