# Table of Contents - [Peapods Overview | Peapods Finance](#peapods-overview-peapods-finance) - [Revenue Share | Peapods Finance](#revenue-share-peapods-finance) - [Protocol Revenue | Peapods Finance](#protocol-revenue-peapods-finance) - [vlPEAS (Governance) | Peapods Finance](#vlpeas-governance-peapods-finance) - [PEAS Tokenomics | Peapods Finance](#peas-tokenomics-peapods-finance) - [vlPEAS Treasury | Peapods Finance](#vlpeas-treasury-peapods-finance) - [Core Principles | Peapods Finance](#core-principles-peapods-finance) - [Pod Fees | Peapods Finance](#pod-fees-peapods-finance) - [Pods | Peapods Finance](#pods-peapods-finance) - [Amplified Volatility | Peapods Finance](#amplified-volatility-peapods-finance) - [Volatility Farming | Peapods Finance](#volatility-farming-peapods-finance) - [Collateral Backing Ratio (CBR) | Peapods Finance](#collateral-backing-ratio-cbr-peapods-finance) - [Risk Ownership (Borrowers) | Peapods Finance](#risk-ownership-borrowers-peapods-finance) - [Arbitrage | Peapods Finance](#arbitrage-peapods-finance) - [Leveraged Volatility Farming (LVF) | Peapods Finance](#leveraged-volatility-farming-lvf-peapods-finance) - [Core Concepts | Peapods Finance](#core-concepts-peapods-finance) - [Indicative Pod Settings | Peapods Finance](#indicative-pod-settings-peapods-finance) - [Implications for Scaling | Peapods Finance](#implications-for-scaling-peapods-finance) - [Position Lifecycle and Internal Mechanics | Peapods Finance](#position-lifecycle-and-internal-mechanics-peapods-finance) - [Net Interest Implications (LVF) | Peapods Finance](#net-interest-implications-lvf-peapods-finance) - [How a Self-Lending Position is Created | Peapods Finance](#how-a-self-lending-position-is-created-peapods-finance) - [Dynamic Liquidity | Peapods Finance](#dynamic-liquidity-peapods-finance) - [Self-lending and Proof of Demand (LVF) | Peapods Finance](#self-lending-and-proof-of-demand-lvf-peapods-finance) - [Metavaults (LVF) | Peapods Finance](#metavaults-lvf-peapods-finance) - [Yield Source | Peapods Finance](#yield-source-peapods-finance) - [Yield Sensitivity and Break-Even Threshold | Peapods Finance](#yield-sensitivity-and-break-even-threshold-peapods-finance) - [Proof of Demand (PoD) Mechanics | Peapods Finance](#proof-of-demand-pod-mechanics-peapods-finance) - [Withdrawing Liquidity When Utilization Reaches 100% | Peapods Finance](#withdrawing-liquidity-when-utilization-reaches-100-peapods-finance) - [Interest Allocation: Case Study | Peapods Finance](#interest-allocation-case-study-peapods-finance) - [Interest Rate Model | Peapods Finance](#interest-rate-model-peapods-finance) - [Metavault Mechanics | Peapods Finance](#metavault-mechanics-peapods-finance) - [APR Differential: Self-Lending vs External Lending | Peapods Finance](#apr-differential-self-lending-vs-external-lending-peapods-finance) - [LVF Yield Scenarios: Borrower Profitability | Peapods Finance](#lvf-yield-scenarios-borrower-profitability-peapods-finance) - [Liquidations (LVF) | Peapods Finance](#liquidations-lvf-peapods-finance) - [Understanding Liquidation Prices | Peapods Finance](#understanding-liquidation-prices-peapods-finance) - [Isolated Lending | Peapods Finance](#isolated-lending-peapods-finance) - [Bad Debt Buffer | Peapods Finance](#bad-debt-buffer-peapods-finance) - [Visualizing Strategy Risk | Peapods Finance](#visualizing-strategy-risk-peapods-finance) - [Liquidation Execution | Peapods Finance](#liquidation-execution-peapods-finance) - [Lending (LVF) | Peapods Finance](#lending-lvf-peapods-finance) - [Links | Peapods Finance](#links-peapods-finance) - [Required Declines to Trigger Liquidation | Peapods Finance](#required-declines-to-trigger-liquidation-peapods-finance) - [Insurance Fund (Metavaults) | Peapods Finance](#insurance-fund-metavaults-peapods-finance) - [TKN Acronyms | Peapods Finance](#tkn-acronyms-peapods-finance) - [Socials | Peapods Finance](#socials-peapods-finance) - [Technical CAs | Peapods Finance](#technical-cas-peapods-finance) - [Contract Addresses | Peapods Finance](#contract-addresses-peapods-finance) - [Audits | Peapods Finance](#audits-peapods-finance) - [Glossary | Peapods Finance](#glossary-peapods-finance) - [Common Terms | Peapods Finance](#common-terms-peapods-finance) --- # Peapods Overview | Peapods Finance ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2Flh7-us.googleusercontent.com%2FZF0FfKjl0g25LifuIu_vXLMJYH2XAwCfNSeSbI6E7vzntY5bsA44m1dFBjjBwr-uapcMi05-6u2S1Lb5Kmb_PAEbA-66QmJ8_6UJdRWjLyBH368FnspCjGefItNRRgYim3cy3F80v5qmeKN9pT4kYAM&width=768&dpr=4&quality=100&sign=5f8f6ea9&sv=2) ### [](https://docs.peapods.finance/#what-is-peapods-finance) What is Peapods Finance? Peapods Finance is a permissionless, modular decentralized finance (DeFi) protocol that allows any ERC-20 asset to become the foundation of a self-sustaining financial system. The protocol enables the creation of Vaults called “Pods” which provide depositors with a synthetic ERC-20 wrapped version of the deposited asset (pTKN). Pods unlock yield opportunities through internal protocol mechanics such as Volatility Farming, Leveraged Volatility Farming (LVF), Lending Markets, Metavaults and Governance. These primitives work together to generate organic yield from volatility and market activity, without relying on inflationary emissions. Peapods enables seamless on-chain deployment of advanced financial tooling with no permissions required. Protocols and communities can bootstrap liquidity and launch leveraged yield strategies through a fully composable and immutable infrastructure with absolutely no upfront costs. ### [](https://docs.peapods.finance/#why-peapods-exists) **Why Peapods Exists** Incentive models across most of DeFi rely on emissions through newly minted tokens which are distributed as rewards. These emissions dilute supply and inevitably decay in effectiveness, whilst devaluing the exact asset they are designed to support. Peapods has been built to eliminate dependence on these models and move DeFi towards a more sustainable incentive model. By treating volatility as a yield source, Peapods enables real, sustainable incentives. The protocol captures fees from wrapping/unwrapping assets, trading activity, and borrowing behavior. These fees are recycled back into the system, creating a compounding flywheel for protocol growth that does not require new token issuance. [NextCore Principles](https://docs.peapods.finance/peapods-overview/core-principles) Last updated 3 months ago --- # Revenue Share | Peapods Finance ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FHz61boaM1NfvWbDLjCAn%252FImage%252025-07-25%2520at%252016.09.jpeg%3Falt%3Dmedia%26token%3D005de97b-ade7-42fc-b7bd-287c000b3d7b&width=768&dpr=4&quality=100&sign=c97e341a&sv=2) Revenue allocated to buy and burn vlPEAS functions as a backing-based yield mechanism, similar to how Pod tokens (pTKN) accrue value. When vlPEAS is burned, it reduces the supply of outstanding vlPEAS while leaving the underlying PEAS untouched. As a result, each remaining vlPEAS represents a larger share of the underlying PEAS tokens. This process increases the claimable PEAS backing per vlPEAS, providing holders with non-emissive, protocol-native yield in the form of value accrual. This structure has several key properties: **Backed Yield**: vlPEAS holders earn PEAS-denominated yield as the collateral backing ratio (PEAS per vlPEAS) increases with every vlPEAS burn. **Non-Dilutive**: No new vlPEAS or PEAS are minted as the yield is derived purely from treasury growth and vlPEAS supply reduction. **Governance Aligned**: Since vlPEAS represents both voting power and yield from Treasury-assigned revenue, its value increases in tandem with protocol usage. The percentage of revenue allocated to these burns is governance-controlled, allowing vlPEAS holders to balance direct yield accrual with other strategic deployments. This system transforms vlPEAS into a PEAS-yielding governance token, where participation is rewarded through growing backing as opposed to the inflation model that is common amongst governance tokens. [PreviousvlPEAS Treasury](https://docs.peapods.finance/protocol-revenue/vlpeas-treasury) [NextPods](https://docs.peapods.finance/pods) Last updated 3 months ago --- # Protocol Revenue | Peapods Finance [](https://docs.peapods.finance/protocol-revenue#revenue-share-overview) Revenue Share Overview ---------------------------------------------------------------------------------------------------- The Peapods protocol generates revenue through LVF-related activity, with fees collected directly from market usage: Revenue Source Share Captured by Protocol Borrowing Interest 10% of all interest paid LP Yield Accrual 10% of all auto-compounded LP yield LVF Open Fee 1% of all borrowed Paired Asset LVF Close Fee 1% of pTKN returned to user Liquidation Bonus 10% of all liquidation proceeds Fees are collected in various assets and may be converted to an agreed upon asset(s) prior to being distributed to their respective destinations. [PreviousvlPEAS (Governance)](https://docs.peapods.finance/peas-tokenomics/vlpeas-governance) [NextvlPEAS Treasury](https://docs.peapods.finance/protocol-revenue/vlpeas-treasury) Last updated 1 month ago --- # vlPEAS (Governance) | Peapods Finance Peapods governance is powered by vlPEAS, a value-accruing wrapped form of the native $PEAS token. Users acquire vlPEAS by wrapping PEAS, granting them direct voting rights over protocol strategy, Metavault capital allocation, and Treasury deployment. Unlike traditional vote-escrow models, vlPEAS requires no fixed lockup period, and voting weight is determined solely by the amount of vlPEAS held. This structure enables flexible yet aligned governance participation while maintaining protocol decentralization. ### [](https://docs.peapods.finance/peas-tokenomics/vlpeas-governance#vlpeas-holders-control) **vlPEAS holders control:** **Metavault Allocations**: Electing which Pods receive liquidity and defining per-Pod allocation caps to manage systemic risk. **Treasury Management**: Deciding how vlPEAS-controlled capital is allocated—including yield strategies, buybacks, and insurance reserves. Governance actions are fully executed on-chain and are binding across all protocol modules. However, to preserve protocol safety, Peapods retains a veto right. This veto right may only be instated in instances where the team of Peapods Finance deems a vote outcome to be malicious, reckless, or harmful to protocol integrity. In these edge case scenarios, execution may be delayed or overridden. [PreviousPEAS Tokenomics](https://docs.peapods.finance/peas-tokenomics) [NextProtocol Revenue](https://docs.peapods.finance/protocol-revenue) Last updated 3 months ago --- # PEAS Tokenomics | Peapods Finance [](https://docs.peapods.finance/peas-tokenomics#token-contract) Token Contract ----------------------------------------------------------------------------------- [0x02f92800F57BCD74066F5709F1Daa1A4302Df875](https://etherscan.io/token/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) [](https://docs.peapods.finance/peas-tokenomics#initial-supply) Initial Supply ----------------------------------------------------------------------------------- 10,000,000 PEAS [](https://docs.peapods.finance/peas-tokenomics#launch-distribution) Launch Distribution --------------------------------------------------------------------------------------------- Tokens Location [44% (4,400,000)](https://app.uniswap.org/positions/v3/ethereum/623058) Uniswap 1% V3 PEAS/DAI position, $100k-$300k market cap concentration [44% (4,400,000)](https://app.uniswap.org/positions/v3/ethereum/623059) Uniswap 1% V3 PEAS/DAI position, $100k-infinity market cap concentration 12% (1,200,000) Team, distributed 6 ways fully vested _Total: 100% (10,000,000)_ [PreviousCore Concepts](https://docs.peapods.finance/peapods-overview/core-concepts) [NextvlPEAS (Governance)](https://docs.peapods.finance/peas-tokenomics/vlpeas-governance) Last