Leverage

Leverage is a strategy that involves using borrowed funds to expand investment size, allowing users in Web3 lending protocols to take on larger positions based on their collateral. By leveraging, users can amplify potential returns if asset values rise; however, this also increases risk due to price fluctuations, as falling asset values can lead to a higher likelihood of liquidation. In Web3 lending protocols, leverage is typically implemented through collateralized borrowing, providing users the opportunity to maximize asset efficiency and enhance profitability potential.