What
The functionality allows users to leverage their positions on assets (e.g., ETH) by looping through lending protocols (ZkLend, Nostra) and automated market makers (AMMs). Users deposit collateral into a lending protocol, borrow stablecoins, trade on AMMs, and repeat this loop to increase their holdings. The process allows for up to 5x leverage, providing more utility and liquidity to the DeFi ecosystem.
Why
The spot leveraging concept fills a gap in the Starknet ecosystem by enabling users to amplify their positions without the need for perpetual contracts. This improves liquidity and utility for decentralized finance (DeFi) platforms on Starknet, providing a tool that is currently unavailable but highly demanded by users and protocols like ZkLend and Nostra. It allows for stable, long-term leveraged positions at lower costs and risk, which are essential for users aiming to increase exposure without facing the volatility of perpetual contracts.
How
- Deposit Collateral: Users deposit assets (e.g., ETH) into a lending protocol like ZkLend or Nostra - interaction with a smart contract on Starknet
- Borrow Stablecoins: Users borrow stablecoins (e.g., USDC) against their deposited collateral - The smart contract on Starknet allows users to borrow stablecoins
- Trading on AMMs: Borrowed stablecoins are swapped for more ETH or the initial asset via AMMs (Starknet-based).
- Re-Deposit and Re-Borrow: The newly acquired ETH is re-deposited as additional collateral to borrow more stablecoins.
- Repeating the Loop: This loop repeats, increasing the user's leverage until they reach the desired level or the borrowing limit.