updated 2 months ago --- # vlPEAS Treasury | Peapods Finance 60% of all LVF-related Protocol revenue and is allocated to the vlPEAS Treasury, which is owned and governed by vlPEAS holders. The remaining 40% is directed toward protocol operations, infrastructure costs, and growth initiatives. ### [](https://docs.peapods.finance/protocol-revenue/vlpeas-treasury#treasury-mandates) **Treasury Mandates** The vlPEAS Treasury is governed by three core requirements, ensuring consistent capital alignment and protection: Mandated Allocation Requirement **Buy & Burn $PEAS** ≥5% of total protocol revenue **Buy & Burn vlPEAS** Up to 55% of revenue (governance-adjustable) **Insurance Reserve** Maintain ≥$200,000 as a reimbursable pool for Metavault bad debt ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FHz61boaM1NfvWbDLjCAn%252FImage%252025-07-25%2520at%252016.09.jpeg%3Falt%3Dmedia%26token%3D005de97b-ade7-42fc-b7bd-287c000b3d7b&width=768&dpr=4&quality=100&sign=c97e341a&sv=2) If the Insurance Reserve ever falls below $200,000 then a minimum of 10% of all incoming revenue is redirected to refill it until the threshold is restored. Governance may vote to increase these thresholds, but they can never be lowered below $200,000 or 10% respectively. The insurance fund is to be used to mitigate scenarios upon which bad debt is incurred by a Metavault up to the total available balance of the fund, as deemed appropriate by vlPEAS votes and/or the Peapods Finance core team. This structure ensures: * vlPEAS appreciates over time through supply reduction * Treasury capital is used defensively to protect depositors * Governance maintains flexibility while respecting core safeguards * * * The vlPEAS governance and Treasury system transforms protocol participation into an aligned, value-generating flywheel through: * **No lockups,** governance weight is live and proportional to vlPEAS held * **Revenue-backed yield**, derived from real usage-based protocol revenue * **Mandatory capital flows** to buybacks, burns, and safety reserves * **Full on-chain control** by vlPEAS holders over Metavaults and vlPEAS Treasury decisions Through this structure, vlPEAS holders become both governors and beneficiaries over various aspects of the Peapods Protocol. [PreviousProtocol Revenue](https://docs.peapods.finance/protocol-revenue) [NextRevenue Share](https://docs.peapods.finance/protocol-revenue/revenue-share) Last updated 3 months ago --- # Core Principles | Peapods Finance ### [](https://docs.peapods.finance/peapods-overview/core-principles#core-principles) **Core Principles** **Sustainability** Peapods does not rely on emissions or inflationary mechanics. Yield comes exclusively from on-chain economic activity and is recycled back to participants. **Transparency** All actions, fee flows, governance decisions, interest rate changes are recorded and visible on-chain. There are no admin keys, upgradable contracts, or hidden privileges. \* \*Excluding during live beta phases **Accessibility** Anyone can turn any ERC-20 token can be turned into a yield-generating Pod via a no-code interface. There is no need for external approvals, governance votes, or technical integration. **Immutability** Core contracts are non-upgradable and cannot be paused or changed once deployed. This ensures long-term consistency and eliminates centralized failure risks. \* \*Excluding during live beta phases **Aligned Incentives** Peapods separates protocol participants into discrete roles such as traders, liquidity providers, lenders, borrowers, and governance participants. Each roles earns value from the protocol in a different way. [PreviousPeapods Overview](https://docs.peapods.finance/) [NextCore Concepts](https://docs.peapods.finance/peapods-overview/core-concepts) Last updated 3 months ago --- # Pod Fees | Peapods Finance Each Pod is configured with the following fee types: Fee Type Description Wrap Fee (e.g., 0.25%) Charged when converting TKN → pTKN Unwrap Fee (e.g., 0.5%) Charged when converting pTKN → TKN Cooldown (Optional) Users may bypass unwrap fees by waiting a predefined cooldown period AMM Buy Fee Paid when purchasing pTKN in the paired LP AMM Sell Fee Paid when selling pTKN into the paired LP All fees are routed based on a Pod-specific revenue split between LP Rewards, Partner Share and pTKN Burns. [PreviousPods](https://docs.peapods.finance/pods) [NextCollateral Backing Ratio (CBR)](https://docs.peapods.finance/pods/collateral-backing-ratio-cbr) Last updated 4 months ago --- # Pods | Peapods Finance Pods are the foundational primitive of the Peapods protocol. Each Pod accepts deposits of a base ERC-20 token (TKN) and mints a synthetic representation known as pTKN. pTKN is fully composable and can be used across multiple functions within and beyond the Peapods ecosystem: * Paired in LPs for Volatility Farming * Borrowed against via Leveraged Volatility Farming (LVF) * Held passively to accrue value from protocol revenue * Used in any external DeFi application that supports ERC-20 assets This flexibility makes pTKN both a yield-bearing asset and a modular building block for advanced strategies. [PreviousRevenue Share](https://docs.peapods.finance/protocol-revenue/revenue-share) [NextPod Fees](https://docs.peapods.finance/pods/pod-fees) Last updated 3 months ago --- # Amplified Volatility | Peapods Finance Choosing the correct pairing asset for a Pod can amplify the potential voaltility, and thus performance of a Pod. The more volatile the pTKN/Paired Asset pair, the greater the likelihood of: Price divergence from fair value (based on external market benchmarks) Arbitrage-driven interactions Fee generation from correcting these imbalances Protocols can optimize this effect by selecting counter-correlated or uncorrelated assets as pairings. For example, pairing a high-volatility DeFi token with ETH or a stablecoin amplifies price dislocations and creates recurring arbitrage windows. This impact can then be further amplified by pairing with an asset that is counter-correlated or negatively correlated with the core LP position of TKN, resulting in arbitrage not just between pTKN/TKN but also in divergences between the prices of the two paired assets. Yield is therefore a direct function of volatility, volume, and fee structure. LP returns increase linearly with system usage but can scale disproportionately during high-volatility environments. [PreviousYield Source](https://docs.peapods.finance/volatility-farming/yield-source) [NextLeveraged Volatility Farming (LVF)](https://docs.peapods.finance/leveraged-volatility-farming-lvf) Last updated 4 months ago --- # Volatility Farming | Peapods Finance Volatility Farming (VF) is a core yield-generation mechanism within the Peapods protocol, designed to monetize volatility. It enables liquidity providers (LPs) to earn yield from real economic activity, rather than relying on token emissions or inflationary incentives. The protocol captures arbitrage flows, trading activity, and pTKN interactions to provide sustainable returns for LPs. By embedding fee mechanics directly into the Pod lifecycle (e.g., wrapping, unwrapping, trading), Peapods ensures that every interaction with the Pod, routes value back to LPs. This creates an organic, non-inflationary incentive loop where Pod activity directly powers LP yield. Volatility Farming transforms liquidity provision into a strategy that benefits from price volatility, rewarding participants for enabling deep, arbitrageable markets. [PreviousIndicative Pod Settings](https://docs.peapods.finance/pods/indicative-pod-settings) [NextYield Source](https://docs.peapods.finance/volatility-farming/yield-source) Last updated 3 months ago --- # Collateral Backing Ratio (CBR) | Peapods Finance ### [](https://docs.peapods.finance/pods/collateral-backing-ratio-cbr#collateral-backing-ratio-cbr) **Collateral Backing Ratio (CBR)** Each Pod maintains a **Collateral Backing Ratio (CBR)**, which defines the amount of TKN backing each pTKN: > **CBR = TKN Balance / pTKN Supply** As Pods generate revenue through wrapping, unwrapping, trading activity, and arbitrage flows, a portion of this revenue is used to burn pTKN supply. Since the underlying TKN balance remains intact, this causes the CBR to increase over time and enables each pTKN to redeem a larger share of TKN. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FHsR35Disjz647G2bYOLf%252FImage%25206-08-25%2520at%252018.32.jpeg%3Falt%3Dmedia%26token%3D30dfb015-e2e7-4767-b09e-8c47046bdbd1&width=768&dpr=4&quality=100&sign=72453eff&sv=2) **Example:** * TKN held in Pod: **1,200** * pTKN in circulation: **1,000** * Resulting CBR: **1.2** Each pTKN is redeemable for 1.2 TKN (less applicable fees). Likewise, wrapping 1.2 TKN would mint 1 pTKN. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FZfTVU1Fp7b3eXZHZiSQo%252F240119_pp_infographics_docs_2_ptkn_vs_tkn_weight%2520change.png%3Falt%3Dmedia%26token%3D3a3fbd87-1979-404d-a721-6992cde6eda2&width=768&dpr=4&quality=100&sign=b8e505db&sv=2) > _CBR increases irreversibly and does not decline. This makes pTKN a value-accruing asset that grows in redemption value over time._ [PreviousPod Fees](https://docs.peapods.finance/pods/pod-fees) [NextArbitrage](https://docs.peapods.finance/pods/arbitrage) Last updated 3 months ago --- # Risk Ownership (Borrowers) | Peapods Finance Leveraged Volatility Farming (LVF) empowers users to amplify yield and retain directional exposure, but it also requires active oversight and responsible strategy selection. Borrowers assume full responsibility for managing their own positions. **Borrowers must actively track and manage:** * **LP Value & Directional Exposure**: LVF positions remain fully exposed to the price of the pTKN. While users benefit from upside, they are also subject to downside movements. * **Oracle Validity**: Borrowers must verify that the oracle accurately reflects the fair market value of the pTKN and paired asset, and is sourced from a liquid, manipulation-resistant market. Oracle decay (liquidity fading over time) should also be monitored. * **Utilization & Interest Rates**: Borrowing costs are determined dynamically based on lending pool utilization. High utilization can drive interest rates sharply higher, especially during periods of market stress or constrained liquidity. * **Leverage Factor**: Higher leverage increases yield potential but narrows the margin before liquidation. Borrowers should calibrate leverage to suit their personal risk tolerance. * **Liquidation Risk**: While LVF uses a self-collateralizing structure where LPs already hold 50% of their position as the debt asset, positions can still be liquidated if the Loan-to-Value ratio (LTV) exceeds 83.33%. Liquidations are partial and aim to preserve remaining collateral but may still result in complete loss of capital. * **Pod Liquidity & Market Volatility**: Illiquid or highly volatile pools may experience slippage or delayed pricing reactions, especially during fast-moving market conditions. * **Any other factors that may reasonably impact the risk profile of a borrower’s position** There are no backstops or reimbursement mechanisms in the event of misconfiguration, mismanagement, or liquidation. Borrowers must take proactive steps to monitor health ratios, review their leverage settings, and validate oracle reliability. > _This is a permissionless system. If you are not fully confident in your Pod or strategy setup, consult a Peapods contributor before deploying capital._ ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FxFrY9wOjBVyDOOzqiKSH%252FUse%2520in%2520Docs%2520%285%29.jpg%3Falt%3Dmedia%26token%3D78cbc64e-9af4-4a36-a419-1200b99248b1&width=768&dpr=4&quality=100&sign=2d3a5316&sv=2) [PreviousPosition Lifecycle and Internal Mechanics](https://docs.peapods.finance/leveraged-volatility-farming-lvf/position-lifecycle-and-internal-mechanics) [NextSelf-lending and Proof of Demand (LVF)](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf) Last updated 3 months ago --- # Arbitrage | Peapods Finance Arbitrage is the act of profiting from price discrepancies across markets. Within the Peapods system, these opportunities arise when the market price of pTKN diverges from its redemption value, which is determined by the Collateral Backing Ratio (CBR). Because pTKN is actively traded in AMM pools, its price can move independently of the amount of TKN it is redeemable for. This creates arbitrage loops that feed value back into the system. ### [](https://docs.peapods.finance/pods/arbitrage#arbitrage-routes) **Arbitrage Routes** **If pTKN is trading below its redemption value:** 1. Arbitrageurs buy discounted pTKN from the AMM pool. 2. They unwrap pTKN to receive more TKN, based on the current CBR. 3. TKN is sold externally at market price, generating a profit. **If pTKN is trading above its redemption value:** 1. Abitrageurs buy discounted TKN from the market. 