How Levrex Finance Works
Levrex Finance combines leveraged lending with automated strategy deployment to enable users to farm yields efficiently. Here's a detailed look into the protocol’s core mechanisms:
Lending/Supplying
Lenders deposit AUSD, the native stable asset, into the Levrex liquidity pool. These funds become available to borrowers and earn interest. In return, lenders receive:
Passive interest income
Protocol rewards (e.g., LKAT)
Lending is an excellent option for users seeking stable returns without active participation in yield farming.
Borrowing/Leveraging
Borrowers provide collateral and can borrow up to 5x AUSD against it. Levrex uses this borrowed AUSD to:
Enter positions on high-yield platforms such as Sushiswap, YearnFi, and Morpho Labs
Compound yield rewards back into the farming pools every 4 hours
This allows users to enhance their exposure to ecosystem rewards without needing large upfront capital.
Strategy Deployment
Levrex automates yield strategy allocation and optimization. Borrowed funds are deployed across the most efficient Katana dApps. Yield rewards, typically paid in KAT and other tokens, are handled as follows:
Locked KAT is converted into LKAT via the LKAT Miner
LKAT and other rewards are reinvested for auto-compounding every 4 hours
This continuous loop of reward generation and reinvestment enables high-frequency compounding.
Health Factor
Each borrower's position is monitored through a Health Factor, which tracks the safety of their leveraged position.
High Health Factor (>1.5): Safe
Borderline (1.2–1.5): Monitor closely
Low (<1.2): At risk of liquidation
Borrowers can increase their Health Factor by adding more collateral or reducing debt.
Liquidation
If a position's Health Factor drops below the liquidation threshold (typically ~1.1), the protocol will partially or fully liquidate the collateral to repay borrowed funds and protect lenders.
A portion of the collateral is sold
The borrower may incur a liquidation fee
Remaining funds, if any, are returned to the borrower
Proper Health Factor monitoring and protocol alerts help users avoid liquidation scenarios.
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