Introduction

Leverage Automated Market Maker (LAMM)

Particle envisions a truly permissionless leverage trading protocol. Just as Uniswap allowed any tokens to be tradable, Particle will allow any tokens to be tradable with leverage.

The key idea is to borrow concentrated liquidity from AMMs (Uniswap v3 as a start). For a concentrated liquidity position, its price boundaries mathematically define the amount of tokens to convert at all price points. When borrowing from a concentrated liquidity position, the protocol calculates the exact amount required to top up, such that the contract locks enough tokens in case the price moves adversely to a price boundary.

In addition, by recording the accumulated swap fees at borrowing and returning time, the protocol ensures the borrower pays an interest that’s no less than the swap fee that the borrowed liquidity would have earned from the original pool.

This way, Particle is able to generate for LPs strictly higher interest fees with no higher impermanent loss than its original swap liquidity provision.