Particle is a decentralized leverage trading system that allows any digital asset to be traded without permission. ^[1][2]

Overview

Particle LAMM, short for Leverage AMM (Automated Market Maker), is a protocol developed by Particle Labs. It’s designed to make any ERC-20 token tradable with leverage. To leverage the vast amount of DeFi liquidity, Particle protocol enables traders to directly borrow from liquidity pools at automated market makers (AMMs) with concentrated liquidity. ^[3][8]

On January 11, 2024, the Particle team announced that it had raised a seed round led by Polychain Capital, to make leverage trading permissionless. Other investors involved in the funding include Nascent, Inflection, Neon DAO, Naveen Jain, Arthur Hayes, DCF God, Sam Williams, Kalos, Richard Ma, Palmer, vxCozy, etc. ^[4]

Trading

Open Positions

Traders can long or short any token with leverage as long as there is liquidity. The maximum leverage available depends on liquidity concentration. ^[5]

To open each leverage position, there are two parts of payment — collateral and premium. The collateral is the maximum amount that a position can lose if the price moves in an undesirable direction. The premium is for interest accrual and the leftover portion will be repaid at position closing. ^[5]

Closed Positions

For PnL calculation, the frontend displays a simulated PnL based on the entry price, current price, leverage ratio, accrued interest, and fees. ^[6]

Any residual of the position token left (e.g., WETH, if the trader is using USDC to long WETH) is returned to the trader's wallet at position closing. The trader may choose to swap into the source token (e.g., USDC) afterward. ^[6]

Earning

When providing liquidity, the LAMM protocol ensures that the LP earns a higher yield while experiencing no higher impermanent loss compared to the underlying AMM. Until the liquidity is borrowed for leverage trading, the supplied liquidity is used for swapping in the AMM by default. While the liquidity is borrowed, it generates the same yield as if the liquidity were still used for swapping, together with a position fee. This process is called liquidity restaking. ^[3][7]

Yield

By default, the liquidity on LAMM is used by the underlying AMM, which generates a swapping fee if the concentrated liquidity is in range. From the AMM point of view, the LAMM contract is an LP owning all the liquidity. For all the swapping fees, yield, and other rewards generated by the underlying AMM or chain, the LAMM protocol routes them all to each LP proportional to their deposit. ^[7]

Impermanent Loss

The borrower of each leverage position is required to pay an upfront collateral. The collateral amount is sufficient so that LP can always withdraw the same amount of tokens compared to the underlying AMM, no matter how the price moves. In other words, the LP would experience no higher impermanent loss, compared to the original AMM. ^[7]

Liquidity Withdrawal

LPs can withdraw the generated swapping fee and the remaining liquidity at any time from the protocol. The yield is accrued periodically and can be withdrawn any time after the protocol claims it from the underlying AMM or chain. ^[7]

Interest

LPs can also collect the accrued interest without withdrawing the liquidity from a liquidity position. This interest includes both the swapping fee-generated interest, as well as the position fee and lending generated interest. ^[7]