New Warp Finance DeFi Protocol to Collateralize Liquidity Provider Tokens

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There has been no shortage of new decentralized finance earning protocols released this year and they continue to launch as the sector evolves. The latest is Warp Finance, which has the grand plan of creating new use cases for unused liquidity provider (LP) tokens.



Announced in early November, Warp Finance is a new DeFi platform that enables users to deposit liquidity provider (LP) tokens and receive stablecoin loans in exchange.

At the same time, their LP tokens continue to earn rewards from Uniswap fees.



The ‘Litepaper’ explains;

“By lending LP tokens compared to other assets, users are able to continue earning trade fees from Uniswap, reducing the effective interest rate paid.”

LP Token Revival

The process of providing liquidity to a pool usually involves depositing an asset pair, like USDT/ETH for example, onto the decentralized exchange in exchange for LP tokens for that pair. These tokens can then be deposited into the ‘farm’ to earn whatever token the protocol is distributing at the time.

The largest of these liquidity mines to run this year was Uniswap’s four UNI pools which accrued over $2.5 billion in crypto collateral at the time. Liquidity mining has now ended on Uniswap resulting in an exodus of collateral, but those LP tokens can still be used on Warp Finance.

Without dedicated liquidity pools to earn new tokens, those LP tokens are somewhat redundant on Uniswap. According to DeFi Pulse, there is around $1.4 billion worth of these tokens on the DEX today.

In late August, SushiSwap had the bright idea of further incentivizing Uniswap LP tokens but is now running on its own independent platform.

Users seeking loans will be able to deposit Uniswap LP tokens generated from the following four pairs: WBTC/ETH, ETH/USDC, ETH/USDT, and ETH/DAI. Tokens will be over collateralized by 150%, enabling the borrowing of 1.5 times more than what was deposited.

Stablecoin loans can then be taken at a fluctuating interest rate which is based on the availability of the respective stablecoin within the liquidity pool. A share of Uniswap’s 0.3% trading fees can still be earned on tokens in the pool.

Lenders will be able to supply DAI, USDC, and USDT to Warp Finance in order to earn a share of the interest paid by the borrowers.

Engage WARP Drive  

The token generation event has been scheduled for January 2021 in a ‘fair launch’ whereby WARP governance tokens can only be earned by active participation and use of the platform. There will be a total supply of 150,000 WARP tokens, priced at $50 on launch.

The platform added that to bootstrap the ecosystem, various short-term campaigns will begin at the time of launch to encourage active participation. These are likely to include liquidity mining pools to earn WARP tokens in addition to the aforementioned rewards.

Early participants will also be able to compete for token rewards and earn limited-edition non-fungible tokens (NFTs) in a recently announced Team Explorer Campaign.


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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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