AMMs have taken the Decentralized financial sector by storm, replacing the traditional order books with algorithmically run smart contracts that execute automatically based on predefined formulae. Liquidity Providers (LP) facilitate continuous trade on these platforms by providing liquidity to the AMM pools and in return receive Liquidity Pool tokens (LPTs) as a receipt of their investment in the pool.
LPTs being non-tradable crypto assets find no further use case in the DeFi space. Unbound Finance enables LPs to leverage their idle assets thereby augmenting the utility of the Liquidity Pool token, making it a more efficient yield generating tool.
What is Unbound Finance?
Unbound Finance is a decentralized lending protocol that offers interest-free UND stablecoin loans against LP tokens as collateral.
Unbound allows perpetual borrowing of loans! That means users can repay the borrowed amount and unlock their assets anytime without any restriction. Additionally, the platform does not liquidate user collateral even during extreme price surges.
Unbound is currently live on the Ethereum mainnet and will be soon live on the Polygon mainnet. In the days to come Unbound will release its mainnet on various other EVM-based chains including Binance Smart Chain, Harmony, Fantom, Avalanche, HECO, KCC, TomoChain to name a few.
This article will provide you with a step-by-step guide on how to use Unbound on the Polygon Mainnet. Users can follow the same steps to use the platform on other chains too.
To Do’s before Using Unbound
Users are required to make the below-mentioned preparations before using the Unbound protocol:
Setting up your Metamask
- Download the Metamask extension on your browser and follow the steps to set up your Metamask wallet.
- Add your desired network (which is supported by Unbound) to your wallet before you go to the Unbound app page.
- Once you are connected to your wallet, select the network on which you want to use the protocol.
Preparing for Gas Fee
Unbound being a cross-chain protocol will be available on multiple EVM-based networks. Therefore, to use Unbound, users must maintain a minimum balance of the native token of the preferred chain to be used as gas fee.
Preparing LP tokens as Collateral
A prerequisite for borrowing at Unbound is to ensure that your wallets are loaded with LP tokens of supported asset pair. LP tokens work as security for acquiring synthetic asset loans at Unbound. For this, users first need to add liquidity to the AMM pool whose LP tokens are whitelisted by the platform.
Note: For the purpose of this guide, we’ll use the LP tokens of the USDT/USDC pool on QuickSwap to mint UND stablecoin.
How to Mint UND By Collateralizing LP tokens
Liquidity providers of AMMs can lock their LPTs as collateral in Unbound’s smart contracts and in return mint synthetic assets such as UND and uETH. While UND is pegged to USD, uETH is an Ethereum pegged ERC20.
- Go to app.unbound.finance.
- Connect your wallet by clicking on either of the two “Connect Wallet” tabs on the dashboard.
3. If you haven’t already selected your preferred network while setting up your wallet, make sure to select it now. For this example, we’ll select the Polygon network.
4. Click on the “Mint” tab on the dashboard.
5. Next, click on “Select Token” and select the type of LP token you want to collateralize.
6. Enter the amount of LP tokens you want to collateralize in order to borrow UND stablecoin. Alternatively, you can click on “MAX” to lock your complete LP tokens as collateral.
Unbound automatically calculates the maximum amount of UND that can be minted corresponding to your LPTs based on the Loan-To-Value (LTV) ratio. Unbound also charges an upfront minting fee at the time of minting the loaned UND. You can view all the details in the card displayed below the “Mint” button.
7. Click on the “Mint” button.
8. Once you have verified the borrowing details, click on “Confirm Mint”.
9. Confirm the transaction by clicking on the “Confirm” tab in your wallet.
That’s it!! Your minted UND will be transferred to your wallet once you receive the “Mint Transaction Successful” notification.
How to Unlock the Collateralized LP tokens
At Unbound, you can unlock your LP tokens any time by repaying the outstanding debt. The amount of collateral to be unlocked is calculated based upon the amount of UND repaid and the corresponding Collateralization Ratio (CR). Follow the steps below to unlock your collateralized assets.
- Click on the “Unlock” tab.
2. Select the collateral type you want to unlock by clicking on the “Select Token” dropdown.
3. Enter the amount of collateral you want to unlock or click on “MAX” to release your entire LP tokens. Alternatively, you can also enter the amount of UND you want to pay back.
Note: If you have your collateralized LP tokens staked in a yield farm, you will need to first Unstake them before you can Unlock your assets.
4. Click on the “Unlock” button.
5. Click on “Confirm” to confirm the transaction in your wallet.
Yayy!! You have successfully unlocked your collateralized assets.
How to Farm Collateralized LP tokens
- Click on the “Farm” tab.
2. Select the DEX you want to farm your LP tokens on.
Note: Initially, for the purpose of this guide we have added support for the USDT/USDC farms on QuickSwap. Support for other pool farms and DEXs will be added gradually.
3. Select the pool type you want to farm your tokens on and click on “Stake”.
4. Enter the amount of LP tokens you want to stake or click on “MAX” to stake all your available tokens and click “Stake”.
5. Confirm the transaction in your wallet. Your LPTs will be staked once you receive the “Transaction Successful” notification. You can now enjoy high APY on your assets.
6. To Unstake your assets, simply click on the “Unstake” dropdown.
7. Enter the amount you want to unstake or click on “MAX” to remove all your assets from the farm.
8. Click “Unstake” and confirm the transaction in your wallet.
9. To Harvest your farm rewards, click on the “Harvest” dropdown.
10. Click on “Harvest” and confirm the transaction in your wallet.
How to Add Liquidity to the UND Pools
This feature of the protocol enables users to earn rewards by adding liquidity to the UND pools, thereby compounding profits from existing DeFi investments.
- Click on the “Earn” tab on the dashboard.
2. Click on “View on QuickSwap”. It will redirect you to the UND pool on QuickSwap.
Note: Support for UND pools on other partnering AMMs will be added gradually.
3. On the supporting DEX, you can further add liquidity to the UND pool and earn additional rewards.
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