How it works

Arcadia has two sides to it:

• Lenders: generate passive income without selling their assets. Lenders provide wrapped ETH or USDC and receive a yield bearing token that accrues protocol fees in the form of interest paid by borrowers and a portion of liquidation fees. Arcadia does not take a cut of the interest and instead passes ALL of the rewards to the lenders. Lenders’ assets are used by borrowers as leverage for financial positions.

• Strategy users: participate in yield strategies and boost their financial positions by borrowing liquidity from lenders. They interact with Lenders and with other third-party protocols using Arcadia Accounts.

At its core, users want yield and protocols want liquidity. Arcadia provides users with more yield and protocols with more liquidity. Arcadia is able to do this by connecting the two sides —lenders and yield seekers— using a novel primitive called an ‘Account.’

Arcadia = More Yield for Users

An Arcadia Account is simply a user-owned and isolated smart contract that holds user collateral and borrowed funds and is able to ‘act’ like a wallet. That is, an Account can execute logic—swap, borrow, stake, withdraw, repay. Users are able to use their Account to interact with third-party protocols just like they would do with their normal wallet with the difference that the assets within an Account can be used even when they serve as collateral to back debt. In other words, you can turn X into a position worth more than X by using Arcadia.

Contrast this with how most protocols work today. You deposit collateral and it remains stuck in a contract, making it unavailable to use anywhere else. Users end up with less liquidity to work with because a portion of the asset value must remain locked as collateral.

Further, while most protocols pool user assets into the same vault smart contract, Arcadia provides each individual user with its own isolated smart contract. This means that Arcadia users are no longer limited to generic configurations set by a Vault manager and thus have unmatched flexibility to deploy their capital across the ecosystem in the most personalized way.

Arcadia = More Liquidity for Protocols

Accounts are also composable. Your liquidity is directed to the third-party protocols you decide to interact with rather than Arcadia holding users’ assets within its protocol. In other words, all the user activities happen on the third-party protocols you choose to interact with. An Arcadia account is just the vehicle you use for those interactions. This is how Arcadia is able to provide protocols with more liquidity.