Supply

Provide Liquidity to Earn

In Vanna Protocol, liquidity providers (LPs) earn by supplying assets such as USDT, USDC, DAI, WBTC, ETH, and WETH into Vanna’s lending pools. These assets are borrowed by traders, generating passive income for LPs through interest and liquidation penalties.

Maximizing Utilization: Two Drivers of Demand

1. More Traders Borrowing Due to Composability: Vanna’s integration with multiple DeFi protocols and derivatives markets attracts a wide range of traders. This composability across different markets (e.g., perpetuals, options, spot trading) increases the number of traders borrowing from the pool, contributing to higher utilization.

2. Larger Amounts Borrowed Through Leverage: Even with fewer traders, under-collateralized borrowing with up to 10x leverage means a larger share of the pool’s liquidity is utilized. Traders can borrow significantly more than their collateral, leading to increased borrowing volume and higher interest accrual for LPs.

Isolated Lending Pools: Enhanced Security and Reduced Risk

Vanna’s isolated lending pools ensure that funds supplied by LPs are used exclusively for borrowing by traders and are not cross-connected with other pools. This structure reduces risk in several key ways:

• Protection from Exploits: In the event of a hack or exploit in one pool, the isolated nature of Vanna’s pools ensures that the risk is contained and does not affect other lending pools. This means LPs in unaffected pools remain secure and insulated from external risks.

• Mitigating Systemic Risk: Isolated pools prevent risks from spreading across the protocol. This means that issues or losses in one pool will not cascade into others, providing additional layers of security for LPs.

• No Impermanent Loss: Since the funds are only used for borrowing and not subject to market fluctuations or trading elsewhere within the protocol, LPs do not face impermanent loss, ensuring a safer environment for earning

vTokens: Your Supply Tokens

When LPs supply assets, they receive vTokens, representing their pool deposit. These vTokens:

• Accrue interest automatically based on pool utilization

• Can be redeemed for the underlying assets (plus interest) when LPs choose to withdraw their funds

• Provide a transparent way for LPs to track their share of the pool

Risk-Free Earning: Efficient Liquidations

Vanna’s efficient liquidation mechanisms further protect LPs. When a trader’s health factor falls below the required threshold, liquidations are triggered swiftly, and penalties are shared with LPs. This ensures zero risk for LPs, allowing them to confidently supply their assets without worrying about liquidation losses.

Dynamic Interest Rates

Interest rates adjust dynamically based on pool utilization—the more liquidity that’s borrowed, whether due to more traders or higher leverage, the higher the interest rates LPs earn. vTokens reflect the growth in LPs’ share of the pool as interest accrues.

By supplying assets to Vanna, LPs benefit from both the increased borrowing volume driven by leverage and the wider participation of traders using the platform’s composable features, while tracking their returns through vTokens.