Leveraged Yielding Positions
Kairos Cash is a lending engine that allows users to leverage their interest-bearing tokens (ibTKNs) positions. Here at Kairos Cash, we have a one-click UI that allows you to do so automatically. Let's dive into this!
To open a leveraged position, users need to deposit the ibTKN they want to leverage. Kairos Cash allows withdrawing more KASHs than it should be possible, as long as the collateral required is supplied to the position eventually, within the same transaction. To better explain this, let's use the example of a user that wants to leverage his wsKRNO position:
- Step 1 and 2 - The user selects the desired leverage, obtains the wsKRNO, and deposits them as collateral.
- Step 3 - Given the selected leverage, the protocol borrows the respective amount of KASHs.
- Step 4 - These KASHs are swapped into KDAI (current price peg and slippage play an important role here).
- Step 5 - These KDAI are swapped to wsKRNO.
- Step 6 - These wsKRNO tokens are deposited back into the Kairos Cash to collateralize the user's position.
This process can be visualized using the following infographic:
Notice that all of these steps happen in one single transaction, and therefore only one gas fee will be required.
If one of these steps fails, the whole transaction fails.Note that if the token is not an Interest Bearing Token, STEP 4 and STEP 5 are substituted by a simple market buy of the token the user is leveraging.
First head to the BORROW page, then click on the collateral you want to use to leverage.
Toggle the “CHANGE LEVERAGE” checkbox.
Our UI automatically computes the optimal LTV and the number of loops for your leveraged positions. Moving the slider towards the right will increase those parameters, making your position riskier and therefore the liquidation price higher. Make sure to check the amount of KASH leveraged in the box underneath, as well as your actual leverage.
The Liquidation Price changes dynamical with your slides, always make sure to double-check it before opening the leveraged position.
Underneath the Liquidation Price, users will be able to see the percentage drop in the current value of the collateral that will flag them for liquidation.
Note that a Borrow Fee will be charged on the leveraged KASH amount that the user is borrowing.
Swap Tolerance is the amount of change in value a user is comfortable with. Factors that affect the change in value when KASH are swapped for other tokens are, the initial price peg difference at the market, and the slippage of trade from price changes during execution.
If the swap tolerance is not high enough, the transaction will fail and an error will pop up.
As a Pro tip, users can still manually change their LTV ratio, by amending the number of KASHs borrowed in the box above while having the "Leverage" tickbox selected! Default is set at 75% so if you wanna play it safe, make sure to edit it!
Below this, users will see the following dynamic data:
- Expected Liquidation price: Price of collateral at which you can expect this leveraged position to be liquidated. This will depend on what percentage of collaterals the user selects as well as the leverage chosen.
- Expected Leverage: The actual leverage you have on your investment given LTV and Number of Loops.
- Expected KASH amount: This number will tell you approximately how many KASH will be borrowed and used to create leveraged components.
- Position Health: Position health is a percentage of the liquidation price of collateral.
Please note that every position you open on Kairos Cash using the same collateral will be combined into a single position, no matter if it is leveraged or not. Therefore be sure to check your combined liquidation parameters after each adjustment using the data in the My Open Positions box, as they are likely to be different from the ones above.
After all the parameters are set, click on ADD COLLATERAL AND BORROW and open your leverage position!
Note: The user will not end up with any KASH in their wallet from this transaction, and will be farming yield at the leverage they have selected.
⚠This is extremely important⚠
Different from what happens in unleveraged positions, if the leveraged position gets liquidated, users will not have any assets in their possession.
It should be noted that 1st-time users will be met with several transactions in the following order.
- 1.Users will have to approve the spending of their collateral token to Vault.
- 2.Then, users will need to approve the spending of their collateral token to the contract specific to the position they are entering.
- 3.Next, they will have to approve the spending of the KASH they are borrowing to the contract specific to the position they are entering.
- 4.Finally, they will need to send the entire transaction to open up the position.
This is important to note, as each transaction will come with an individual gas cost.
Please note that as Kairos Cash cannot distinguish between leveraged and not leveraged positions this function can be used to repay any kind of debt, but it will cost more with gas than a usual repay transaction. Use this function accordingly.
Bear in mind that leveraged positions can be closed by simply repaying the amount of KASH owed to the protocol, it is not compulsory to use this function. This function allows users to close their position even if they do not have the required KASHs in their wallets.
Kairos Cash allows withdrawing collaterals even without repaying KASHs, as long as the KASHs required are supplied to the position eventually, within the same transaction. The process works the exact opposite as the "Leverage Yielding Transaction".
To better explain this, let's use the example of a user that wants to close his wsKRNO leveraged position. This user does not have enough KASHs in his wallet to repay his debt, therefore he needs to use the "Deleverage" function.
- Step 1 - The user selects the amount of KASHs he wants to repay.
- Step 2 - The protocol releases the user's collateral, in this case, wsKRNO.
- Step 3 - These wsKRNO tokens are then unstaked from Collateral Box and turn into KDAI.
- Step 4 - These KDAI are swapped for KASHs. (current price peg and slippage play an important role here).
- Step 5 - These KASHs tokens are deposited back into the Kairos Cash to repay for the user's released collaterals.
- Step 6 - The user receives whatever collaterals are left after these transactions, in this case, the value will be equal to the profit that the leveraged position has produced.
This process can be visualized using the following infographic:
Notice that all of these steps happen in one single transaction, and therefore only one gas fee will be required. If one of these steps fails, the whole transaction fails.
First, click on the REPAY button. Secondly, toggle the "Deleverage" tickbox at the bottom of the screen. A warning pop-up will open. Once closed users will be able to see the following page.
Here users will be able to select the number of KASH they want to repay. Please note that the amount of KASHs a user wants to repay changes dynamically with Swap tolerance and will be reset every time one of these parameters changes.
Users will also be able to select the Swap Tolerance they are willing to accept. If the swap tolerance is not high enough, the transaction will fail and an error will pop up.
After all the parameters are set to the user's desire, they can click on REPAY and start the transaction. Please note that gas fees are usually higher than the usual repay action, therefore we recommend using this function only if the user's willing to accept the cost. Attention! Note that, as of right now, after the full unwind process, some dust (in both KASH and/or Collateral) still remains in the position. This small issue will soon be addressed! In the meantime, if you wish to clear the remaining dust, process an additional, normal transaction. Stay tuned!