Overview

We provide an illustration to the protocol logic in https://excalidraw.com/#json=TcmwLn2W4K9H_UlCExFXa,J_yKjXNaowF0gYL8uvPruA

The basic flow of opening a leverage position in LAMM contains 3 steps:

• Borrow Liquidity: input tokenId and liquidity, the protocol decreases liquidity from an LP position to obtain amountFromBorrowed and amountToBorrowed for a token pair.

• Swap: In one swap, the protocol swaps amountFromBorrowed together with marginFrom into amountReceived. The amount is then locked in contract.

• Accounting: The protocol ensures enough amount is swapped, i.e. amountReceived + amountToBorrowd + marginTo is enough to cover collateralTo. The leftover amount are kept as premiums.

Similarly, the basic flow of closing an LAMM position contains 3 steps:

• Accounting: Based on liquidity in the record (a lien), determine the amount to repay, i.e. amountFromAdd and amountToAdd.

• Swap: In one swap, at least swap enough to (1) get amountToAdd and (2) leave enough for amountFromAdd.

• Repay: increase liquidity back for LP and add tokensOwed, the leftover amounts (premiums subtract owed and PnLs) are all refund to the borrower.

For more details, please refer to the illustrative figures and the notes in the link above. The same figures are provided in the sections next.