Leveraged Farming

Leveraged farming allows users to deposit borrowed assets in a yield-generating vault (represented by a ERC20 or ERC-4626 token) and deposit the position as collateral in the same transaction.

Example

A "LSD" pool supports rETH with collateral factor 0.95 and ETH with collateral factor 1.0.

The exchange rate is 1 rETH = 1.05 ETH

A user deposits 1 rETH as collateral. He then uses leveraged farming to:

• borrows 5 ETH

• deposit the 5 ETH in rocketpool an obtain 4,76 rETH

• deposits 4,76 rETH as collateral in the pool

His position is now 5,76 rETH of collateral, 5 ETH of debt. His health factor is 1,0944 (5.76 * 1 * 0.95/5)