2. They wrap TKN into pTKN, based on the current CBR. 3. They sell the newly minted pTKN into the AMM at the inflated price, generating a profit. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FQOreDClqmJEoU9qQrLWh%252FImage%25206-08-25%2520at%252018.30%2520%281%29.jpeg%3Falt%3Dmedia%26token%3D73fd69db-6c9a-4c61-8e0b-ed3d13d4c0d3&width=768&dpr=4&quality=100&sign=55afa700&sv=2) Each arbitrage event delivers three key outcomes: **Pod Revenue**: Buy, Sell, Wrap and unwrap fees are captured and allocated to the Pod. The rate of fees and distribution mechanics are specific to the settings of each Pod. **CBR Growth**: If a portion of Pod revenue is allocation to pTKN burns, then the CBR of the Pod will increase thus increasing the value of each pTKN relative to TKN. **Price Stability**: Arbitrage pressure pulls the AMM price of pTKN back toward its redemption value, improving capital efficiency and liquidity reliability. Arbitrage is therefore not only self-correcting—it is value-generating. It ensures that price dislocations benefit both LPs and pTKN holders, while continuously reinforcing the underlying economic loop of the Pod. [PreviousCollateral Backing Ratio (CBR)](https://docs.peapods.finance/pods/collateral-backing-ratio-cbr) [NextIndicative Pod Settings](https://docs.peapods.finance/pods/indicative-pod-settings) Last updated 3 months ago --- # Leveraged Volatility Farming (LVF) | Peapods Finance Leveraged Volatility Farming (LVF) is a capital-efficient yield amplification strategy that allows users to access enhanced LP rewards without supplying both sides of a trading pair. Users deposit pTKN, borrow the paired asset (e.g., ETH or USDC), and create a liquidity position in a pTKN/Paired Asset pool. This forms a synthetic leveraged LP position where the collateral and borrowed asset co-exist within a single unified structure. LVF uniquely enables users to obtain leveraged exposure to volatility farming rewards using a self-collateralizing position, without relying on external leverage, overcollateralization models, or emissions. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FzDESttMymI3HDUoAX0V2%252FUse%2520in%2520Docs%2520%284%29.jpg%3Falt%3Dmedia%26token%3Dfb7d08b8-4702-4db3-a7df-9d1ea4ac332c&width=768&dpr=4&quality=100&sign=dd30afb&sv=2) LVF provides numerous benefits to borrowers, including: · Access enhanced LP rewards with only one-sided exposure, no need to supply both assets · Avoid selling the underlying asset thus ensuring full exposure to pTKN is retained · Participate in high-yield liquidity provisioning with amplified exposure to VF rewards · Contribute to Pod depth and arbitrage frequency, increasing long-term pTKN value [PreviousAmplified Volatility](https://docs.peapods.finance/volatility-farming/amplified-volatility) [NextPosition Lifecycle and Internal Mechanics](https://docs.peapods.finance/leveraged-volatility-farming-lvf/position-lifecycle-and-internal-mechanics) Last updated 3 months ago --- # Core Concepts | Peapods Finance Peapods Finance is built upon a modular suite of DeFi primitives that collectively enable any ERC-20 token to serve as the base layer for yield generation, liquidity provisioning, and governance. These components operate permissionlessly, without emissions, and without the need for centralized intermediaries. Each module can be used independently or in combination to create self-sustaining financial ecosystems around any asset. ### [](https://docs.peapods.finance/peapods-overview/core-concepts#core-components) **Core Components** **Pods** Smart vaults that wrap base tokens (TKN) into synthetic tokens (pTKN). These synthetic tokens become composable, yield-bearing derivatives of their underlying asset. **Volatility Farming (VF)** A mechanism that rewards liquidity providers with real yield based on protocol fees with no emissions. Yield increases with volatility and liquidity depth. **Leveraged Volatility Farming (LVF)** A soft-leverage system that enables users create full-range liquidity positions by depositing only the pTKN side of the LP pair. Users borrow the paired asset to open amplified LP positions, increasing yield and retaining full exposure to their chosen asset. **Self-Lending & Proof of Demand (PoD)** A mechanism enabling users to bootstrap lending markets by borrowing from themselves in a flashloan-style loop, initializing utilization and demand without requiring outside liquidity. **Metavaults:** Governance-directed smart vaults that aggregate lender deposits and automatically allocate liquidity across whitelisted Pods, based on protocol-defined strategies. **vlPEAS Governance** Governance structure based on vlPEAS which allows users to vote to direct liquidity flow, approve Pod whitelisting, and earn protocol revenue. **Protocol Flywheel** A compounding feedback loop where usage generates fees, which increase LP rewards and vlPEAS revenue, leading to further adoption and deeper liquidity. Each module is fully composable with one another, enabling projects to tailor strategies and capital flows to their unique community needs or market conditions. The following sections explore each of these primitives in greater detail. [PreviousCore Principles](https://docs.peapods.finance/peapods-overview/core-principles) [NextPEAS Tokenomics](https://docs.peapods.finance/peas-tokenomics) Last updated 3 months ago --- # Indicative Pod Settings | Peapods Finance Configuration can vary depending on asset characteristics and typical price action. Below are some indicative settings based on the daily volatility of the underlying asset of a Pod. Volatility Category Wrap/Unwrap Fee Buy/Sell Fee Low Volatility (<5%) 0.2% / 0.3% <1% each Mid Volatility (5–10%) 0.5% / 1% 1–2% each High Volatility (10%+) 1% / 1.5% 2.5% each The recommendation for pTKN Burn varies depending on the intention of the Pod. A lower pTKN burn will see a greater portion of Pod revenue being supplied solely to liquidity providers, whilst a higher burn ensures a larger portion of yield for passive pTKN holders. If the goal is to incentivize a “staking” style model then a higher pTKN burn is the favorable option, or if the aim is to encourage liquidity depth then a lower pTKN burn should be applied. _Note: The greater the volume and liquidity depth of both the TKN and pTKN pools, the greater the potential performance of the Pod._ [PreviousArbitrage](https://docs.peapods.finance/pods/arbitrage) [NextVolatility Farming](https://docs.peapods.finance/volatility-farming) Last updated 4 months ago --- # Implications for Scaling | Peapods Finance Self-Lending and Proof of Demand create a new primitive for DeFi liquidity deployment that benefits all parties within the Defi ecosystem: **Long-Tail Assets:** Any ERC-20 token can become a leveraged, yield-bearing asset without needing external liquidity, governance approval, technical lift or grants. **DAOs and Treasuries:** Idle assets can be deployed into self-sustaining LP positions while simultaneously creating yield, utilization, and revenue. **Composable DeFi Stack:** Other protocols can plug into Pods and LVF vaults, bootstrapping their own demand-led liquidity layers. This model fundamentally reverses DeFi’s traditional lifecycle since demand comes first **and then** supply follows via market signals. The prevailing result of this mechanism is that emissions and incentives are not required to bootstrap a fully functioning lending market with **both supply and demand.** This represents a generalized, scalable, and fully automated solution to bootstrapping on-chain liquidity without incentives. Self-Lending and PoD unlock permissionless, bottom-up capital formation for the next generation of decentralized markets. [PreviousDynamic Liquidity](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/dynamic-liquidity) [NextNet Interest Implications (LVF)](https://docs.peapods.finance/net-interest-implications-lvf) Last updated 3 months ago --- # Position Lifecycle and Internal Mechanics | Peapods Finance ### [](https://docs.peapods.finance/leveraged-volatility-farming-lvf/position-lifecycle-and-internal-mechanics#creation-of-an-lvf-position) **Creation of an LVF Position** 1\. The user deposits pTKN into the LVF vault. 2\. The protocol borrows the equivalent value of the paired asset from the LVF lending market. 3\. The user creates a full-range LP using both pTKN and the borrowed asset. 4\. The resulting LP token is locked as collateral within the LVF vault. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FVm7f197fVl1Kc6nCkmCh%252FUse%2520in%2520Docs%2520%286%29.jpg%3Falt%3Dmedia%26token%3D2c2cda36-e07e-4ef9-b29a-b88038dd9948&width=768&dpr=4&quality=100&sign=b90710af&sv=2) ### [](https://docs.peapods.finance/leveraged-volatility-farming-lvf/position-lifecycle-and-internal-mechanics#self-collateralization) **Self-Collateralization:** Because the LP position contains equal value of both the borrower’s asset and the debt asset, the vault treats this position as self-collateralizing, bringing the collateralisation rate up to 200%. This allows for 100% capital efficiency on initial the deposit value and enables direct entry into leveraged farming without requiring any initial paired liquidity asset to be supplied. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252Faqn6dLof0oZYfA8Z38dM%252FUse%2520in%2520Docs%2520%282%29.jpg%3Falt%3Dmedia%26token%3D72f300a0-a788-4307-b162-55a3c4c6f70e&width=768&dpr=4&quality=100&sign=814da4ed&sv=2) ### [](https://docs.peapods.finance/leveraged-volatility-farming-lvf/position-lifecycle-and-internal-mechanics#liquidation-threshold) Liquidation Threshold: The liquidation threshold is set at 83.33% LTV, which corresponds to the theoretical floor at which the borrowed asset component becomes insufficient to back its own repayment. The LP token must remain above this threshold or the position is liable to be liquidated. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FrRUXrMZbeXJNh7l19EjN%252FUse%2520in%2520Docs%2520%288%29.jpg%3Falt%3Dmedia%26token%3D61fc200e-1e3f-4b11-9dba-82b15f1f3fe2&width=768&dpr=4&quality=100&sign=9573910b&sv=2) [PreviousLeveraged Volatility Farming (LVF)](https://docs.peapods.finance/leveraged-volatility-farming-lvf) [NextRisk Ownership (Borrowers)](https://docs.peapods.finance/leveraged-volatility-farming-lvf/risk-ownership-borrowers) Last updated 3 months ago --- # Net Interest Implications (LVF) | Peapods Finance All LVF borrowing on Peapods follows a standardized interest distribution model: * **90%** of interest paid by borrowers is allocated to lenders (pro-rata) * **10%** is retained by the protocol as non-emissive revenue In self-lending configurations, a borrower may also act as a supplier to the lending pool by using a flashloan-enabled loop. This entitles them to reclaim a proportional share of the lender-side interest distribution, effectively reducing their **net cost of capital**. This structure introduces a unique APR spread whereby external lenders receive the full gross yield, while self-lending borrowers pay significantly less without affecting protocol revenue or requiring emissions. This asymmetric structure introduces a number of implications which enable Peapods to uniquely provide a scenario in which both lenders and borrowers incentives are aligned, allowing both parties benefit together without subsidies or emissions. [PreviousImplications for Scaling](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/implications-for-scaling) [NextInterest Allocation: Case Study](https://docs.peapods.finance/net-interest-implications-lvf/interest-allocation-case-study) Last updated 3 months ago --- # How a Self-Lending Position is Created | Peapods Finance The self-lending lifecycle operates entirely within a single atomic transaction and interacts with multiple Peapods primitives (Pods, LVF Lending Vaults, and incentivised LP Pools): 1. **Flashloan Paired Asset** The user initiates a flashloan for the required paired asset (e.g., ETH or USDC). This mimics external capital and will be used to fund the lending pool momentarily. 