Borrowing Against Aquarius LP Tokens on Stellar: Venues and Leverage Maths

Why LP collateral matters

An LP token is a claim on two assets in a pool plus the fees they earn. Using it as collateral lets a liquidity provider borrow against that claim and add more liquidity, turning a fixed position into a levered one.

On Ethereum and Solana this is a mature category: LP and yield-bearing tokens are routine collateral, and curated vaults run looped positions for users. On Stellar the pieces arrived separately. Aquarius issues transferable SEP-41 LP share tokens, and Soroban lending venues support flash loans. What was missing was a venue willing to list the LP tokens themselves.

Where you can borrow against an LP today

XOXNO Lending is the first venue on Stellar to list Aquarius LP tokens, in its mainnet configuration from August 2026. The LPs are collateral-only: you can deposit them, but nobody can borrow them. They sit in two isolated risk groups, "AMM Collateral" and "Aquarius Ecosystem":

Aquarius LP	Max LTV	Liquidation threshold	Liquidation bonus	Supply cap
XLM/AQUA	50%	60%	10%	5,000,000 LP
AQUA/USDC	50%	60%	10%	5,000,000 LP
XLM/USDC	50%	60%	10%	500 LP
PYUSD/USDC, USDY/USDC, CETES/USDC, USTRY/USDC, XAUM/USDC, XLM/SolvBTC	50%	60%	10%	200–500 LP

Against them you can borrow XLM, USDC, EURC or PYUSD, and XOXNO supports flash loans on those assets, which is what makes a one-transaction loop possible. Two caveats. First, the supply caps on most pairs are small, so capacity is limited today. Second, XOXNO's Stellar deployment is young and small, with roughly $74K of TVL on DefiLlama at the time of writing.

Blend V2 can list LP tokens too, because anyone can deploy a pool with any collateral. We are not aware of a major Blend pool listing Aquarius LPs as of this writing, and Blend paused its backstop after the August Comet exploit, so check its current status first.

How a leveraged LP position works

Take $1,000 in an XLM/USDC LP and a target of 1.5× exposure. Done by hand, you would deposit the LP, borrow XLM, swap half to USDC, add liquidity, deposit the new LP, and repeat. Each pass adds less, costs more fees, and leaves the position exposed between steps.

A flash loan does it in one transaction:

1. Flash-borrow $500 of XLM.
2. Swap half to USDC and add both to the pool, receiving about $500 of new LP.
3. Deposit all $1,500 of LP as collateral.
4. Borrow $500 of XLM against it and repay the flash loan.

You end with $1,500 of LP exposure and $500 of XLM debt, and the venue checks health once, at the end. This is the pattern XOXNO's "multiply" feature and WhaleHub's leverage vault (in testnet development) both use.

The maths: yield and liquidation

Yield. At leverage L, return on your equity is the LP yield on the whole position minus interest on the borrowed part:

net APY = LP APY × L − borrow APR × (L − 1)

With an LP earning 10.77% (the Aquarius XLM/USDC concentrated pool's unboosted rate in August) at 1.5×: borrowing at 0.10% nets 16.11%; at 5% it nets 13.66%; at 10.79% it nets 10.76%, the same as not levering at all. Leverage only pays while the borrow rate stays well under the LP yield, and borrow rates move with utilisation.

Liquidation. With XLM debt against an XLM/USDC LP, the risk is an XLM rally. In a constant-product pool the LP's value grows with the square root of the XLM price, while XLM debt grows one-for-one. With a 60% liquidation threshold, the health factor starts at 0.6 × L ÷ (L − 1) and falls with the square root of the price move:

Leverage	Starting health factor	XLM rise that liquidates
1.25×	3.00	+800%
1.50×	1.80	+224%
1.75×	1.40	+96%
2.00× (max at 50% LTV)	1.20	+44%

These figures ignore interest, fees and the extra impermanent loss of concentrated ranges, all of which bring liquidation closer. A falling XLM price makes this position safer, because the debt shrinks faster than the collateral. Borrowing USDC instead flips that: a falling XLM becomes the risk.

Questions to ask before looping

• Do rewards still reach you? Aquarius rewards accrue to the address holding the LP token. Once it is in a lending contract, whether you still receive them depends on the venue, and rewards are often a large share of LP yield.
• How is the LP priced? An LP priced from the pool's own spot price can be manipulated; one priced from the pool invariant and independent feeds is much harder to move. The YieldBlox exploit shows what happens when collateral pricing is weak.
• What is the borrow rate, and how fast can it change? Utilisation-driven rates can jump when others borrow the same asset.
• How deep is the exit? Unwinding sells through the same Aquarius pool. A large unwind in a shallow pool moves the price against you.
• Who watches the position? A self-managed loop has no one deleveraging it at 3am during a rally.

The takeaway

LP collateral is a genuine new primitive for Stellar, and the numbers make the trade clear: modest leverage, a borrow rate well below the LP yield, and a price move you can survive. The maximum leverage a venue allows is not the leverage worth using.

Sources: XOXNO rs-lending-xlm mainnet configuration (configs/mainnet/markets.json, spokes.json); DefiLlama; Aquarius pool data as of August 2026. Supply caps and parameters can change through XOXNO governance.