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Introduction

What is VII Finance?​

VII Finance is a credit-based market-making protocol. It allows users to borrow against their Uniswap V4 Liquidity Positions while earning lending interest on top of swap fees.

📺 Protocol Explainer​

Watch this video to understand how VII Finance works:

We have two main systems:

  1. Uniswap V4 Hook: We have developed a Uniswap V4 hook that allows LPs to earn lending interest on top of swap fees.

    • What does this mean?

      Let's compare a vanilla USDC-USDT Uniswap V4 pool with a USDC-USDT pool that has the VII Finance hook enabled.

      When you provide liquidity to a USDC-USDT pool with the VII Finance hook enabled, your tokens are lent to a lending protocol of your choosing.

      For example, if the lending protocol provides ~5% APY on your stablecoins, then on top of the swap fees you would have earned in a vanilla pool, you can earn an additional 5%.

  2. Lending Protocol that Accepts Uniswap V4 Liquidity Positions as Collateral:

    • We have built on top of Euler v2, inheriting all the features that Euler vaults offer for ERC20s. You can supply and borrow as usual. In addition, you can also use Uniswap V4 Liquidity Positions as collateral to borrow funds.

    Let's go through an example to illustrate why this is helpful:

    Suppose you have 100k USDC. On VII Finance, you can borrow 2M USDC, convert 1M into USDT, and then provide liquidity to the USDC-USDT pool with the VII Finance hook enabled at a tight range. Since this Liquidity Position is accepted as collateral, your effective LTV would be 95% (safe for stable pairs).

    • What does this mean? You are now earning swap fees (estimated 5%) on your 2M USDC-USDT tight range liquidity position and lending interest (estimated 5%), while paying borrowing interest (estimated -5.5%) on the 2M USDC you have borrowed. Your effective APY on your initial 100K USDC? Approximately 90%.

Who is it for?​

For Lenders​

Vanilla Lenders​

Lenders can provide any single asset that gets borrowed against ERC20 collateral (like WETH) or Uniswap V4 Liquidity Positions (such as a position in the USDC-USDT pool). Lenders can earn the equivalent of LP yield without worrying about impermanent loss.

Liquidity Providers​

Liquidity providers can provide liquidity into pools with the VII Finance hook enabled to earn lending interest on top of swap fees.

For Borrowers​

Vanilla Borrowers​

Borrowers can borrow tokens (like USDC) against their collateral (like WETH) to access liquidity. They can also take out leverage to go long or short on a token, just like with any other lending protocol.

Active LPs​

Liquidity providers with conviction in their strategies can borrow tokens against their Liquidity Positions to double down on their strategies (all while earning lending interest on top of swap fees, of course).

See here for why you would want to do this for stable pairs.

For volatile pairs, you can borrow one of the tokens and keep rebalancing to hedge against impermanent loss.

For example:

ETH-USDC pool:

  • A user with only ETH can borrow the required USDC and provide liquidity to the ETH-USDC pool. Since Liquidity Positions are accepted as collateral, users can achieve almost 50% LTV (2x leverage). The user can keep rebalancing to ensure leverage stays at 2x and the position remains delta-neutral (we have vaults coming soon that will automate this for you).