Using Leverage with Seneca Vaults

When users deposit SEN to their desired vault, it enables the vault to mint Seneca Dollars undercollateralized, acquire the user’s desired assets, and collateralize the stablecoin - entirely in the same transaction! This enables users access to highly efficient leveraged farming, without exposing the protocol to undercollateralization risks. This process can be broken down further in the following example, using everyone’s favorite Arbitrum-native perps LP:

Step 1 - The user selects the desired leverage, obtains SEN using a DEX or lending market, and deposits it as collateral in the GLP vault.

Step 2 - Given the selected leverage, the protocol mints the respective amount of SEN.

Step 3 - These SEN are swapped into USDC, ETH, or whichever asset is incentivized for GLP deposit. (current price peg and slippage play an important role here).

Step 4 - These assets are deposited into GMX to recieve GLP tokens.

Step 6 - These GLP tokens are held within the Seneca Protocol, used to collateralize the SEN minted in step 2.

Step 7 - The user enjoys the yield of all the GLP collateralizing the newly minted SEN, while the protocol is protected from insolvency/undercollateralization by the presence of a liquid collateral type.