2. **Supply to LVF Lending Pool** The flashloaned paired asset is deposited into the LVF lending pool associated with the target Pod. This mints a receipt token (e.g., ERC-4626 shares) representing their temporary supplier position. 3. **Wrap Base Token and Form LP** Simultaneously, the user wraps the base token (TKN) into pTKN and combines it with the receipt token to form a pTKN/Paired Asset LP. This LP is created using the incentivised AMM. 4. **Use LP as Collateral** The LP token is deposited into the LVF vault and registered as collateral for a new borrowing position. 5. **Borrow Back Paired Asset** The user borrows the same quantity of the paired asset that was initially flashloaned, using their LP as collateral. 6. **Repay Flashloan** The borrowed paired asset is used to repay the flashloan, completing the cycle. At the end of this transaction: - The user has created a valid LP-backed LVF position - The LVF lending pool is 100% utilized - No external supplier was needed - The interest rate curve is active and visible This design establishes demand-driven liquidity from zero and exposes the position to real yield accrual immediately. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FcNnlcnt249ZUdCDQAzYu%252FImage%25204-09-25%2520at%252022.06.jpeg%3Falt%3Dmedia%26token%3D90e3b5db-b4da-412e-9064-5a31c33e92a9&width=768&dpr=4&quality=100&sign=fe9b9786&sv=2) [PreviousSelf-lending and Proof of Demand (LVF)](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf) [NextProof of Demand (PoD) Mechanics](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/proof-of-demand-pod-mechanics) Last updated 2 months ago --- # Dynamic Liquidity | Peapods Finance Self-Lending Pods introduce a fully autonomous liquidity model where utilization, interest rates, and price movement interact to determine both the cost and availability of capital without the need for external rebalancing or manual adjustments. This system enables highly efficient, soft-leveraged positions that respond fluidly to real market conditions. * * * ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/dynamic-liquidity#utilization-responsive-liquidity-behavior) Utilization-Responsive Liquidity Behavior At deployment, a Self-Lending Pod is initialized at 100% utilization, simulating a fully borrowed lending market and forming a single-sided LP position. This configuration creates a liquidity curve that extends from the current price upward, enabling full directional exposure to the Pod asset (pTKN). As the system evolves, utilization dynamically adjusts in response to external market activity: **When pTKN price increases**: Arbitrageurs inject paired asset capital to capture profit. This reduces utilization, which lowers interest rates and makes borrowing more affordable. **When pTKN price declines**: Arbitrage becomes restricted due to the absence of paired capital. However, rising interest rates incentivize lenders to supply funds. This new liquidity enables downside arbitrage and gradually reduces utilization and borrowing costs. Utilization effectively becomes the system’s real-time signal, governing both the activation of liquidity ranges and the cost of borrowing—ensuring capital flows when and where it’s needed, without emissions or manual adjustments. * * * ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/dynamic-liquidity#automated-liquidity-range-management) Automated Liquidity Range Management Self-Lending Pods eliminate the complexity and manual upkeep typically associated with concentrated liquidity models like Uniswap v3. Instead of requiring users to manage price bands or reposition liquidity, range logic is embedded directly into the protocol’s interest rate model. High utilization acts as a signal that liquidity is “out of range,” which increases the interest rate for the lending pair. This incentivizes lenders to supply capital to restore balance. Conversely, when utilization drops, it reflects that liquidity is “in range,” resulting in lower borrowing costs and more active capital circulation. Because all Pods operate using full-range AMM infrastructure (x \* y = k), liquidity is always available and tradable, even during extreme price movements. This architecture removes the need for rebalancing and prevents the realization of impermanent loss, which is common in concentrated liquidity strategies. The result is a system that is easier to use, more capital efficient, more resilient under volatile conditions and void of the risk of realizing losses through rebalancing activities. ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/dynamic-liquidity#interest-rate-responsiveness-and-position-management) Interest Rate Responsiveness and Position Management Leverage and liquidation thresholds in Peapods are initialized when a position is created, based on the amount of borrowed capital relative to deposited collateral. However, because positions are fully self-managed, users can adjust their leverage over time by adding collateral, repaying debt, or overborrowing to increase exposure. While these structural parameters define liquidation risk, the ongoing cost of maintaining a position is governed by the protocol’s dynamic interest rate model. As utilization increases, interest rates rise and borrowing becomes more expensive. When arbitrageurs or lenders supply capital, utilization falls, reducing interest rates and easing the cost of borrowing. This responsiveness ensures that borrowers are only charged a premium when liquidity is scarce. When supply is sufficient, borrowing becomes more affordable, enhancing the sustainability of leveraged positions. The result is a flexible system where users can actively manage both their exposure and their cost over time. [PreviousProof of Demand (PoD) Mechanics](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/proof-of-demand-pod-mechanics) [NextImplications for Scaling](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/implications-for-scaling) Last updated 3 months ago --- # Self-lending and Proof of Demand (LVF) | Peapods Finance ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf#the-problem) **The Problem** In traditional DeFi lending systems, a market cannot form until liquidity is provided by a lender. This supply-first architecture creates a “cold-start” problem, particularly for long-tail or newly launched assets, where borrowing interest may exist but is unable to manifest. Without initial capital, interest rates remain flatlined, no revenue is generated, and no market signal emerges for potential suppliers. ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf#the-solution) **The Solution** Peapods introduces a novel mechanism—Self-Lending—paired with a signaling framework known as Proof of Demand (PoD). These components allow a borrower to simulate both sides of a lending market in a single atomic transaction. By flashloaning the paired asset, momentarily supplying it, and then borrowing it back against a collateralized LP, the user triggers 100% utilization. This serves as an on-chain signal to external capital: yield exists here, and capital is needed. The process is: - Fully collateralized - Conducted in a single transaction - Permissionless and non-emissive The result is a market that can emerge spontaneously from user demand—without coordination, external incentives, or prior liquidity. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXefNMaH1vbNobbckVUpdETzM247YIkCTt8Kzqy624oX05VwTPAnNhIPUfdsBZ7VroUNBKNpIsgWt8cCLYlAa1pI3SOyEH1x53PmChICjEbXId_CvUWypyKYJCxaMO6Th6lNOKyPUw%3Fkey%3DoVnJG6yg0b50enB0xugTMw&width=768&dpr=4&quality=100&sign=29fed224&sv=2) [PreviousRisk Ownership (Borrowers)](https://docs.peapods.finance/leveraged-volatility-farming-lvf/risk-ownership-borrowers) [NextHow a Self-Lending Position is Created](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/how-a-self-lending-position-is-created) Last updated 3 months ago --- # Metavaults (LVF) | Peapods Finance Metavaults function as decentralized, trustless liquidity routers which automate capital allocation while maintaining structural safeguards and optimizing yield for its suppliers. Metavaults are asset-specific (e.g., ETH, USDC) smart contracts that aggregate deposits and deploy them across LVF lending markets based on governance-defined parameters. Instead of requiring users to allocate capital manually to individual Pods, Metavaults automate this process by routing liquidity dynamically to the most capital-efficient and high-yielding opportunities. All allocations are made to whitelisted Pods, as voted on by vlPEAS holders\*, who also define allocation caps and rebalancing schedules. Capital flows as follows: * **Lender → Metavault** * **Metavault → Lending Pair** * **Lending Pair → LVF Borrower** * **Borrower → LP Creation** (using their own pTKN + borrowed capital) * **Interest → Metavault** (yield accrues from borrower payments) This system ensures efficient liquidity deployment, passive yield generation, and protocol-wide yield optimization. Governance plays a critical role, with vlPEAS holders controlling which Pods receive allocations, maximum caps per Pod, and enforcing segmentation of risk across the vault portfolio. Voting outcomes are codified on-chain and throttle how much capital each Pod can receive per epoch. [PreviousInterest Rate Model](https://docs.peapods.finance/lending-lvf/interest-rate-model) [NextMetavault Mechanics](https://docs.peapods.finance/metavaults-lvf/metavault-mechanics) Last updated 3 months ago --- # Yield Source | Peapods Finance LPs who provide liquidity to a pTKN/Paired Asset pool (e.g., pOHM/ETH) earn yield from protocol fees triggered by: Wrap and unwrap actions Arbitrage between TKN and pTKN markets Continuous spot trading volume within the Pod’s LP These interactions generate wrap fees, AMM buy/sell fees and >unwrap fees. Most of the fees are retained in the Pod, either directly (via auto-compounding LP Rewards) or indirectly (through CBR increases and pTKN burns). The AMM structure follows a standard x\*y=k invariant with full-range liquidity. This ensures pricing is always available and arbitrage remains frictionless, allowing value to be extracted consistently by LPs across market regimes. Unlike traditional liquidity sourcing schemes such as liquidity mining, where yield decreases as TVL scales, VF yield remains actually improves as TVL scales. This is because VF does not rely on diluting the token supply or short-term mercenary capital. Instead yield scales with protocol usage whilst LPs retain exposure to upside of CBR increases. