Flash Leverage

Overview

Flash Leverage enables users to create or deleverage a borrow position in a single transaction, bypassing the need for multiple, manual recursive transactions. This mechanism leverages the concept of flash loans and swaps to provide users with a powerful tool for executing complex financial operations with unprecedented efficiency and flexibility.

Flash Loans

Flash loans are a subtype of transactions that enable users to borrow an indeterminate amount of assets from a source of liquidity, as long as the asset is returned at the end of the transaction. If the transaction would not be able to do so, the transaction cannot execute. These transactions do not require collateral, and therefore enable novel products that improve gas efficiency and capital efficiency for users.

Feeless Flash Loans

Ion enables users to take feeless flash loans from the protocol to effectively take uncollateralized borrows that can then be leveraged to perform complex operations (while supporting some internal products) such as position rebalancing, leveraged yield generation, and more. Because fees on borrows are only charged on a per-block basis and there is no additional fee charge incurred by the protocol, flash loans are completely free on Ion and incur no cost to the user (outside of network costs).

Design Decisions

Sourcing Collateral and Paying Off Debt

1. Leverage Creation:

   • Collateral can be sourced via flash loans or flash swaps, either by borrowing the collateral directly or by borrowing another asset and converting it to the collateral asset.

   • Debt repayment is facilitated by borrowing from Ion, ensuring a seamless transaction process.

2. Deleveraging:

   • Involves sourcing the borrowed asset to repay debt and withdrawing collateral from the vault to pay it back.

   • Collateral conversion can be achieved through swaps or direct redemption with a liquid staking or restaking provider.

3. Path Flexibility:

   • Multiple paths are available for both leverage and deleverage strategies, allowing users to select the most efficient route based on their specific needs and market conditions.

Slippage Control

Slippage control mechanisms are integral to the Flash Leverage feature, ensuring that transactions are executed within acceptable risk parameters. These controls include maxResultingDebt, maxCollateralToRemove, sqrtPriceLimitX96, and maxResultingAdditionalDebt, among others, providing users with safeguards against unfavorable market movements during the leverage or deleverage process.