ArchimedesFi Fix Rate borrowing + undercollateralized leverage & $ARCH token to capture value?
@ArchimedesFi Fix Rate borrowing + undercollateralized leverage & $ARCH token to capture value?
📍In this thread
What is it
How does it work
Lambro thoughts on protocol dynamics
How i would play it
ArchimedesFi allows farmers to bid at a fixed cost to leverage on yield bearing stablecoin n lenders to lend money to leverage farmers
The $ARCH token is design to be more sustainable with a dynamic emission + constant buy pressure from borrows to “bid” leverage capacity
📍What is & How does ArchimedesFi work
It is a lending &borrowing platform built on top AMMs with goals to allowing leverage up to 10x yield
There is 2 core parties in Archimedes
🔹Lenders is referred as Liquidity Providers (LP)
🔹Borrowers is referred as Leverager Takers (LT)
LP provide asset to 3CRV/lvUSD pool and receive interest which the protocol pays out in
LT borrow from these pools to create a leverage position from whitelisted yield-bearing stablecoin (starting with $OUSD) @OriginProtocol
📍How does ArchimedesFi enabled Fix lending?
Introducing "Leverage round"
Leverage round is available when the LP pool (3CRV/lvUSD) TVL is increased to a set amount.
Whenever a LT opens a position the price (lvUSD) will be higher and lower in price over the proceeding days until all the leverage is acquired. A bit like a dutch auction, and these auction will be done using $ ARCH
When a leverage round starts,
assume 1 $ARCH = 150 lvUSD
Depending on the rate of of the auction you can buy more and more lvUSD with 1ARCH
13:00 1$ARCH = 150lvUSD
14:00 1$ARCH = 160lvUSD
15:00 1$ARCH = 170lvUSD
This way LT will buy “leverage power” (lvUSD) at the rate they prefer until the it has sold out it’s leverage capacity at the price they want.
🎟️You can imagine $ARCH as their tickets to buy leverage capacity.
📍Why would LP provide liquidity & the difference?
🔹Sustainable yield coming from
Protocol fees including
- 0.5% origination fee,
- 30%performance fee on position gain
Buy power for ARCH to “bid”/ buy leverage power
Protocol Dynamic emission + partner incentives
🔹What is dynamic emission?
To avoid over inflating the token archimedes team introduced a dynamic emission to keep the APY in a specific range.
There are 3 key element that determines its APY
Benchmark ARCH price
Every 2 weeks the protocol calculates the ARCH emission with a a formula of
Biweekly Emission =
(“target TVL” * “Target APY”/ 26) * (1/ “Benchmark ARCH Price”)
Each year there is a set of minimum & maximum emissions to avoid edge cases.
📍Why would LT borrow with Archimedes?
🔹Predictable fee model
with the “bidding” auction model, LT will know their leverage cost
🔹Tradability - Archimedes package position as an NFT, LT can trade it on NFT marketplaces for easy exit or potentially more composability in the future with other protocols.
In short, if you have strong conviction on a strategy APY why not leverage up it with fix cost?
Mkt & BD @raaguiars
& more here
📍Tokenomics (subject to change)
Total Fixed Supply: 100,000,000 ARCH.
📍Summary, thoughts & prediction
This is an interesting protocol with lots of moving parts, essentially it uses “auction” & “dynamic emission” as a novel way to maintain $ARCH token price. ARCH price will be based on revenue/demand + a speculation of the market.
🔹My thinking model of “fair” pricing of $ARCH
Hard demand to use auction = how good is the underlying apy, how much lvUSD is available to auction, how much $ARCH is circulating
Meaning i have to monitor
🤔 3CRV/lvUSD + relationship of how much archimedesfi team for lvUSD available to auction
🤔OUSD (first yield bearing stablecoin) current APY & premium for future APY
🤔Circulating $ARCH supply & upcoming emission based on dynamic emission
I personally won't go in $ARCH yet as I feel like I haven't fully understood the protocols but this is very interesting to follow. I’d keenly keep a close eye on what the “cost” to fix borrowing on OUSD & the relationship to its apy for first action first.
One thing I am not very comfortable with is the tokenomics “subject to change” on gitbook & no clear indication on the fix emission yet.
Thank you @CurveCap tweet and video that brought this protocol to my attention n discussing protocol dynamics with @ViNc2453 is always fun n fruitful
I really love to pick @newmichwill @mrblocktw the curve big brains thoughts on this protocol specially my summary & prediction
Thanks for reading
help lambro get attention on twitter & substack for his weird obsession in social media growth
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