Module 3.2｜How Does Fulcrum Strategy Work

The Fulcrum Strategy operates through 4 essential steps that allow users to maximize their yield through leveraged yield farming. Here’s a detailed breakdown of each step, making it easy to understand.

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Step 1: Lenders deposit funds (USDC/USDT/SOL) into the lending pool.

The deposited funds are used to support borrowers who want to leverage their positions in JLP. It creates a source of capital that borrowers can access while providing lenders with an opportunity to earn interest on their deposits.

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Step 2: Leveragers Borrowing from the Lending Vault

This borrowing mechanism allows users leveragers to leverage their positions, meaning they can control more assets than they own outright. By taking out loans from the lending pool, the leverage vault amplifies its investment in JLP tokens.

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Step 3: NX purchasing JLP from Jupiter Exchange

NX Finance utilizes the borrowed capital to purchase JLP tokens from the Jupiter Exchange. The funds borrowed from the lending pool are directed towards acquiring JLP tokens, which represent liquidity provided to the Jupiter DEX. This purchase enhances the leverage vault's holdings of JLP, enabling it to benefit from potential price appreciation and yield generation.

Reminder: Some users may misunderstand the mechanism of NX Finance and think it operates like traditional lending protocols, where borrowed funds are sent directly to the user's wallet.

However, this is NOT the case! NX Finance is not a traditional lending protocol; it does not transfer borrowed funds to your wallet. Instead, NX executes the leverage position transaction automatically according to your leverage request.

The borrowed funds are managed by smart contracts and directly swapped for JLP tokens. As a result, users will not have direct access to the borrowed funds during this process.

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Step 4: Earning Yield with Real-Time APR

The lending pool compensates lenders with a real-time APR. As utilization rates increase, so does the APR offered to lenders. This incentivizes more deposits into the lending pool while providing borrowers with an opportunity to achieve boosted yields on their borrowed amounts, as they use these funds to invest in JLP. This dynamic creates a win-win situation where lenders earn attractive yields on their deposits while borrowers can leverage their positions for potentially higher returns.