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FpyjvUIVYuJt8yHvmxGTU%252FImage%25206-08-25%2520at%252018.30.jpeg%3Falt%3Dmedia%26token%3D9103a366-d86e-4751-a20f-3911e3e6406f&width=768&dpr=4&quality=100&sign=a939dd33&sv=2) This structure avoids capital flight, incentivizes active market participation, and creates an enduring value base that aligns liquidity with demand rather than emissions. All parties benefit from markets scaling and maturing, which is a notable distinction when comparing to traditional yield farming models. [PreviousVolatility Farming](https://docs.peapods.finance/volatility-farming) [NextAmplified Volatility](https://docs.peapods.finance/volatility-farming/amplified-volatility) Last updated 3 months ago --- # Yield Sensitivity and Break-Even Threshold | Peapods Finance We now examine how low LVF yield can drop before a self-lending LVF position reaches its break-even point. In this model, where User A’s net cost of capital is highlighted in the table at varying borrow rates but assuming the same split of external vs self-lending. Any LVF yield **above** this breakeven point transforms the position into a **yield-generating opportunity** and conversely, any yield **below** this threshold effectively behaves as a **funding rate**, or a net cost for holding leveraged exposure to the asset. This distinction is especially relevant in LVF, where not all participants are yield farmers. Some may be seeking to leverage long exposure to an asset, while others such as protocols sourcing liquidity may tolerate mild funding costs as a more cost-effective manner of liquidity sourcing vs existing models such as bribes or yield farming. The ability to support sustainable leveraged positions makes LVF a flexible and capital-efficient tool in a variety of strategic contexts. ### [](https://docs.peapods.finance/net-interest-implications-lvf/yield-sensitivity-and-break-even-threshold#comparative-break-even-thresholds-by-borrow-rate) **Comparative Break-Even Thresholds by Borrow Rate** **Borrow Rate** **Annual Interest Paid** **Net Cost (after Self-Lending)** **Break-Even LP Yield** 50% $2,500 $700 7.0% 40% $2,000 $560 5.6% 30% $1,500 $420 4.2% 20% $1,000 $280 2.8% 10% $500 $140 1.4% 📌 _As borrowing costs decline, the LP yield required to break even falls sharply, reaching as low as 1.4% at a 10% borrow rate. This reinforces the robustness of self-lending under varying market conditions._ [PreviousAPR Differential: Self-Lending vs External Lending](https://docs.peapods.finance/net-interest-implications-lvf/apr-differential-self-lending-vs-external-lending) [NextLending (LVF)](https://docs.peapods.finance/lending-lvf) Last updated 3 months ago --- # Proof of Demand (PoD) Mechanics | Peapods Finance Proof of Demand (PoD) is a foundational concept in Peapods' lending architecture. It formalizes what 100% utilization represents. Specifically, it signals that capital is fully borrowed and that borrowing demand is provably real, immediate, and under-supplied. Rather than using emissions, bribes, or external incentives to attract liquidity, PoD leverages interest rates as a dynamic market signal. When a Self-Lending Pod is initialized, utilization of the lending pair is set to 100%, simulating a state of full demand with no redeemable liquidity. This triggers a sequence of predictable, permissionless incentives. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FLWllBf2QW3ws3jYMg1bs%252FImage%25204-09-25%2520at%252022.07.jpeg%3Falt%3Dmedia%26token%3Db392977c-2af3-4321-a6b7-4a3006597544&width=768&dpr=4&quality=100&sign=b2b0f151&sv=2) ### [](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/proof-of-demand-pod-mechanics#key-mechanics) Key Mechanics **Utilization-Driven Rate Adjustment** The LVF lending pools employ a non-linear interest rate model. As utilization approaches 100%, borrowing APRs rise exponentially, increasing the reward for capital suppliers. **No Emissions Required** All yield offered to lenders is derived entirely from borrower-paid interest, not from protocol incentives. This makes supply-side returns fully demand-driven and sustainable. **Reverse Dutch Auction for Capital** High utilization advertises increasingly attractive APRs to the market. When the yield matches the risk appetite of lenders, capital enters. As supply arrives, utilization falls, and interest rates normalize. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FS0BFswh6O7tZOLqk2vCZ%252FImage%25204-09-25%2520at%252022.08.jpeg%3Falt%3Dmedia%26token%3D862d360d-d332-4282-b81f-72f05c453297&width=768&dpr=4&quality=100&sign=62fc757c&sv=2) This model allows borrowers to prove demand through their willingness to pay, removing the need for liquidity mining programs and incentives via emissions. Capital is only attracted when and where it’s needed which allows for real yield pricing and capital efficiency at every stage. [PreviousHow a Self-Lending Position is Created](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/how-a-self-lending-position-is-created) [NextDynamic Liquidity](https://docs.peapods.finance/self-lending-and-proof-of-demand-lvf/dynamic-liquidity) Last updated 2 months ago --- # Withdrawing Liquidity When Utilization Reaches 100% | Peapods Finance When utilization in a lending pair reaches 100%, suppliers are not able to redeem their pfTKNs for the original asset through the standard withdrawal process. This is a standard scenario across all lending markets in DeFi. However, Peapods provides a novel solution which ensures that liquidity remains accessible thanks to pfTKN tradability on decentralized exchanges. This solution is outlined below. **T₀:** A supplier deposits USDC into a lending pair. In return, they receive pfUSDC—a receipt token that tracks their share of the lending pool. **T₁:** At a later time, the supplier wishes to redeem their pfUSDC for USDC. However, the lending pair is at 100% utilization, meaning all available USDC has been borrowed and is currently locked. **T₁ (Alternative):** Instead of waiting for borrowers to repay, the supplier can immediately sell their pfUSDC on a decentralized exchange. Since pfUSDC remains liquid, this exit option allows the lender to retrieve USDC (or another asset) from a willing buyer in the open market. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FmaWa5zoP2VTNNlTVn0ir%252FUse%2520in%2520Docs%2520%281%29.jpg%3Falt%3Dmedia%26token%3D0ffeb205-9972-4cb5-ae7f-e3f6b9050071&width=768&dpr=4&quality=100&sign=6f5a184d&sv=2) This exit strategy reinforces the composability and reliability of the system. Even under maximum stress, lenders maintain an accessible off-ramp. This feature, which is not present in other lending market, keeps capital flowing and preserves confidence in the liquidity layer. In LVF lending markets, suppliers can never get stuck, because the receipt token is liquid and tradable on DEXes through the very LP pool in which they are being lent to. [PreviousIsolated Lending](https://docs.peapods.finance/lending-lvf/isolated-lending) [NextInterest Rate Model](https://docs.peapods.finance/lending-lvf/interest-rate-model) Last updated 3 months ago --- # Interest Allocation: Case Study | Peapods Finance To illustrate how self-lending reduces net borrowing costs, consider a standardized example involving **User A**, who borrows $5,000 at 50% APR to open an LVF position. Instead of relying entirely on external lenders, User A supplies **$4,000 of the lending pool themselves** using a flashloan-enabled self-lending loop—meaning 80% of the interest paid to lenders is redirected back to them. ### [](https://docs.peapods.finance/net-interest-implications-lvf/interest-allocation-case-study#interest-distribution-breakdown-user-a) **Interest Distribution Breakdown (User A)** **Component** **Amount** **Total Interest Paid** $2,500 (50% of $5,000) Interest to Lenders (90%) $2,250 – Returned to User A (80% share) $1,800 – Paid to External Lender (User B) $450 Protocol Fee (10%) $250 **Net Interest Cost (User A)** **$700** 📌 _By supplying the majority of the lending pool, User A effectively reclaims 80% of the interest paid to lenders—lowering their_ _**real**_ _cost from $2,500 to just $700. This drastically improves capital efficiency without impacting lender returns or protocol revenue._ * * * #### [](https://docs.peapods.finance/net-interest-implications-lvf/interest-allocation-case-study#undefined) [PreviousNet Interest Implications (LVF)](https://docs.peapods.finance/net-interest-implications-lvf) [NextLVF Yield Scenarios: Borrower Profitability](https://docs.peapods.finance/net-interest-implications-lvf/lvf-yield-scenarios-borrower-profitability) Last updated 3 months ago --- # Interest Rate Model | Peapods Finance This adaptive rate mechanism ensures sustainable market conditions for both Farmers and Lenders while maintaining capital efficiency. Peapods Finance uses a dynamic, utilization-based interest rate model derived from Fraxlend. This model adjusts borrowing costs according to current market conditions, with rates increasing as utilization rises. It ensures that lenders are rewarded more when demand is high, while keeping costs manageable for borrowers during low activity. The model is essential for driving real, emissions-free yield in LVF lending markets, and is particularly effective in scenarios like Self-Lending and Proof-of-Demand (PoD), where utilization begins at 100%. Interest rates in LVF Pods dynamically adjust based on utilization: * When utilization is high, **interest rates increase**, attracting external lenders who want to earn yield. * As new liquidity enters the pool, **interest rates decrease**, ensuring borrowers can efficiently access capital without excessive costs. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252Ft9pHZuvjjSNt0XaPxAfm%252FImage%25204-09-25%2520at%252022.08.jpeg%3Falt%3Dmedia%26token%3D7236467b-f80e-43b9-b950-191ae6e42431&width=768&dpr=4&quality=100&sign=cedbc27c&sv=2) ### [](https://docs.peapods.finance/lending-lvf/interest-rate-model#interest-model-core-parameters-and-definitions) Interest Model Core Parameters and Definitions Parameter Value Description UTIL\_PREC 100,000 Precision scalar for utilization (basis points: 100% = 100,000) VERTEX\_UTILIZATION 92,000 Utilization point at which the curve changes slope (92%) MIN\_TARGET\_UTIL 95,000 Lower bound of target utilization range (95%) MAX\_TARGET\_UTIL 97,000 Upper bound of target utilization range (97%) ZERO\_UTIL\_RATE 157,680,000 Base rate at 0% utilization (0.5% APR) MIN\_FULL\_UTIL\_RATE 9,460,800,000 Interest rate at 100% utilization with minimum pressure (30% APR) MAX\_FULL\_UTIL\_RATE 1.5768e+12 Maximum rate ceiling at 100% utilization (5,000% APR) VERTEX\_RATE\_PERCENT 5e+17 Defines rate acceleration post-vertex. Encodes both rate step (50%) and curve steepness RATE\_HALF\_LIFE 129,600 Half-life in seconds (~1.5 days) for rate smoothing RATE\_PREC 1e+18 Rate precision for internal math consistency [PreviousWithdrawing Liquidity When Utilization Reaches 100%](https://docs.peapods.finance/lending-lvf/withdrawing-liquidity-when-utilization-reaches-100) [NextMetavaults (LVF)](https://docs.peapods.finance/metavaults-lvf) Last updated 2 months ago --- # Metavault Mechanics | Peapods Finance Metavaults are designed to minimize idle capital, enable non-technical users to access protocol yield passively, and reduce liquidity fragmentation across the system. Deposits are pooled into modular strategy contracts that isolate risk, ensuring that if a downstream Pod underperforms or is liquidated, only its allocated portion of vault capital is affected. A governance system that is controlled by vlPEAS\* determines which Pods can receive allocations, and how much they can be allocated from the Metavault. Through this system, it is the role of vlPEAS voters to conduct due diligence risk assessments on any Pod seeking to enable or increase allocation from the Metavault. This includes examining the integrity of the Oracles used, the amount of liquidity available, the underlying asset (TKN) and any other factors that may contribute to lending risks. Metavaults target 80% Utilization to ensure that funds are available to be withdrawn by lenders as they desire, but this value can fluctuate depending on in-market activity and lender