December 4th, 2020 at 11:01 pm UTC · 3 min read
Warp Finance is revolutionizing the decentralized finance (DeFi) space by providing users with a completely new and cutting edge use for the liquidity provisioning (LP) tokens earned from liquidity providing: collateralizing stablecoin loans. This process lets Warp users unlock additional value from their LP tokens, representing a massive opportunity for users to profit.
Liquidity provisioning or LP tokens memorialize the liquidity that a particular user has generated on a DeFi protocol. This incentivizes token market making, helping to resolve the liquidity issues that have plagued the blockchain industry since its inception. Despite this revolutionary accomplishment, LP tokens are limited by their singular use case, which is distributing users’ shares of the transaction fees that accumulate during the period for which they are providing liquidity.
By providing LP tokens with an additional use case (collateralizing stablecoin loans), Warp Finance lets its users unlock additional value of their LP tokens, allowing them to restake/farm the stablecoins received from their loans while still being still able to earn the 0.3% rewards from Uniswap for liquidity providing, and receiving their LP tokens back when the loan is repaid.
This represents a colossal market opportunity, as Uniswap alone has around $1.3 billion in total value locked (TVL), with LP tokens in existence that represent that value. Additional billions of dollars are locked up across other platforms with corresponding LP tokens, such as Curve and SushiSwap – all the major decentralized exchanges (DEXes) such as these offer LP tokens.
Warp capitalizes on this vast market opportunity by being the first protocol to offer users stablecoins in exchange for their LP tokens. The process is quite simple, with substantial benefits:
All users need to do is first deposit LP tokens onto the Warp Platform as collateral. Initially, Warp will accept LP tokens from Uniswap, but intends to increase acceptance to other platforms’ LP tokens as well. Then, users will be issued a stablecoin loan (with a few options to choose from), which they can restake and farm while their LP token is simultaneously staked in Uniswap. The result is that the loans on Warp could effectively be negative interest, since the yield earned from LP staking could negate what is owed for interest, and even result in a surplus that is paid out to the borrower. Users will be able to receive their LP token collateral back in its original form when their loan is successfully repaid.
This means that Warp users will effectively be able to leverage and “level up” their LP tokens. Thus, additional value is unlocked from the massive amounts of LP tokens already held by DeFi users.
To learn more about Warp Finance and how they are enabling users to receive stablecoin loans in exchange for LP tokens, visit their website at warp.finance.