How It Works

The StackFi protocol has two main user groups, each playing a different role in the system:

1. Passive Lenders

Passive lenders are users who want to earn yield with lower risk. They deposit their assets into StackFi’s liquidity pools, similar to supplying funds to protocols like Compound or Aave.

• Anyone can become a lender on StackFi

• Deposited assets are made available to borrowers

• In return, lenders earn APY on their assets

• Lenders are not actively trading or managing positions

Their role is to provide liquidity and earn passive income while the protocol manages risk through its design.

2. Borrowers (Active Users)

Borrowers are active traders, yield farmers, or even other protocols who want to increase their position size using leverage.

• Borrowers deposit collateral

• They can borrow liquidity worth up to 10× their initial capital

• This borrowed liquidity is used for trading, farming, or other DeFi strategies

• This multiplier is what gives StackFi its leverage power

Core Components of StackFi

Credit Accounts & Credit Managers

The key innovation behind StackFi is the Credit Account.

A Credit Account is an isolated smart contract, similar to a leveraged smart-contract wallet. It combines:

• The user’s own funds

• Borrowed liquidity from lenders

Each Credit Account:

• Has liquidation thresholds

• Can only interact with approved tokens and protocols

• Is designed to prevent malicious behavior (for example, borrowing funds to buy a fake token or interact with unsafe contracts)

Credit Managers control how these Credit Accounts operate and ensure risk rules are enforced.

No Asset Siloing, No Custody

StackFi does not lock assets inside its own protocol.

• All trading and farming happens on trusted third-party DeFi protocols such as Uniswap, PancakeSwap, Aave, and others

• StackFi does not have its own exchange, order books, or secondary market

• User funds are never held by a company or individual

Because of this:

• StackFi is not a trading platform

• There are no funding rates

• The protocol simply provides leverage and credit infrastructure

Liquidations & Risk Protection

Borrowed positions are monitored continuously.

• If a position becomes too risky, it is liquidated by third-party liquidators

• Liquidations happen before lenders’ funds are at risk

• When everything works as designed, liquidity providers’ assets are returned safely to their pools

This system is what allows StackFi to offer composable leverage while protecting lenders.

Fees & Governance

StackFi charges fees for certain operations.

• Fees are split between a Reserve Fund and protocol operations

• All parameters, fee structures, and spending decisions are controlled through governance

Modular & Composable by Design

StackFi’s core logic is built in a modular core layer that supports both lenders and borrowers.

• New liquidity pools can be connected without changing the core code

• Credit Account managers can be customized for different use cases

• This design makes integrations easier and safer

Because of this modularity, StackFi can:

• Support leverage for a wide range of assets

• Offer personalized rates, collateral limits, and risk segmentation

• Serve many use cases, including:

  • Trading

  • Yield farming

  • Liquidity provision

  • NFTs

  • Real-world assets (RWAs)

  • Long-tail assets without increasing lender risk

The Goal of StackFi

StackFi aims to be an open-source leverage and credit layer that integrates seamlessly with existing and future DeFi protocols. By focusing on composability and modular risk management, StackFi enables leverage across many products and user bases, while keeping capital efficient and risks controlled.