Borrowing against a liquidity position without closing it
A Uniswap range is an asset worth borrowing against. Two operations put one in a vault and lend you money, with the position left earning fees throughout.
In short: you need cash, but your money is in a Uniswap liquidity position that earns fees, and closing it ends that income. You can put the position in a vault and borrow against it. It stays in the pool, keeps its range and keeps earning fees while the loan is open. The cost is interest, plus more work later: with debt on it, collecting fees or moving the range each need the debt cleared first.
You need money and you own a liquidity position. The obvious move is to close it, which costs you the fee income, books whatever the range has done to your ratio, and leaves you to rebuild later at a price you cannot predict. You can instead borrow against the position and leave it where it is.
Two operations
- Deposit and borrow
- Moves a position you already hold into the vault and borrows against it in the same step. The borrow is optional: leave it out and the position is deposited, ready to borrow against later
- Borrow more
- Draws further against a position already in the vault. The amount is required here, because nothing else in the step could say how much
The reason for that second detail: the step’s own amount field is carrying the position’s identifier, so it cannot also carry a size, and the borrow amount has to be stated explicitly. A borrow of zero would be a transaction that did nothing, so it is not treated as a default.
What the position keeps doing
It stays in the pool. It keeps collecting fees. The range is unchanged and the liquidity is unchanged; the only new fact is a claim against it.
That is why you would do this instead of selling. A working liquidity position has a return you stop receiving the moment you close it, and deciding later to get back in will not get you the same position at the same price.
The cost of the debt
There are two costs.
- Interest, continuously, on what you drew.
- Everything else becomes harder. Once there is debt against the position, collecting the fees, adding liquidity, moving the range and splitting it each require the debt to be cleared first, which is why they are all flash-funded operations here. That cost is invisible until you try to do routine maintenance and find it is no longer routine.
Which asset
The borrow asset determines which vault market you are in. Each symbol is its own market, so choosing the asset also chooses where the position lives, as well as what arrives in your account.