Introduction to Leveraged Yield Farming

In the world of DeFi, high APY (Annual Percentage Yield) always grabs attention, and even though DeFi yields outshine traditional finance, users are constantly in pursuit of higher profits by shifting from one platform to another. This is where leveraged yield farming, with its superior capital efficiency, shines for seasoned DeFi participants.

Leveraged yield farming is the process of borrowing funds to amplify your yield farming position. In simpler terms, if yield farming without leverage gives you Y returns, yield farming with 5X leverage gives you 5Y returns. However, leveraging isn't free; you pay borrowing interest for the privilege of using borrowed funds. Where leveraged yield farming excels is in capital efficiency, enabling you to borrow more than your collateral.

In many DeFi lending platforms, a significant issue is low capital efficiency. For instance, if you collateralize $1, you might only be able to borrow 50 cents, reducing your potential earnings. This constraint doesn't apply to leveraged yield farming.

Leveraged yield farming allows undercollateralized loans, increasing utilization rates. Higher utilization rates mean not only higher APYs for farmers but also for lenders. The undercollateralized model boosts borrowing interest rates paid to lenders. Leveraged yield farming platforms like Vicuna Finance will attract substantial TVL (Total Value Locked) due to these advantages.

The main benefits are:

• Increased yield potential: Earnings in leveraged yield farming come from yield farming rewards, trading fees, and additional token rewards, offset by borrowing interest

• Capital Efficiency: Much Higher due to looping in leveraged yield farming compared to traditional DeFi lending platforms, resulting in more competitive APYs for both farmers and lenders.

• Additional rewards: Earnings in leveraged yield farming come from yield farming rewards, trading fees, and additional token rewards, offset by borrowing interest.

• Very easy to use: Borrow and lend with a intuitive UI and a few clicks.

• Introduction of CL-AMM LYF Farms: CL-AMM Vaults offer auto-managed liquidity and dynamic rebalancing, automatically optimizing positions and yields based on real-time market conditions.