Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
With nearly $574M in liquidity, the GLP token by Arbitrum is a popular index of assets used to provide liquidity for swaps and leverage trading on GMX. Recently in May, a new composable leveraged yield farming protocol launched with a strategy to provide leverage for GLP and boost GLP APY up to 10X. Similar to Gearbox on Ethereum Mainnet, Archi Finance connects users who want passive lending interest with leverage degens. In Archi, passive liquidity providers earn interest by supplying single-asset liquidity and degen farmers borrow those assets to achieve 2X-10X leverage with GLP to achieve a higher APY.
For leverage farmers on Archi, one can choose the collateral assets and leverage allowed by the protocol (up to 10X). The selected borrowing assets will affect the fees for depositing and withdrawing from GMX.
Archi Finance currently offers two delta hedge strategies. The 50:50 strategy consists of 50% stablecoins and 50% unstable coins (ETH, WBTC), with the existing GLP of GMX fluctuating within this range. Alternatively, you can choose the same proportion of unstable coins as GMX. After borrowing is completed, 10% of the assets will be used as liquidation rewards. Asset protection (liquidation) will be activated when the collateral assets reach 40%, and the remaining assets will be returned to the degen farmer.
When leverage farming on Archi Finance, the assets one deposits become the collateral for external protocols/actions. This includes both initial funds and the borrowed amount that you obtain from the protocol. Archi Finance monitors the tokens in your portfolio and calculates their value at all times, which is always denominated in the underlying borrowed asset used to open the position in.
To manage risk, the Archi Finance health factor represents the level of collateralization and determines whether the position is at risk of liquidation. Anyone can check the health factor of a position and potentially liquidate it if the health factor falls below a certain threshold.
While this is a newer protocol with more risk to using it, there is one published Quantstamp audit “indicating an extensive number of high-severity issues” that have either been fixed or “mitigated.” One of the most important issues to be aware of that still presents a real risk to users is that liquidity providers will not always be able to withdraw their liquidity at any moment. The liquidation mechanism has been revamped to lock a liquidation fee when users open a position so as to maintain liquidation incentives and further restrictions have been added for how long and how often borrowers can open a position.
As of today, Archi Finance has just over $9.62M in total value deposited with a recently launched token (ARCHI) as of June 26th with a fully diluted valuation over $10.6M.
Today, I’ll show how I can earn up to 30% APR by lending single assets such as ETH, WBTC, USDC, and USDT to Archi leveraged GLP farmers.
How to Earn Up to 30% APR Lending to Leverage Farmers on Archi Finance
Before we get started, please be aware of these risks.
- Smart contract risk in Archi Finance and GMX/GLP contracts
- An economic design exploit in the design of Archi Finance or the GLP token
- Front-end spoof attack…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