withdrawals. ### [](https://docs.peapods.finance/metavaults-lvf/metavault-mechanics#key-user-benefits) Key user benefits: * **Passive Income**: Earn lending yield through a risk-managed strategy which allocates to the greatest risk-adjusted opportunities without requiring active monitoring and adjustments. * **Easy to Use**: Metavaults are a simple and accessible strategy making it a prime candidate for all parties from DAOs to first-time Defi users. * **Risk Controls**: vlPEAS voting on caps per Pod and whitelisting ensure that user capital is risk-managed whilst the diversifaction of lending allocations ensures that risk is not isolated to a single lending pair. * **Aligned Incentives:** As vlPEAS earn a Revenue Share which is derived from LVF Revenue, these voters are incentivised to allocate capital in a way that secures the highest yield for lenders, whilst meeting the demand of borrowers which ensures maximum liquidity efficiency for the entire Protocol. [PreviousMetavaults (LVF)](https://docs.peapods.finance/metavaults-lvf) [NextInsurance Fund (Metavaults)](https://docs.peapods.finance/metavaults-lvf/insurance-fund-metavaults) Last updated 3 months ago --- # APR Differential: Self-Lending vs External Lending | Peapods Finance This section compares the **same lending market** from the perspective of two different participants: * **User A**: A borrower who self-supplies 80% of the lending pool * **User B**: An external lender who contributes the remaining 20% Although both interact with the same interest rate curve, their **net APR outcomes diverge significantly** due to self-lending mechanics. **Effective APR Comparison** **Role** **Basis** **% of Lending Pool** **Gross APR** **Net APR** User A (Self-Lending) $5,000 borrowed / $4,000 supplied 80% 50.0% 14.0% User B (External Lender) $1,000 lent 20% 45.0% 45.0% **APR Spread** (Lender yield vs Borrow cost) \- \- \- +31.0% 📌 _This asymmetric structure enables lenders to earn full returns while borrowers dramatically reduce their net cost—without subsidy or emissions. It creates a capital-efficient win-win that aligns incentives between both roles._ [PreviousLVF Yield Scenarios: Borrower Profitability](https://docs.peapods.finance/net-interest-implications-lvf/lvf-yield-scenarios-borrower-profitability) [NextYield Sensitivity and Break-Even Threshold](https://docs.peapods.finance/net-interest-implications-lvf/yield-sensitivity-and-break-even-threshold) Last updated 3 months ago --- # LVF Yield Scenarios: Borrower Profitability | Peapods Finance To assess the economic performance of self-lending strategies, we analyze User A’s profitability across various LVF yield environments. In each case, the user has $10,000 in LP exposure (2x leveraged via $5,000 borrowed capital) and pays a fixed net interest cost of $700 annually. ### [](https://docs.peapods.finance/net-interest-implications-lvf/lvf-yield-scenarios-borrower-profitability#profitability-under-varying-lvf-yields) **Profitability Under Varying LVF Yields** **LVF Yield** **Gross Yield** **Net Interest Cost** **Net Profit** **Effective APR (on $5K)** **External Lender APR** 50% $5,000 $700 $4,300 86.0% 45.0% 40% $4,000 $700 $3,300 66.0% 45.0% 30% $3,000 $700 $2,300 46.0% 45.0% 20% $2,000 $700 $1,300 26.0% 45.0% 10% $1,000 $700 $300 6.0% 45.0% 📌 _User A remains profitable across a broad range of yield conditions, with increasing capital efficiency as volatility and yield rise. Even at 10% LP yield, the strategy remains net positive._ * * * #### [](https://docs.peapods.finance/net-interest-implications-lvf/lvf-yield-scenarios-borrower-profitability#undefined) [PreviousInterest Allocation: Case Study](https://docs.peapods.finance/net-interest-implications-lvf/interest-allocation-case-study) [NextAPR Differential: Self-Lending vs External Lending](https://docs.peapods.finance/net-interest-implications-lvf/apr-differential-self-lending-vs-external-lending) Last updated 3 months ago --- # Liquidations (LVF) | Peapods Finance Liquidation is the mechanism by which the protocol reclaims borrowed funds when a user’s position becomes too risky. In Peapods, all leveraged positions are backed by LP tokens containing both a volatile asset (pTKN) and a paired base asset. This collateral model enables a safer liquidation process whereby half of the position already consists of the required debt asset to be repaid. This protects both lenders and borrowers from excessive downside during the liquidation process. By enforcing a conservative **83.33% Loan-to-Value (LTV)** threshold, Peapods ensures that positions are liquidated **before** they become undercollateralized. Liquidators are economically incentivized to repay debt in exchange for discounted collateral, while borrowers retain any remaining equity after the position is resolved. The use of paired-asset LPs creates natural buffers that allow the system to absorb volatility without generating bad debt. Liquidators may carry out a partial liquidation in which they choose to liquidate only a portion of the position if full liquidation would be unprofitable due to slippage. The remaining collateral can be unwound in follow-up transactions once price stabilizes or arbitrage corrects the market. Since part of the debt is always covered by the stable paired asset, the protocol remains solvent even if pTKN experiences moderate post-liquidation price slippage. [PreviousInsurance Fund (Metavaults)](https://docs.peapods.finance/metavaults-lvf/insurance-fund-metavaults) [NextUnderstanding Liquidation Prices](https://docs.peapods.finance/liquidations-lvf/understanding-liquidation-prices) Last updated 3 months ago --- # Understanding Liquidation Prices | Peapods Finance In Leveraged Volatility Farming (LVF), understanding how your **liquidation price adjusts in real time** is key to managing risk. Your position’s liquidation threshold is directly influenced by the price ratio between your paired asset (e.g. pfWETH, pfUSDC) and your Pod asset (pTKN). This is because **your borrow debt is denominated in the paired asset**. As that asset changes in value relative to pTKN, your liquidation price dynamically shifts: * If the **paired asset strengthens** against pTKN, your **liquidation price rises**, increasing your risk of liquidation. * If **pTKN strengthens** against the paired asset, your **liquidation price falls**, giving you more room to absorb volatility. In other words, liquidation risk is driven not just by pTKN’s absolute price, but by its **relative performance**. Users should always consider the volatility and correlation between their chosen pair when estimating how resilient their position is to market movement. [PreviousLiquidations (LVF)](https://docs.peapods.finance/liquidations-lvf) [NextLiquidation Execution](https://docs.peapods.finance/liquidations-lvf/liquidation-execution) Last updated 3 months ago --- # Isolated Lending | Peapods Finance Peapods supports Isolated Lending markets via permissionless lending pools tied to individual Pods. These isolated pairs offer advanced users the ability to directly supply capital where demand is highest and interest rates are most attractive. ### [](https://docs.peapods.finance/lending-lvf/isolated-lending#why-choose-isolated-lending) Why Choose Isolated Lending? Isolated lending enables users to: * Target specific high-yield opportunities where demand for borrowing is concentrated. * Capture premium interest rates not yet accessible via Metavault routing. * React to Pod-level market signals (e.g., sustained 100% utilization, high volatility, or self-lending demand) faster than governance-directed strategies. By supplying directly to a lending pair, users retain full control over which assets they engage with and can maximize returns in scenarios where Metavaults are not yet allocated or are fully capped. However, with greater yield comes greater responsibility. ### [](https://docs.peapods.finance/lending-lvf/isolated-lending#risk-ownership-and-required-oversight) Risk Ownership and Required Oversight Isolated lenders are solely responsible for performing due diligence on the Pod, token, and oracle behavior associated with the lending market. Participation in these markets requires ongoing monitoring of: * Pod health and LP liquidity * Oracle liquidity depth, price accuracy and resistance to manipulation * Utilization trends and interest rate movements * Borrower demand and volatility in the paired asset * Any other factors that may reasonably impact the risk profile of a lender's position There are no safety nets in isolated markets. If a Pod accrues bad debt (e.g., due to failed liquidation, stale or faulty oracle data, or sudden price collapse), all losses are socialized across active lenders, with no reimbursement or protection provided by the protocol. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FJDn8Lxq9FqOWR85bveC1%252Fimage.png%3Falt%3Dmedia%26token%3D64b28a82-115e-4b13-af25-d20efce9e751&width=768&dpr=4&quality=100&sign=5d53ea7&sv=2) > 🛑 **Caution**: There is no recovery mechanism for isolated lenders who suffer losses, all bad debt is socialized amongst lenders. You must be willing and able to assess and manage risk on your own. ### [](https://docs.peapods.finance/lending-lvf/isolated-lending#metavaults-provide-a-risk-minimized-alternative) Metavaults Provide A Risk-Minimized Alternative For users seeking exposure to lending yields without managing position-level risk, Peapods offers Metavaults which are automated capital allocators backed by governance and an Insurance Fund. While yields from Metavaults may be lower than the top isolated markets, they offer a safer, passive alternative for users who prefer set-and-forget strategies. You can read more about [Metavaults here](https://docs.peapods.finance/metavaults-lvf) . [PreviousLending (LVF)](https://docs.peapods.finance/lending-lvf) [NextWithdrawing Liquidity When Utilization Reaches 100%](https://docs.peapods.finance/lending-lvf/withdrawing-liquidity-when-utilization-reaches-100) Last updated 3 months ago --- # Bad Debt Buffer | Peapods Finance Peapods’ LP-based collateral structure introduces inherent protection against insolvency. Because 50% of each LVF position is composed of the **paired asset** (e.g. pfUSDC), this portion is automatically seized by the liquidator and used to directly repay part of the debt. For a liquidator to be financially incentivised to execute a liquidation, the remaining debt including the **10% liquidation bonus** must be recovered by selling the volatile side (pTKN) since the other half of the position is already secured as the debt asset. This structure creates a **built-in price buffer**: the pTKN price can fall significantly during liquidation while still allowing the system to fully repay the liquidator and avoid any bad debt. ### [](https://docs.peapods.finance/liquidations-lvf/bad-debt-buffer#example-price-tolerance-at-liquidation) **Example: Price Tolerance at Liquidation** **Position Value** **$2,000** Paired Asset $1,000 (seized directly) pTKN 10 tokens @ $100 = $1,000 Debt at 83.33% LTV $1,666.60 Liquidator Payout (110%) $1,833.26 Amount to Recover via pTKN $833.26 **Required Average pTKN Price** **$83.33** **Lowest Wick (linear model)** **$66.66** **Max Drop from $100** **33.34%** > 📌 _Assuming liquidation occurs at the 83.33% LTV threshold, pTKN can fall by up to_ _**33.34%**_ _to a low of_ _**$66.66**_ _during a linear liquidation without incurring any bad debt and whilst still providing the 10% liquidator reward._ [PreviousVisualizing Strategy Risk](https://docs.peapods.finance/liquidations-lvf/visualizing-strategy-risk) [NextLinks](https://docs.peapods.finance/links) Last updated 3 months ago --- # Visualizing Strategy Risk | Peapods Finance The following chart illustrates how different LVF configurations affect your liquidation buffer. It shows the **% decrease in pTKN required to reach liquidation**, based on different leverage profiles. **Breakdown of Strategies:** * 🟢 **Standard LTV (2.0x Leverage)** A typical LVF setup using only the user’s pTKN and borrowed paired asset. Provides a strong buffer (up to 64%) before liquidation. * 🟡 **Looped LTV (2.33x Leverage)** A more aggressive strategy where the user borrows against their LP, uses the borrowed paired asset to buy more pTKN, and loops it into a new LVF position. This reduces the buffer to 53%. * 🔵 **Withdrawn LTV (2.33x Leverage)** Similar borrowing profile to the looped strategy, but the paired asset is withdrawn and not recycled back into the system. This configuration is the most aggressive, with only a 36% buffer. These variations illustrate how **strategy choice impacts liquidation risk**. Leverage is not inherently unsafe but understanding how it affects your liquidation buffer and managing your strategies within your risk tolerance is essential. