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Borrow Against Uniswap V3 LP Tokens
In Uniswap's v3, a new type of LP framework was launched in which positions are represented as ERC-721 tokens. Uniswap v3 LP are unique in that they specify for each pool of two assets:
- A price range in which they want their liquidity to be active i.e. accumulating fees
- A fee tier, currently limited to either 0.05%, 0.01%, 0.3% or 1%
By allowing LPs to select the price range, Uniswap achieves more efficient liquidity and allows LPs to more carefully maximize yield. By providing liquidity within a range, the LPs are essentially betting that the price of the asset pair will remain within a certain price range as they will get paid fees based on trading volume within the range.
As interest bearing tokens, Uniswap v3 LP is well-suited to serve as collateral in on-chain lending protocols like ParaSpace. Within ParaSpace you can access credits by supplying and collateralizing your UniV3 LP tokens. You can use those credits to borrow tokens including the tokens that make up that LP position while still accruing fees and claiming those fees through the ParaSpace dApp. The amount of credits you receive from the Uniswap LP position is based on the price of the position * lowest LTV of the two assets in the pool.
You can increase the liquidity in your UniV3 LP directly on the ParaSpace dApp so long as you have one or both of the assets in the pool in your wallet balance. You can do this in a leveraged fashion by borrowing those assets from the credits you receive for supplying the Uniswap v3 LP position.
We price uniswap v3 LP tokens by pulling the balances of each coin from the LP contract, then using Chainlink oracle to establish the value of each of those.
By leveraging your position, you will need to offset the borrowed interest you pay with the interest income from fees you make from Uniswap trading activity. Make sure to monitor the expected fee interest rate and compare that with the amount of borrowed interest you are paying on ParaSpace.
We will support the following pools:
- USDC/ETH - 0.05%, 0.3%
- USDC/USDT- 0.01%
- WBTC/USDC - 0.3%
- ETH/USDT - 0.05%, 0.3%
- WBTC/ETH - 0.05%, 0.3%
- DAI/ETH - 0.05%, 0.3%
- DAI/USDC - 0.01%
- APE/ETH - 0.3%