Leveraged Yield Farming

This powerful strategy allows users to deploy capital more efficiently by using LP tokens as collateral, amplifying exposure to yield opportunities through leverage.

Core Concept

Liquidity provision is foundational to DeFi. When users supply liquidity to a pool on Astroport, they receive LP tokens, which represent their share of the pool. These tokens accrue trading fees and are often incentivized through emissions programs and third-party rewards.

To enhance capital efficiency, Mars Protocol has whitelisted Astroport LP tokens as valid collateral within its Credit Accounts. Users can use these tokens to:

• Borrow assets to enter LP positions

• Leverage existing positions for higher yield

• Optimize collateral deployment across the broader Mars ecosystem

How Leveraged Yield Farming Works

Users can employ various strategies to join Astroport liquidity pools with leverage:

1. Borrow the underlying LP assets (e.g., USDC and NTRN) directly

2. Borrow a different asset (e.g., WETH.axl) and use Astroport’s mechanisms to enter the pool via single-sided liquidity provisioning

The borrowed capital is automatically swapped (if needed) and used to provide liquidity, increasing the user's exposure to LP rewards while maintaining a single, consolidated Credit Account.

Thanks to Mars’ cross-collateralized architecture, users are not restricted to matching the pool’s native asset pair. This flexibility significantly reduces borrow costs, simplifies transactions, and increases access to yield farming strategies.

Astroport Integration on Neutron

Mars Protocol’s leveraged yield farming is currently live on Neutron through its integration with Astroport. This integration offers several key advantages:

Key Benefits:

• Custom Ratio Provisioning: Unlike traditional AMMs (e.g., Apollo Vaults on Osmosis), Astroport allows asymmetric liquidity deposits, meaning users can supply liquidity in any asset ratio—or even single-sided.

• Reduced Transaction Overhead: No additional swap transaction is needed when supplying in a custom ratio. This results in lower gas costs and improved capital efficiency.

• Protocol Incentives: Astroport supports LP incentives through:

  • ASTRO token emissions, driven by governance votes

  • Third-party rewards, attracting deeper liquidity to selected pools

Strategy Examples

1. Borrowing Underlying LP Assets

A user borrows USDC and NTRN to enter the USDC-NTRN LP pool:

• Borrow Rates:

  • USDC: 8.00%

  • NTRN: 4.15%

• LP APY: 26.05%

• Initial Account APY: 3.91%

• Post-Strategy Account APY: 9.26%

By borrowing both LP assets, the user fully leverages the LP position and captures enhanced yield through the pool’s incentives.

2. Borrow Rate Optimization Strategy

Instead of borrowing the native LP assets, the user borrows WETH.axl, which has a lower borrow rate of 2.83%. Upon entering the LP:

• The borrowed WETH.axl is automatically swapped into one of the LP assets.

• Single-sided liquidity provisioning is used to minimize transaction complexity and gas usage.

• LP APY: 26.05%

• Initial Account APY: 3.91%

• Post-Strategy Account APY: 10.16%

This strategy improves yield performance over the previous example by optimizing for the lowest borrow rate, demonstrating the flexibility and capital efficiency enabled by Mars Protocol’s integration with Astroport.

Summary

Leveraged Yield Farming on Mars Protocol combines the power of on-chain leverage with efficient liquidity provisioning and incentive farming. By integrating directly with Astroport, Mars offers a seamless and flexible path to optimized yield strategies - backed by a robust risk and collateral model.

If LP asset pairs are highly correlated, they may also qualify for High Leverage Strategies (HLS), enabling even greater capital efficiency.

Tutorials