Introducing LP Finance, Interest-Free Borrowing Protocol on Solana

LP Finance
4 min readFeb 1, 2022

DeFi on Solana has grown rapidly since 2021 regarding Solana’s scalability dominance, which led users to migrate from Ethereum. Solana has grown nearly 3000% since last year, and Solana DeFi has grown from $156M TVL to ATH $15B in less than 9 months period, which proved the potential of Solana Network.

What is LP Finance?

LP Finance started with an idea to bring new concepts to the DeFi world. At some period, DeFi projects started to lose uniqueness, with the identical AMM model, staking, and borrowing. LP Finance came out with an evolved method of original protocols and will allow users to access better services.

LP Finance provides five flagship services:

  • Interest-Free Borrowing
  • Short Selling
  • Token Auction
  • Liquidity Pool 2.0
  • Mobile Payment App

The services are provided under our CBS Protocol, which generates Collateral Backed Stablecoins.

CBS Protocol

CBS might be an unfamiliar term. It is an abbreviation of “Collateral Backed Stablecoin”. Basically, any tokens that are backed by overcollateralized assets and are pegged to the value of any asset is CBS.

On LP Finance, users can mint five types of CBS.

  • lpUSD: United States Dollar Pegged Stablecoin
  • lpCAD: Canadian Dollar Pegged Stablecoin
  • lpBTC: Bitcoin Pegged Stablecoin
  • lpETH: Ethereum Pegged Stablecoin
  • lpSOL: Solana Pegged Stablecoin

Advancing CBS, there are a lot of great things we can do. Let’s deep dive into our primary service; Interest-Free Borrowing.

Interest-Free Borrowing

Users can borrow CBS by depositing collateral tokens. Over 20 tokens can be used as collateral, which is expected to bring more exposure to users on Solana.

After depositing tokens as collateral, 0.1% one-time fee will be charged and users will be able to borrow CBS.

Exclusively for LP Finance Token (LPFi) deposited as collateral will earn staking rewards while borrowing.

Short Selling

Short selling service is not common on Solana DeFi. Users can borrow crypto, and sell to create short positions, but it is hard to manage the investment and is inefficient.

On LP Finance, users can short sell BTC, ETH, and SOL indirectly. lpBTC, lpETH, and lpSOL will be minted and sold immediately when user opens a short position. Additionally, user-friendly dashboard will enhance the user experience when managing portfolios.

Short selling will be a good strategy for hedging the investment in bear markets. Users can leverage their position up to 20x, without paying multiple deposit fees, which normally occurs when the position is leveraged over epochs.

Token Auction

LP Finance’s liquidation model is different from other lending protocols. Instead of providing liquidator rewards on a first-come-first-serve basis, every user who deposits lpUSD to the auction pool will be earning compounded rewards. Deposited lpUSD will be used for liquidation automatically.

Liquidity Pool 2.0

Liquidity pool provides a method to determine the value of tokens and allow users to swap tokens. Traditionally, liquidity providers earn fees from this process.

LP Finance is suggesting an enhanced version of liquidity pool. Liquidity Pool 2.0 applies to our stable pairs, which are

  • lpBTC-BTC
  • lpETH-ETH
  • lpSOL-SOL

Note that the pairs are between CBS and its corresponding pegged token. Therefore, we do not want the values to diverge. To achieve this, every time a short position is liquidated, a liquidator reward will be provided to the LP Providers, and the reward will be distributed at a certain ratio to balance the value of CBS and the corresponding pegged token.

LP Providers for the pairs listed above will earn swap fees and liquidator rewards at the same time without risking impermanent loss.

Mobile Payment App

DeFi and cryptocurrencies are great, but their limited utility is a big wall to overcome. LP Finance offers a centralized mobile payment app, where users can use lpCAD and lpUSD for payment services in selected stores.

The primary reason why merchants avoid crypto payment is that they are not familiar with cryptocurrencies, and it is hard to withdraw funds in fiat currencies.

On LP Finance mobile payment app, merchants will be able to accept payments at near-to-zero fees and withdraw an equivalent amount of funds immediately in fiat currencies through the app.

All in one — LP Finance

LP Finance provides services advancing stablecoins, which we believe is the core component of DeFi.

Unlock the potential of your liquidity. All in one - LP Finance.

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