Collateralized Loans

Arcadia reimagines collateralized lending through an innovative Account-based system. Unlike traditional platforms that treat each asset separately, Arcadia considers your entire portfolio as one, enabling more flexible collateral management and efficient capital use. Note that this is only relevant for margin accounts and not for spot accounts.

Key Features

Borrowing

Borrowing enables advanced strategies by allowing you to use borrowed funds within the same transaction. The system checks your position's health only at the end, enabling complex DeFi operations while maintaining security. If your final position is unhealthy, the transaction reverts automatically.

For example, if you want to open up a 5x leveraged wETH-cbBTC position with USDC as debt, you can in a single transaction:

• Provide just a single asset. This does not even have to be wETH or cbBTC, but can be any asset.

• Immediately borrow the required amount of USDC, through a native flashloan-like mechanism. No looping required to reach the maximum leverage.

• Use the borrowed funds, together with the deposited asset(s), to swap into the required amounts of wETH and cbBTC.

• Use the wETH and cbBTC to create a leveraged LP position.

Multi-Asset Collateral

Arcadia breaks traditional barriers by supporting a wide range of digital assets as collateral. The protocol works with standard tokens (ERC20), LP Positions (ERC721) and more. In theory, any available asset type can be integrated within Arcadia, without the need for a protocol-wide upgrade.

Collateral Management

Your Arcadia Account acts as a smart portfolio, valuing assets collectively rather than individually. This means you can adjust your collateral composition freely while maintaining a leveraged position. In practice, this means you can switch pools in which liquidity is provided, change ranges of your positions and adjust leverage ratios, all through a single transaction.

Risk Parameters

The protocol uses four key factors to manage risk effectively. Each factor is creditor specific, meaning the different Lending Pools have different risk parameters.

Asset based

Collateral Factors determine how much you can borrow against each asset. For example:

• A USDC collateral factor of 0.90 means you can borrow up to 90% of your USDC value. This corresponds to 10x leverage.

• A wETH collateral factor of 0.80 allows borrowing up to 80% of your wETH value. This corresponds to 5x leverage.

Liquidation Factors set safety thresholds for your position. For example:

• A USDC liquidation factor of 0.95.

• A wETH liquidation factor of 0.90.

An Account with 850 USDC debt, with a total value equal to 1000 USDC and where the Account assets are fully composed of wETH, will be liquidated when:

• The Account value remains equal, but the open debt increases from 850 USDC to 900 USDC (1000/0.9), and/or

• The open debt remains equal, but the total account value decreases to 944.44 USDC (850/0.9)

Your total borrowing capacity is calculated using a weighted average of these factors based on your portfolio composition. All values in a Margin Account are valued in the asset you have borrowed. For example, if the ETH price is 3500 USD and USDC is worth 1 USD, the protocol values an Account holding 1 ETH at 3500 USDC.

Exposure caps set a maximum amount of the asset to which the creditor can be exposed. For example:

• The USDC Lending Pool has an exposure cap of 5,000 wETH. This means that the Lending Pool can only be exposed to up to 5,000 wETH of collateral, whether as a plain ERC20 asset or as composed in a DEX LP position.

Asset module based

Each Asset Module, for example the Uniswap V3 asset module, the Aerodrome Slipstream asset module, ... has a specific exposure cap. This exposure cap ensures that a specific creditor has no more exposure to the underlying protocol than the cap. This is expressed in USD.

For example, the Uniswap V3 asset module may have an exposure cap of 10m USD. Even though from the example of above, it could support one big LP position of 5,000 wETH and 20M USDC, the exposure cap on the Asset Module would not allow Uniswap V3 positions totalling worth more than $10m as collateral.

The combination of asset-specific caps and asset module-specific caps allows the creditors for great flexibility in assessing and protecting themselves from risks.

Position Management

Managing your position is straightforward yet powerful. Arcadia provides:

• Real-time monitoring of your position's health, including Telegram notifications

• Flexible collateral adjustment capabilities

• Flash actions for efficient position modifications, including changing underlying LP pool, changing ranges, ...

• Auto-compounder

• Auto-rebalancer

Risks

Borrowing assets is inherently risky.