lvBTC
lvBTC is a synthetic asset designed to facilitate lending and borrowing within the Archimedes ecosystem. It is not intended to be a freely tradable asset (you won’t be able to “buy coffee” with it), but rather serves as a tool to enable leveraged exposure to BTC.
Why lvBTC
The primary purpose of lvBTC is to allow the implementation of a lending pool on top of AMMs such as Curve, which inherits the security and transparency of the AMM platform. For instance, by inheriting Curve's security stance, Archimedes can offer a robust and reliable lending and borrowing experience without the need to build a proprietary pool from scratch.
Minting lvBTC
Newly minted lvBTC can only be sent directly to the Curve pool through Archimedes' smart contract system. This ensures that lvBTC is used exclusively within the intended lending and borrowing framework and cannot be minted to arbitrary addresses.
Liquidity Providing
- LP deposit WBTC to WBTC/lvBTC Curve pool: This is a standard Curve pegged factory pool and is not controlled by Archimedes. LPs get interest payments via the standard Curve gauge system.
- Access WBTC in the Curve pool: When Archimedes detects excess WBTC in the pool, it triggers the following on-chain sequence: New lvBTC is minted, swapped for WBTC, WBTC is sent to a dedicated vault, and is made available for leverage.This is the only method new lvBTC is minted. The destination address is a smart contract that deals with the swap and is determined by the protocol admin.
- WBTC is now available for leverage
lvBTC doesn’t leave Archimedes smart contracts and Curve pool in this process.
LPs Safeguards
There are several safeguards in place to reduce the risk of LPs
Pool rebalance
When WBTC/lvBTC goes out of balance (low amount of WBTC), the smart contracts automatically return fee WBTC (WBTC that is not taken as leverage) to the Curve pool. For example: trigger rebalance when 30% WBTC or less is in the pool.
Position expiration
In case there is still missing WBTC in the Curve pool, The smart contract will start expiring positions until the pool regains balance. All positions can expire, by the protocol, after 30 days.
Position force close
The code is constantly monitoring the WBTC value of the leveraged position. When it goes below a certain threshold (collateral WBTC value + safety buffer), smart contracts immediately close the position (even before the 30 days period). For example: a safety buffer of 10%.
All thresholds are determined by Archimedes DAO via ARCH token holder votes.
LP Incentives
The incentive of all participants is aligned. Everyone profits when positions are live and there is no special incentive to liquidate positions (there is only a small fee to cover gas costs).
Archimedes is a system to exchange liquidity for risk: LPs provide most of the liquidity, LTs assume most of the risk. From here, it is a profit share: LPs get their share via the standard gauges in the form of liquid tokens such as WBTC, wETH, CRV, CVX, Bal, AURA (and possibly some other reward tokens).