Warp Finance intends to improve an already revolutionary process: liquidity providing. Warp accomplishes this goal by providing a new and cutting-edge use case for the liquidity provisioning (LP) tokens earned from liquidity providing, which is collateralizing stablecoin loans. In this manner, Warp unlocks additional benefits of LP tokens for DeFi traders.
While liquidity mining has vastly improved the decentralized finance (DeFi) field by providing liquidity to token markets, as with any nascent industry, it is still far from perfect. Namely, the only real use case for the LP tokens memorializing the liquidity providing process is distributing users’ shares of the transaction fees that accumulate during the period for which they are providing liquidity.
Such a restricted use is truly a shame, as there is a massive amount of LP tokens in existence, all of which have limited utility. On Uniswap alone, there is approximately $1.3 billion in total value locked (TVL), meaning that there are LP tokens in existence that correspond to this value.
In order to provide additional benefits to DeFi traders who provide liquidity, Warp Finance was created. The Warp platform allows users to unlock additional value from their LP tokens by using them to collateralize stablecoin loans. The process for this is quite simple, and works as follows:
- Users deposit LP tokens onto the Warp Platform as collateral. Initially, Warp will accept LP tokens from Uniswap.
- Users will receive a stablecoin loan at a rate of 150% overcollateralization.
The benefits of this innovative platform are multifold, stemming from the fact that Warp users gain leverage on their LP tokens. These users will be able to continue to restake/farm the stablecoins received from their loans while still being able to earn the 0.3% rewards from Uniswap for liquidity providing, and receiving their LP tokens back when the loan is repaid. Effectively, Warp users are able to “level up” their LP tokens to provide them with additional value and use.
DeFi traders further benefit from Warp’s innovative design since the stablecoin loans issued by Warp might effectively have a negative interest rate; since users’ LP tokens will be staked for the duration of their loan, and this staking will earn a yield, this could cancel out the interest rate on their loans and even provide a return paid out users over what is deducted for interest.
Thus, Warp Finance offers an opportunity to further revolutionize the liquidity providing process, enabling DeFi traders to unlock additional benefits from the LP tokens they likely already possess.
For more information about Warp Finance and how it is revolutionizing LP rewards, visit their website at warp.finance.