How does Archi ensure over-collaterization while allowing users leveraged operations?

When farming with Archi Finance, the assets that you deposit become the collateral for external protocols/actions. This includes both your initial funds and the borrowed amount that you obtain from the protocol. Archi Finance monitors the tokens in your portfolio and calculates their value at all times, which is always denominated in the underlying borrowed asset that you opened the position in.

To manage risk, Archi Finance uses a risk model to continuously assess the quality and value of the collateralized assets and calculates a health factor for the position. This health factor represents the level of collateralization and determines whether the position is at risk of liquidation.

Anyone can check the health factor of a position and potentially liquidate it if the health factor falls below a certain threshold.

Liquidation Insurance

After a degen farmer activates leverage, 10% of their principal will be deducted. When liquidation occurs, these funds will be used to incentivize the liquidator. The deducted funds will be returned to the degen farmer upon normal repayment.

The percentage of principal deduction can be controlled by the DAO and is in the range of 5% to 20%.

What is a Health Factor?

Health Factor is a numeric representation of your account health from 0 to 100. If your health factor drops below 40 or close to it, you might be liquidated. The higher the number is, the safer you are.

Hf(t)=TV(t)TVR(t)c(t),H_{f}(t) =\frac{TV(t)-TVR(t)}{c(t) },

Total GLP Value

Represents total balance in the underlying asset.

TV(t)=  fi(t)pi(t)/GLPprice(t),TV(t)=\sum{\;f_i(t)*p_i(t)/GLP_{\text{price}}(t)},


Total GLP Required to Repay

TVR(t)=  bi(t)pi(t)/GLPprice(t)TVR(t)=\sum{\;b_i(t)*p_i(t)/GLP_{\text{price}}(t)}

After Liquidation

After a liquidation event, a portion of the assets will be used to repay the borrowed amount, while the remaining assets will be returned to the borrower.

Anyone can run a liquidator bot to help secure the protocol, and you can discuss setting up your bot and other liquidator-related topics in our group.

Additionally, 10% of the remaining assets will be used to incentivize liquidators.

Archi Finance liquidation bot demo:

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