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FmMA0cLMRSaUjLm87TRnZ%252Fimage.png%3Falt%3Dmedia%26token%3Dd557ad40-590f-4236-83eb-8f5486b7988a&width=768&dpr=4&quality=100&sign=914a6bca&sv=2) [PreviousRequired Declines to Trigger Liquidation](https://docs.peapods.finance/liquidations-lvf/required-declines-to-trigger-liquidation) [NextBad Debt Buffer](https://docs.peapods.finance/liquidations-lvf/bad-debt-buffer) Last updated 3 months ago --- # Liquidation Execution | Peapods Finance In Leveraged Volatility Farming (LVF), user positions are collateralized by LP tokens composed of a deposited pTKN and a borrowed paired asset. These LP tokens serve as both the yield-bearing position and the collateral backing the loan. Once the position’s **Loan-to-Value (LTV)** exceeds **83.33%**, it becomes eligible for liquidation. Liquidation is **permissionless** and **atomic**, meaning a third party may repay any amount of the outstanding debt and receive **110% of the repaid amount** in collateral. The 10% bonus comes directly from the borrower’s equity. Importantly, liquidators are not required to close the entire position. If slippage or LP depth would make a full liquidation unprofitable, **they may choose to execute partial liquidations**, seizing only as much collateral as is profitable in that moment. This makes liquidation behavior responsive to real-time market conditions and reduces the risk of cascading price impact. **Example — Full Liquidation at Threshold** **Metric** **Value** Total Collateral Value $10,000.00 Max LTV 83.33% Debt at Liquidation $8,333.00 Liquidator Repays $8,333.00 Liquidator Receives $9,166.30 **Liquidator Profit** **$833.30** Borrower Retains $833.70 **Borrower Equity Lost** **50%** **Formula Summary** * **Max Debt** = Collateral × 83.33% * **Liquidator Reward** = Debt Repaid × 110% * **Remaining Collateral** = Total Collateral − Liquidator Reward * **Borrower Equity Lost (at threshold)** = 50% [PreviousUnderstanding Liquidation Prices](https://docs.peapods.finance/liquidations-lvf/understanding-liquidation-prices) [NextRequired Declines to Trigger Liquidation](https://docs.peapods.finance/liquidations-lvf/required-declines-to-trigger-liquidation) Last updated 3 months ago --- # Lending (LVF) | Peapods Finance Peapods Finance offers a robust and modular lending system built upon a modified fork of Fraxlend. This architecture allows the protocol to create isolated lending pairs, where lenders can supply assets such as USDC and receive pfTKNs (eg. pfUSDC) in return. These pfTKNs act as yield-bearing receipts and represent the supplier's claim to future repayment. The uniqueness of Peapods' lending system lies in its isolated design where each lending pair operates independently, ensuring that risks are contained within individual pools. This means if a default or severe event occurs in one market, it will not impact the solvency of any other. As a result, the platform mitigates systemic risk, allowing for more predictable and safer participation. Additionally, the protocol's design ensures that any bad debt is socialized within the pair rather than across the protocol. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252Fv6GoBfyFL2q6weCnLbfY%252FUse%2520in%2520Docs%2520%283%29.jpg%3Falt%3Dmedia%26token%3Dad20edbd-dfb2-422b-9334-7d4557d60341&width=768&dpr=4&quality=100&sign=458b1a69&sv=2) While inspired by Fraxlend, Peapods’ version is further optimized to support the Leveraged Volatility Farming (LVF) mechanics and to enhance receipt token composability across DeFi. [PreviousYield Sensitivity and Break-Even Threshold](https://docs.peapods.finance/net-interest-implications-lvf/yield-sensitivity-and-break-even-threshold) [NextIsolated Lending](https://docs.peapods.finance/lending-lvf/isolated-lending) Last updated 3 months ago --- # Links | Peapods Finance [Contract Addresses](https://docs.peapods.finance/links/contract-addresses) [Technical CAs](https://docs.peapods.finance/links/technical-cas) [Audits](https://docs.peapods.finance/links/audits) [Socials](https://docs.peapods.finance/links/socials) [PreviousBad Debt Buffer](https://docs.peapods.finance/liquidations-lvf/bad-debt-buffer) [NextContract Addresses](https://docs.peapods.finance/links/contract-addresses) Last updated 9 months ago --- # Required Declines to Trigger Liquidation | Peapods Finance #### [](https://docs.peapods.finance/liquidations-lvf/required-declines-to-trigger-liquidation#required-decline-in-ptkn-vs-paired-asset-to-trigger-liquidation) Required Decline in pTKN (vs Paired Asset) to Trigger Liquidation The following table shows how much pTKN would need to decline (in % terms) **relative to the paired asset** in order to reach the liquidation threshold of **83.33% LTV**, which corresponds precisely to **2.66x leverage**. The relationship between leverage and LTV is: To determine the maximum tolerable decline before hitting 83.33% LTV, we use: **Leverage Factor** **LTV** **Max Tolerable Decline in pTKN (vs Paired Asset)** 1.33x 16.5% 96.1% 1.66x 33.0% 84.3% 2.00x 50.0% 64.0% 2.33x 66.6% 36.3% 2.66x 83.0% 0.70% (liquidation imminent) 📌 _At 2.66x leverage, you are at the liquidation threshold. Any adverse movement in pTKN vs the paired asset will trigger liquidation. At lower leverage levels, pTKN can decline significantly before triggering liquidation, providing more buffer._ Understanding these thresholds helps inform responsible leverage decisions, especially when selecting volatile or highly correlated assets. ![](https://docs.peapods.finance/~gitbook/image?url=https%3A%2F%2F3679785424-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FWWGuQ85FudSBhxhUZWcf%252Fuploads%252FrRUXrMZbeXJNh7l19EjN%252FUse%2520in%2520Docs%2520%288%29.jpg%3Falt%3Dmedia%26token%3D61fc200e-1e3f-4b11-9dba-82b15f1f3fe2&width=768&dpr=4&quality=100&sign=9573910b&sv=2) [PreviousLiquidation Execution](https://docs.peapods.finance/liquidations-lvf/liquidation-execution) [NextVisualizing Strategy Risk](https://docs.peapods.finance/liquidations-lvf/visualizing-strategy-risk) Last updated 3 months ago --- # Insurance Fund (Metavaults) | Peapods Finance Peapods Metavaults are protected by an Insurance Fund, designed to provide a safety buffer in the event of unexpected losses or bad debt events. #### [](https://docs.peapods.finance/metavaults-lvf/insurance-fund-metavaults#fund-size-and-backing) Fund Size & Backing * The Insurance Fund is backed by a minimum reserve of $200,000. * These funds are reserved specifically for the purpose of risk mitigation across all active Metavaults. * Governance (via vlPEAS votes) may choose to increase this minimum reserve threshold, but it can never be lowered below $200,000. #### [](https://docs.peapods.finance/metavaults-lvf/insurance-fund-metavaults#purpose-and-scope-of-use) Purpose & Scope of Use * The Insurance Fund is strictly limited to covering bad debt scenarios incurred by any Metavault. * **Decision-Making Authority**: * Deployments from the Insurance Fund must be approved by either: * A vlPEAS governance vote, or * The Peapods Finance core team, if urgent action is required. #### [](https://docs.peapods.finance/metavaults-lvf/insurance-fund-metavaults#limits-of-protection) Limits of Protection * The Insurance Fund is capped by its available balance. * Once depleted, no further coverage is available until additional funds are allocated. * The Insurance Fund does not guarantee against all losses, but instead provides a structured safety net to minimize systemic risk. * * * > **Disclaimer** _The Insurance Fund should not be relied upon as a guarantee of repayment or full coverage for all participants. Users assume the edge-case risk that losses may exceed the available balance of the fund._ [PreviousMetavault Mechanics](https://docs.peapods.finance/metavaults-lvf/metavault-mechanics) [NextLiquidations (LVF)](https://docs.peapods.finance/liquidations-lvf) Last updated 2 months ago --- # TKN Acronyms | Peapods Finance Acronym Meaning **TKN** The original asset or token before being wrapped or abstracted into different forms within Peapods Finance. **pTKN** The wrapped version of a token within Peapods Finance, enabling it to participate in volatility farming and liquidity mechanisms. **spTKN** A staked LP receipt token representing a liquidity provider’s position within a Pod’s incentivized liquidity pool, allowing them to earn additional rewards. **aspTKN** A staked LP receipt token similar to **spTKN**, but with **auto-compounded yield**, ensuring earned rewards are continuously reinvested for maximum efficiency. **pvTKN** A yield-bearing token representing a user's **lending deposit within a MetaVault**, allowing capital to be dynamically allocated across multiple Pods. **fTKN** A yield-bearing token representing a user's **lending deposit directly into a specific Pod**, earning interest from that Pod’s borrowing activity. **vlTKN** A wrapped version of **TKN** with **special governance capabilities**, allowing holders to participate in governance decisions and direct liquidity flows within Peapods Finance. [PreviousCommon Terms](https://docs.peapods.finance/glossary/common-terms) Last updated 9 months ago --- # Socials | Peapods Finance * [Website](https://peapods.finance/) * [DApp (Beta)](https://beta.peapods.finance/) * [DApp](https://peapods.finance/app) * [Coingecko](https://www.coingecko.com/en/coins/peapods-finance) * [Etherscan](https://etherscan.io/token/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) * [Telegram](https://t.me/PeapodsFinance) * [Twitter/X](https://x.com/peapodsfinance) * [Medium](https://medium.com/@peapodsfinance) * [Youtube](https://youtube.com/@peapodsfinance) [PreviousAudits](https://docs.peapods.finance/links/audits) [NextGlossary](https://docs.peapods.finance/glossary) Last updated 5 months ago --- # Technical CAs | Peapods Finance [](https://docs.peapods.finance/links/technical-cas#indexmanager) **IndexManager** --------------------------------------------------------------------------------------- ETH: 0x6eFFcF94993d6a6081204fc3C30473468Eb7666E Arbitrum: 0x64511ccE99ab01A6dD136207450eA81263b14FD8 Base: 0x556059e80CB0073D4A9547081Cf0f80cBB94ec30 [](https://docs.peapods.finance/links/technical-cas#leveragemanager) **LeverageManager** --------------------------------------------------------------------------------------------- ETH: 0x4e6EF371C9CDDE8C3e6716AffEEBaD14C8c62D0B Arbitrum: 0x3f2257B6f1fd055aEe020027740f266127E8E2B0 Base: 0x31E35550b15B2DFd267Edfb39Dd9F3CD1c6ab82D [PreviousContract Addresses](https://docs.peapods.finance/links/contract-addresses) [NextAudits](https://docs.peapods.finance/links/audits) Last updated 9 months ago --- # Contract Addresses | Peapods Finance **Token Contract** PEAS token is currently live on Ethereum, Arbitrum, Base and Mode. Bridging can be done [through our dApp](https://peapods.finance/app/bridge) . In the background, our bridge utilizes LayerZero infrastructure using lock/mint and burn/mint technology, making sure no additional PEAS are ever coming into circulation when expanding to additional chains. Our token address is the same on all chains: 0x02f92800F57BCD74066F5709F1Daa1A4302Df875 [Ethereum](https://etherscan.io/address/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) [Arbitrum](https://arbiscan.io/address/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) [Base](https://basescan.org/address/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) [Mode](https://modescan.io/address/0x02f92800F57BCD74066F5709F1Daa1A4302Df875) **The main Liquidity Pools for PEAS can be seen below:** **Ethereum - Uniswap V3** * [PEAS-DAI](https://app.uniswap.org/explore/pools/ethereum/0xae750560b09ad1f5246f3b279b3767afd1d79160) * [PEAS-ETH](https://app.uniswap.org/explore/pools/ethereum/0x44c95bf226a6a1385beaced2bb3328d6afb044a3) * [PEAS-USDC](https://app.uniswap.org/explore/pools/ethereum/0x5268006a9da67c19a25aeb594f8e921867c56b36) #### [](https://docs.peapods.finance/links/contract-addresses#ethereum-uniswap-v2) Ethereum - Uniswap V2 * [PEAS-ETH](https://app.uniswap.org/explore/pools/ethereum/0x9af2bfb7117d24eb97961ce6f747cd0c80482606) #### [](https://docs.peapods.finance/links/contract-addresses#base-aerodrome-v3) BASE - Aerodrome V3 * [PEAS-USDC](https://www.dextools.io/app/en/base/pair-explorer/0xb0a65b3a6f9da0e5eb057e0d5327deddbe17309e) * [PEAS-pOHM](https://www.dextools.io/app/en/base/pair-explorer/0xd533986cbb79a015fe9f6c8f92dbb35cc998c37e) * [PEAS-pwBLT](https://www.dextools.io/app/en/base/pair-explorer/0x2787d72d17db123351ebe903237e761ebcf529d6) #### [](https://docs.peapods.finance/links/contract-addresses#base-uniswap-v3) BASE - Uniswap V3 * [PEAS-USDC](https://app.uniswap.org/explore/pools/base/0x5abdb204b1e5365fc523b6aac9d0fc405bf5a72b) #### [](https://docs.peapods.finance/links/contract-addresses#arbitrum-camelot-algebra) Arbitrum - Camelot Algebra * [PEAS-ETH](https://info.camelot.exchange/pair/arbitrum-one/v3/0x44cc8b40b1483e62e59ef937441ba6aa8e584a77) * [PEAS-USDC](https://info.camelot.exchange/pair/arbitrum-one/v3/0xcf71459248557807b87cf988f30ae7845f7bd6d5) #### [](https://docs.peapods.finance/links/contract-addresses#arbitrum-uniswap-v3) Arbitrum - Uniswap V3 * [PEAS-ETH](https://app.uniswap.org/explore/pools/arbitrum/0x23d17764f41aea93fdbb5beffa83571f0bf3f8b2) #### [](https://docs.peapods.finance/links/contract-addresses#mode-kim-exchange-v4) Mode - Kim Exchange V4 * [PEAS-USDC](https://www.dextools.io/app/en/mode/pair-explorer/0x54f0b20d4e140d9beb0e2fadb4f3c425621b9243) [PreviousLinks](https://docs.peapods.finance/links) [NextTechnical CAs](https://docs.peapods.finance/links/technical-cas) Last updated 11 months ago --- # Audits | Peapods Finance [](https://docs.peapods.finance/links/audits#green-arrows-audits) Green Arrows Audits ------------------------------------------------------------------------------------------ 1. [yAudit](https://reports.yaudit.dev/reports/01-2024-Peapods/) 2. [SourceHat](https://sourcehat.com/audits/PeapodsFinance/) [](https://docs.peapods.finance/links/audits#lvf-audits) LVF Audits ------------------------------------------------------------------------ 2MB [3\. yAudit (LVF)](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2FNepD2vC6ydmdzIX0TlkF%2FyAudit_report%20(2).pdf?alt=media&token=68015161-a7d3-498d-aa2e-7276747534c6) PDF Download[Open](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2FNepD2vC6ydmdzIX0TlkF%2FyAudit_report%20(2).pdf?alt=media&token=68015161-a7d3-498d-aa2e-7276747534c6) 879KB [4\. Guardian (LVF)](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2FhIIhvk8ktnP28clIIAls%2FPeapods_Report.pdf?alt=media&token=59b4693e-0a8c-4250-aa01-0ad348124dbe) PDF Download[Open](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2FhIIhvk8ktnP28clIIAls%2FPeapods_Report.pdf?alt=media&token=59b4693e-0a8c-4250-aa01-0ad348124dbe) 6MB [5\. Pashov (LVF)](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2F1H0oxy7m5JgiUvW4syJW%2FPeapods-security-review_2024-11-16%20(2).pdf?alt=media&token=cbf5bd53-7c2d-4bd6-8c35-4dc2e9e2266b) PDF Download[Open](https://3679785424-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWWGuQ85FudSBhxhUZWcf%2Fuploads%2F1H0oxy7m5JgiUvW4syJW%2FPeapods-security-review_2024-11-16%20(2).pdf?alt=media&token=cbf5bd53-7c2d-4bd6-8c35-4dc2e9e2266b) [PreviousTechnical CAs](https://docs.peapods.finance/links/technical-cas) [NextSocials](https://docs.peapods.finance/links/socials) Last updated 9 months ago --- # Glossary | Peapods Finance Term Definition **$PEAS** The native utility token of Peapods Finance, used for governance, protocol fees, and staking rewards. **$pTKN** The wrapped version of a token within Peapods Finance, enabling it to participate in volatility farming and liquidity mechanisms. **$TKN** The underlying asset in a Peapods liquidity pool, which can be wrapped into its corresponding pTKN for use in the protocol. **Arbitrage (Arb)** A trading strategy that exploits price differences between different markets or liquidity pools to make a profit. **Beta** An early stage of a product launch where users test functionality and provide feedback before a full release. **Borrowing** The act of taking out an asset (typically stablecoins or paired assets) against collateral to use in trading or liquidity farming. **CBR (Exchange Rate)** The exchange rate mechanism used in Peapods to determine the value of Collateral Backing Rate of pTKN:TKN over time. **CBR APR** The annualized percentage rate (APR) associated with the CBR mechanism. **Classic LP** A traditional liquidity pool where users deposit two assets in equal value to facilitate trading and earn swap fees. **Fixed Discount** A discount mechanism where borrowers can acquire assets at a predetermined reduced price. **Impermanent Loss (IL)** A temporary loss experienced by liquidity providers when the price of deposited assets changes relative to their initial value. **Interest Rate** The cost of borrowing an asset, determined dynamically by supply and demand in the liquidity market. **Isolated Lending** A lending model where risk is contained within a specific market or asset pair, preventing liquidity from being affected by external volatility. **Leveraged Volatility Farming (LVF)** A farming mechanism that allows users to amplify their exposure to volatility yield by borrowing paired assets without liquidation risk. **LVF APR** The annualized percentage rate (APR) for leveraged volatility farming positions, representing the return based on volatility yield and borrowed funds. **Liquidity Pool (LP Pool)** A smart contract that holds two assets, enabling decentralized trading and generating fees for liquidity providers. **Liquidity Provider (LP)** A user who supplies assets to a liquidity pool in exchange for a share of trading fees and rewards. **Meta-Vaults** Smart liquidity vaults that automatically allocate capital across different liquidity pools to optimize returns. **Proof-of-Demand (POD)** A mechanism where borrowers create artificial demand for liquidity, increasing utilization rates and attracting external suppliers. **Security Audits** Reviews of smart contract code to identify and fix vulnerabilities before deployment. **Self-Lending PODs (DCLP)** A borrowing mechanism that allows users to lend to themselves, instantly bootstrapping liquidity without waiting for external suppliers. **Soft Leverage** A borrowing structure in LVF where users increase their position size with reduced liquidation risks vs standard leverage markets. **Stable-Yield Farmers** Users who supply Paired Asset liquidity in exchange for yield, without taking exposure to price volatility. **Treasury Accrual** The process of accumulating protocol revenue to fund operations, buybacks, or incentive programs. **vlPEAS (Vote-Locked PEAS)** A governance token that allows holders to participate in liquidity allocation decisions and earn rewards. **Volatility Farming (VF)** A strategy where users earn yield based on price fluctuations of assets instead of just price appreciation. **Volatility Farmers** Users who borrow liquidity to farm volatility yield, profiting from price swings of an asset. [PreviousSocials](https://docs.peapods.finance/links/socials) [NextCommon Terms](https://docs.peapods.finance/glossary/common-terms) Last updated 9 months ago --- # Common Terms | Peapods Finance Term Definition **$PEAS** The native utility token of Peapods Finance, used for governance, protocol fees, and staking rewards. **$pTKN** The wrapped version of a token within Peapods Finance, enabling it to participate in volatility farming and liquidity mechanisms. **$TKN** The underlying asset in a Peapods liquidity pool, which can be wrapped into its corresponding pTKN for use in the protocol. **Arbitrage (Arb)** A trading strategy that exploits price differences between different markets or liquidity pools to make a profit. **Beta** An early stage of a product launch where users test functionality and provide feedback before a full release. **Borrowing** The act of taking out an asset (typically stablecoins or paired assets) against collateral to use in trading or liquidity farming. **CBR (Exchange Rate)** The exchange rate mechanism used in Peapods to determine the value of Collateral Backing Rate of pTKN:TKN over time. **CBR APR** The annualized percentage rate (APR) associated with the CBR mechanism. **Classic LP** A traditional liquidity pool where users deposit two assets in equal value to facilitate trading and earn swap fees. **Fixed Discount** A discount mechanism where borrowers can acquire assets at a predetermined reduced price. **Impermanent Loss (IL)** A temporary loss experienced by liquidity providers when the price of deposited assets changes relative to their initial value. **Interest Rate** The cost of borrowing an asset, determined dynamically by supply and demand in the liquidity market. **Isolated Lending** A lending model where risk is contained within a specific market or asset pair, preventing liquidity from being affected by external volatility. **Leveraged Volatility Farming (LVF)** A farming mechanism that allows users to amplify their exposure to volatility yield by borrowing paired assets without liquidation risk. **LVF APR** The annualized percentage rate (APR) for leveraged volatility farming positions, representing the return based on volatility yield and borrowed funds. **Liquidity Pool (LP Pool)** A smart contract that holds two assets, enabling decentralized trading and generating fees for liquidity providers. **Liquidity Provider (LP)** A user who supplies assets to a liquidity pool in exchange for a share of trading fees and rewards. **Metavaults** Smart liquidity vaults that automatically allocate capital across different liquidity pools to optimize returns. **Proof-of-Demand (POD)** A mechanism where borrowers create artificial demand for liquidity, increasing utilization rates and attracting external suppliers. **Security Audits** Reviews of smart contract code to identify and fix vulnerabilities before deployment. **Self-Lending PODs (DCLP)** A borrowing mechanism that allows users to lend to themselves, instantly bootstrapping liquidity without waiting for external suppliers. **Soft Leverage** A borrowing structure in LVF where users increase their position size with reduced liquidation risks vs standard leverage markets. **Stable-Yield Farmers** Users who supply Paired Asset liquidity in exchange for yield, without taking exposure to price volatility. **Treasury Accrual** The process of accumulating protocol revenue to fund operations, buybacks, or incentive programs. **vlPEAS (Vote-Locked PEAS)** A governance token that allows holders to participate in liquidity allocation decisions and earn rewards. **Volatility Farming (VF)** A strategy where users earn yield based on price fluctuations of assets instead of just price appreciation. **Volatility Farmers** Users who borrow liquidity to farm volatility yield, profiting from price swings of an asset. [PreviousGlossary](https://docs.peapods.finance/glossary) [NextTKN Acronyms](https://docs.peapods.finance/glossary/tkn-acronyms) Last updated 3 months ago ---