A few months back, Pashov Audit Group audited @PeapodsFinance’s LVF upgrade.
Over a 4-week audit, it became clear how LVF’s fundamentally novel approach to yield & leverage can be a game-changer for DeFi, ultimately leading me to become $PEAS liquid investor 🧵
2/ Imagine a protocol that allows you to:
• Earn single-sided, real, sustainable yield
• Obtain extra-safe leverage
• Borrow ETH + stables
All on/against ANY token.
This is what we saw looking at Peapods' LVF codebase. Quite interesting, eh?
3/ So, how does it work?
Peapods pioneered Volatility Farming, letting users earn real yield from the natural ups & downs of crypto prices, by taxing arbitrage bots.
Volatility Farming turns market volatility from a necessary evil into a way to generate sustainable profits.
4/ Anyone can create a ‘Pod’ - a vault that wraps any token for a pToken. pTokens are fully backed and can be redeemed for the underlying by unwrapping.
Since pTokens are traded on DEXs, price differences emerge vs the underlying token as markets move.
5/ This creates arbitrage opportunities. To close these, (un-)wrapping must occur, generating protocol fees that are distributed as yield to Pod LPs and other stakeholders.
More volatility → more protocol fees → more yield. Hence the name ‘Volatility Farming.’
6/ A friction point in OG Volatility Farming was the need to hold 50% of position value in a paired asset to LP and earn yield.
This is where Leveraged Volatility Farming (LVF) comes in.
7/ LVF natively integrates lending markets into Volatility Farming, allowing users to simply borrow the paired asset needed to LP.
Outcome: increased efficiency & profitability.
Users earn 2x yield while keeping full exposure to their favorite asset.
8/ LVF introduces Self-Lending Pods: through paired asset abstraction + flashloans, a user can bootstrap an entire Pod by borrowing from themselves🤯
This instantly creates the LP and locks in demand, without needing anyone else to supply first.
9/ Peapods calls this mechanism “Proof of Demand” (POD).
The user sets up the position and becomes the first borrower themselves. From block #1, the Pod is at 100% utilization, clearly signaling the market there’s already demand willing to pay.
10/ Instead of waiting for suppliers or bribing them with emissions, LVF flips the model: demand is locked in immediately, and interest rates keep rising until someone steps in for the high APR.
This fundamentally solves the chicken-and-egg problem.
11/ On the supply side, a unified liquidity layer of Metavaults ensures best risk-adjusted yields by automatically allocating funds to Pods based on just-in-time demand and risk.
$PEAS holders will set caps and boundaries through token voting.
12/ Together, these features prime Peapods as an emerging DeFi one-stop shop, delivering:
• Best-in-class single-sided yield on any token
• Extra-safe leverage on any token
• Borrow ETH + stables vs any token
• Free liquidity rails for projects
We enjoyed auditing this design - strengthening oracle safety, validating liquidation logic, and ensuring LVF’s novel mechanisms hold under stress🫡
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