How it Works

The breakdown of Arkis's innerworkings

Participants in Arkis

There are two participants in Arkis:

• Liquidity Providers: LPs contribute to the liquidity pools to earn a passive yield on their assets, without the risk of impermanent loss. They have the flexibility to choose the tokens and blockchains where they wish to deposit their assets.

• Asset Managers (Borrowers): Asset Managers seek additional capital to enhance their trading strategies and improve investment returns.

Secure Leverage Provision

Margin Accounts

A Margin Account in Arkis is a smart contract where Asset Managers deposit collateral and obtain credit from liquidity pools funded by Liquidity Providers. These accounts are restricted to trading operations using whitelisted protocols and tokens. For example, traders might:

• Swap wBTC for eETH tokens using the 1Inch protocol.

• Provide liquidity to a USDC/wETH pool on Uniswap and claim fees as necessary.

• Deposit USDC and USDT into a Curve liquidity pool and subsequently invest the LP token into Convex.

Margin Accounts enable a seamless trading experience on approved protocols and tokens, similar to trading directly from a trader’s personal wallet. Arkis integrates with existing protocols by creating smart contract adapters, allowing users to operate through familiar interfaces like Curve or Uniswap using Wallet Connect. This setup preserves the native trading experience but extends undercollateralized leverage and ensures appropriate liquidation processes if a trader’s portfolio begins to decline in value.

However, Asset Managers cannot transfer funds to unapproved destinations or engage with high-risk protocols or questionable liquidity pools. This safeguard ensures that while traders can obtain necessary leverage for their operations, they must use it within the boundaries of secure, sanctioned trading environments.

Cross-Chain Architecture

Currently, Arkis operates on Ethereum Mainnet only; however, our architecture was designed to operate in cross-chain.

Margin Accounts may involve multiple smart contracts across different chains, allowing traders to leverage assets on one blockchain to open positions on another, manage positions across chains, and bridge assets between contracts on different chains.

Portfolio Margin

Exotic Collateral and Partial Withdrawal

Within Arkis, Asset Managers can collateralize LP tokens, Pendle PT/LP positions, new stablecoins, or other yield-bearing positions. Within Arkis, users can get overcollateralized loans over yield-bearing assets (or portfolios of assets) and withdraw leverage on an external wallet (centralized exchange). For example:

• Asset Manager provides 1 000 000 USDC worth of Pendle PT tokens.

• Borrow 500 000 USDC.

• They will withdraw 500 000 USDC to their personal wallet/exchange account, while Pende PT tokens will sit on a Margin Account to secure the loan.

Unified Portfolio View

Arkis Protocol maintains a unified view of all positions across different chains within a Margin Account. This comprehensive approach is crucial for managing the complexities faced by professional asset managers who often handle numerous positions across various protocols. Unlike many lending protocols that evaluate positions in isolation, potentially leading to premature liquidations based on a negative profit and loss (P&L) in a single collateral position, Arkis considers the total portfolio value. This holistic view ensures that as long as the aggregate portfolio P&L remains positive, individual losses do not trigger unnecessary liquidations.

Flexibility and Risk Management

The unified portfolio view provides the necessary flexibility for asset managers and traders by allowing them to leverage multiple positions that may serve different strategic purposes—some may be profit-generating while others could be defensive hedges against potential risks. Arkis’s system supports a variety of operations with collateral—such as swaps or liquidity pool supplies—without necessitating immediate liquidation, provided the total value of the portfolio in terms of the borrowed asset remains sufficiently high. This ensures that loans are considered healthy and continue to support the trader's broader strategies.

Arkis Margin Engine

Ensuring the health of a trader's portfolio is managed by the Arkis Margin Engine, a sophisticated real-time analytics system that provides centralized portfolio risk assessment. The Margin Engine actively monitors the values of Margin Accounts, estimating their current worth and operational status. If the value of a Margin Account falls below a certain threshold, the Margin Engine promptly signals the Arkis Protocol to initiate potential liquidation processes. This mechanism is essential for maintaining the integrity and sustainability of financial operations within the Arkis ecosystem.