I found this really interesting idea that I came across studying Impermax Finance Project. Basically, from what I understand they enable yield farmers to use leverage to increase their yields with the benefit of increasing liquidity in the system and would allow for better prices for traders. This as a result would lock up more SOV on emissions. Also, this should increase yields on the platfrom for those lending out XUSD, rBTC, rETH, etc.
“Impermax is a DeFi lending platform that lets Uniswap liquidity providers use their LP tokens as collateral for permissionless loans. This potentially unlocks billions of dollars locked in LP token contracts that are otherwise unusable.
These LP token backed loans can be used for trading, staking, or other purposes, but the most interesting case is to use loans to increase one’s liquidity providing position. This allows yield farmers to multiply returns many times without adding any additional funds of their own. This is called leveraged yield farming, and it’s what Impermax is designed for. A leveraged yield farmer can multiply their Uniswap yields up to 20 times, (although leverage comes with increased risk of impermanant loss.)”
-Blog post: What Is Yield Leverage, And Why Is It Important To DeFi? | by Impermax Finance | Medium
Website link: https://www.impermax.finance or impermax.finance
I likely have completely missed something as it seems too good to be true but looks like a win-win for traders, liquidity providers and SOV stakers and holders. I guess it just depends how much risk Liquidity Providers are willing to take even if sovryn limits leverage to yield farmers to 2-3x, that could double the amount of liquidity in the system.
Please comment what you think. Really like to see what Sovryn Developers thinks of this idea, who knows this may become a SIP proposal. I am not technical person so if its stupid idea forgive me .