Archimedes is a cutting-edge lending and borrowing marketplace built on Decentralized Exchanges that:
- Attracts lenders’ capital by offering top of market native sustainable real yield on its liquidity pool
- Allows users to create leveraged positions of up to 10x on yield-bearing stablecoins via innovative mechanisms and great user experience
- Enables partner protocols to attract sustainable long-term capital
As an open source software, Archimedes aims to broaden the appeal of DeFi, improving capital efficiency and creating more favorable conditions for institutional and retail investors alike.
Notably, the platform is fully collateralized and engineered to bring groundbreaking solutions that generate relatively high yet realistic returns while mitigating risks like position liquidation and market volatility. Archimedes brings innovation to how borrowers buy access to leverage and how emissions are designed to reward lenders, while it is built to reduce user risks by working only with battle tested partners and by choosing to not launch with a liquidation mechanism.
At the core of this effort are unique tokenomics designed to attract long term liquidity and to reduce sell pressure on its utility and governance token, supporting a robust platform that delivers DeFi differently. Let’s start by taking a closer look at the two native tokens that power the Archimedes ecosystem.
Why Use Archimedes Finance?
Unlike many other DeFi borrowing and lending protocols, Archimedes Finance takes a qualitative approach to generate benefits for both borrowers and lenders.
Borrower Benefits
- Top of market Stablecoin APY: Borrowers can access up to 10x leverage to amplify the return on interest-bearing stablecoins.
- Relative Low risk: Low liquidation risk as Archimedes chooses to launch without a liquidation mechanism; Archimedes also only supports “blue chip”, highest quality partners
- Sustained APY: Although the APY on leveraged assets is variable across the entire market, high leverage helps sustain high yields.
- Automated “set and forget”: With Archimedes, there’s no need to manage the position; no manual compounding or switching positions is necessary.
- Tradability: Because each position is wrapped as an NFT, holders can trade it without unwinding.
- Predictable Innovative Fee Model: Leverage takers or borrowers pay all their fees upfront via Archimedes’ bidding mechanism via an Auction, meaning there are never any variable interest payments to track and the market will set price for leverage.
Lender Benefit: Real Yield and Cutting-edge Dynamic Emission
As a liquidity provider you can get 1-5% returns on your stablecoins at AAVE or Compound, or you can choose to provide liquidity to non-stablecoin pools at a much higher risk with high risk of impermanent loss.
As many know, liquidity pool APYs fluctuate constantly based on supply and demand, mostly coming from CRV emissions and not from real economic activity. As a result, investors often “pool hop,” moving their capital from pools with lower or falling APYs to whatever better alternatives are available. This takes a lot of effort and could pose a relatively big risk if jumping to new protocols.
Archimedes aims to help change this narrative using what is known as “Real Yield.” This term is defined as the reward lenders receive as a share of protocol revenue as coming from real economic activity. If executed properly, Real Yield can help address expensive pool hopping, harvesting, and compounding for investors by avoiding all the hassle and gas fees, all for a smaller protocol fee.
In addition to Real Yield, Archimedes brings a novel solution to governance token emissions to further reward LPs. Archimedes’ emission is designed to avoid overinflation and so that ARCH emission volume varies to counterbalance the ARCH price variations so that APYs are sustainable and designed for the long term.
Partner Benefit: Long-term Capital
As a result, Archimedes’ solutions are designed to allow Liquidity Providers to stay in a single pool as it’s designed to enable sustainable top of market APYs. This greatly benefits the pools initiated by Archimedes and its partners, making TVL more sustainable for both sides.
The Archimedes Ecosystem
The Archimedes protocol issues lvUSD tokens. This over-collateralized, USD-pegged stablecoin is backed by interest-bearing tokens and is the “oil” of its Leverage Engine.
In addition to the lvUSD stablecoin, there is Archimedes’ governance and utility token: ARCH.
ARCH plays a vital role in the Archimedes ecosystem and will be facilitating access to leverage.
Let’s take a closer look at how these tokens power the Archimedes protocol.
