What is LeverFi?
Decentralized exchanges (DEXes) have allowed users to exchange digital assets without relying on intermediaries or trusting them to hold their funds. DEX exchanges operate through smart contracts interacting directly with users' crypto wallets.
However, leveraged derivatives trading is still popular among traders, something that most decentralized protocols in the DeFi environment cannot yet provide. Over the past few years, DEX exchanges that give users derivatives trading using smart contracts — LeverFi is one such protocol- have emerged.
What is LeverFi?
LeverFi is a decentralized blockchain protocol for leveraged cryptocurrency trading. The project's developers strived to create a valuable product for traders and liquidity providers in the DeFi sector. The uniqueness of LeverFi is that this platform combines the properties of a decentralized exchange and a leveraged DeFi protocol.
The project was founded in 2019 in Singapore under the name RAMP DEFI. In 2022, the RAMP DEFI team rebranded the project to LeverFi, which more accurately reflects the direction of its activities (the name comes from leverage).
In September 2023, LeverFi raised $7 million in two rounds of investment from DWF Labs and Unicorn-Verse, funds known in the cryptosphere. Funds such as ParaFi Capital, Arrington, XRP Capital, Ruby Capital, Torchlight Ventures, IOST, Signum Capital and MW Partners backed the project at various stages. In addition, the project team has raised about $1 million more from private investors at the closed ICO stage.
How does LeverFi work?
Traders pledge digital assets through a smart contract and receive the right to open positions with up to x10 leverage. At the same time, the promised tokens go into a liquidity pool and generate farming revenue for traders — this is one of the main features of the LeverFi protocol.
Users can pledge and earn revenue in native LEVER tokens without trading. In this respect, LeverFi is similar to credit protocols, where users can make a deposit available as collateral and earn interest.
Traders do not have direct access to the borrowed assets but can only use them in trading, withdrawing profits to their wallets. In case of a loss, a part of the trader's funds will be deducted from the collateral and taken over by the lenders. In case of the worst transaction outcome, the trader's position will be forcibly closed, and the collateral will be liquidated in favour of the lender.
Lenders who provide traders with assets for trading earn interest. The interest rate is calculated dynamically based on the usage curve: the more traders use leverage, the more lenders earn. Any user can simultaneously lend digital assets and make them available to other traders.
Traders and investors can track their crypto portfolio and its returns on the exchange using the inbuilt LeverFi Portfolio tool.
In addition to crypto derivatives, LeverFi supports standard spot trading and allows assets to be added to liquidity pools to generate income. However, the exchange supports a limited number of assets on both the spot and derivatives markets: only the cryptocurrencies BTC and WETH ("wrapped" ether) and the USDT and USDC stablecoins are available for trading.
LEVER token
LEVER is a native utility token of the LeverFi protocol. The token was released in July 2022 following the rebranding of RAMP DEFI. The current token supply in the market as of December 2023 is $28.6 billion, with a maximum supply of 35 billion LEVER.
The token has several functions in the LEVER ecosystem:
- Use as collateral;
- Adding new assets to liquidity pools;
- Rewarding liquidity providers, including users who have blocked their digital assets to provide collateral;
- Participation in the management of the platform: to gain voting rights, a LEVER holder blocks his tokens for 6 to 48 months and receives xLEVER tokens in return, which allows him to participate in voting for proposals to improve the protocol. The longer the blocking period, the more xLEVER tokens the holder will receive for the same blocked amount;
- Discounts: traders receive discounts on trading commissions from 40% to 60% for holding xLEVER in their wallet;
- Rewards are part of the Lender and Trader Incentive Programme.
The LEVER token is trading at $0.0015 — slightly higher than it was after listing in 2022, after which the rate hit an all-time high of $0.005 just a few days later. Relative to ATH, the price of LEVER has fallen nearly 73%. Despite the growth of most cryptocurrencies, the LEVER token has declined in value since the beginning of 2023, which may be due to a drop in trading activity amid the regular generation of new tokens.
The RAMP token issued before the rebranding is still listed on exchanges, including centralized exchanges, at $0.049. However, unlike LEVER, the RAMP token has grown stronger since listing in October 2020 but is 95% below its ATH of $1.03 in March 2021. RAMP's capitalization in December 2023 was $23.8 million.
Outlook
Nothing is known about LeverFi's TVL (number of assets locked in the protocol), and there is no roadmap for 2024, making it difficult to assess the project's future prospects.
Despite this and the relative risks regarding the prospects, experts from CryptoDaily assess LEVER as one of the tokens with high potential due to an experienced team, support from large and well-known funds like ParaFi Capital, XRP Capital and IOST, as well as the presence of a competitive platform with advanced functionality compared to most trading and credit blockchain protocols.