How to use Arch to Create Leverage
At Archimedes, borrowing means building a Leverage position, which is the action of borrowing funds to increase a position’s size and, thus, the return. Like many decentralized lending protocols, Archimedes requires collateral to issue loans. However, unlike other platforms, Archimedes currently does not have a liquidation mechanism — here’s how it works instead:
Step 1: Bidding with ARCH for access to leverage
First, the user needs to buy access to leverage via Archimedes’ bidding mechanism. Leverage cost is measured in how many ARCH tokens buy the equivalent of $1 of leverage, but this relationship will depend on how much the market is willing to pay for Archimedes’ leverage. In this bidding mechanism for leverage, the Archimedes team will announce every time a leverage round is available. The protocol defines an initial leverage price, which reduces over time until a floor price is reached or all leverage is taken, whichever happens first. So, since leverage is scarce, users waiting too long may miss the opportunity.
When borrowers buy leverage, they’re in fact borrowing appreciating OUSD stablecoins from Curve pools via Archimedes. If OUSD interest goes up, borrowers can generate a higher APY position. This means users will bid in the Auction based on what they think the OUSD yield will be worth in the future.
These ARCH tokens are then used to compensate lenders, Archimedes’ Curve liquidity providers (LPs). As a result, the APY for these lenders is influenced by how many borrowers leverage their position and by the cost of leverage.
This idea is super innovative and revolutionary – we love what Archimedes is building.
Step 2: Provide Collateral
In addition to ARCH, borrowers must also provide collateral in the form of Origin Dollar tokens (OUSD). For example, with $10,000 worth of OUSD as collateral, investors can borrow up to $90,000 to achieve 10x leverage.
Step 3: Create a Position
By creating a leveraged position, borrowers hope to earn up to 10x yield (or a whopping 50% APY with current market conditions) on interest-bearing stablecoins. Behind the scenes, the Archimedes protocol handles the creation of every position, representing each as an NFT.
Step 4: Unwind, Sell or Renew
All accrued interest is “saved” under this NFT, meaning each unwound position generates the original principal plus any profit earned from interest. And because each leverage position is wrapped as an NFT, holders can trade them without unwinding the position.
These NFTs also serve as an on-ramp to the DeFi ecosystem for those interested in novel digital assets, or traditional Centralized Finance (CeFi) users who want exposure to yield-generating utility tokens and to the transparency of DeFi.
That way, the position owners can choose to unwind, sell the NFT, or, after about 12 months when the position expires, they can collect their proceeds or renew the position if and when more leverage is available.
We strongly believe in the product as it is solving one of the biggest pain points for protocols in DeFI: to secure long-term TVL. “Curve wars” or bribing via Votium have low ROI for protocols who are striving for liquidity and governance token emissions are mostly unsustainable. Thus Archimedes can help partner protocols get liquidity for relatively long periods and those partners would be willing to pay a lot for it.
How Lending Works
The Archimedes protocol is built for lenders looking for stable, relatively low-risk for top of market returns. As mentioned, those that provide liquidity to the Archimedes 3CRV/lvUSD pool lend it to borrowers, supporting leveraged stablecoin positions. Borrowers or leverage takers borrow funds for a limited timeframe, paying all interest up front in ARCH tokens. A performance fee is also charged on top of each leveraged position. Together, these fees and the cutting-edge dynamic ARCH emissions determine the APY for lenders.
What Archimedes Does For DeFi
As a state-of-the-art unforked protocol, Archimedes is breaking with the DeFi status quo by adding an option for leverage without liquidation mechanisms, offering up to 10x leverage, providing a novel and unprecedented utility to its governance token, rewarding lenders with Real Yield and a leading-edge dynamic emission design, and integrating the use of interest-bearing stablecoins. These features allow Archimedes to deploy a solution that addresses the sustainability problem within liquidity pools, which typically start with high yields and quickly dry up with time.
By supporting only some proven projects and applying its innovative mechanisms and designs, Archimedes is positioning itself to thrive in any market scenario, bullish or bearish. Its mechanism is built thinking of the long term relationship with Liquidity Providers and partners while enabling access to leverage to scale.
Furthermore, Archimedes builds its solutions for everyone. Its user interface and experience are designed to drive adoption for DeFi and non-DeFi users alike.
Despite the innovative spin of the product, it’s important to note that Archimedes is an experimental protocol that carries significant smart contract risk, economic model risk, and asset exposure risk. In addition, DeFi borrowing and lending is often complex, meaning users should remain diligent when making investment decisions.
However, while there are significant risks to consider, it’s worth noting that CeFi platforms have struggled the most amidst recent market volatility. This reality suggests that DeFi protocols like Archimedes work transparently as they should, and are poised to perform even better as they mature.
The project is launching soon and you can visit their website at https://archimedesfi.com/ to read more about the product.