> For the complete documentation index, see [llms.txt](https://whalehub-1.gitbook.io/whalehub/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://whalehub-1.gitbook.io/whalehub/leveraged-farming/how-leverage-works.md).

# How Leverage Works

Opening a leveraged position is a single signed transaction. Everything below happens inside it — there is no moment where you hold a half-built position, and nothing to babysit between steps.

> **Status: testnet preview.** Addresses and flows on this page are live on Stellar testnet only.

## The one-transaction open

```mermaid
sequenceDiagram
    autonumber
    participant U as You
    participant V as Leverage vault
    participant P as Blend pool
    participant Z as Zapper
    participant A as Aquarius pool
    U->>V: deposit LP as equity
    V->>P: flash_loan — borrow the asset
    P->>Z: hand over the borrowed asset
    Z->>A: swap half, deposit both legs
    A-->>Z: new LP minted
    Z->>V: send the new LP to the vault
    P->>V: take equity + new LP as collateral
    P->>P: one health check, at the end
    V->>U: credit your share of the position
```

Why a flash loan matters: without it, reaching the same leverage means looping `supply → borrow → swap → supply` several times. Each pass adds less leverage, costs more in fees, and leaves you liquidatable *between* passes. Blend's flash loan runs the health check **once, at the end**, so the position is never observably unhealthy while it is being built.

## What protects the transaction

| Guard           | Where     | What it does                                                                                            |
| --------------- | --------- | ------------------------------------------------------------------------------------------------------- |
| Leverage cap    | Vault     | Rejects the open if the requested leverage exceeds the on-chain cap                                     |
| Slippage bounds | Zapper    | The swap and the deposit must produce at least the amounts you quoted, or the whole transaction reverts |
| Health check    | Blend     | The final position must be solvent, or the whole transaction reverts                                    |
| Live quote      | Interface | The expected LP output is computed from the pool's current reserves before you sign                     |

Because all of it is one transaction, a failure anywhere means nothing happened — you keep your LP and pay only the network fee.

## How your position is tracked

The vault holds one Blend position and records each depositor as **shares** of it. Your position is not stored as a number; it is calculated from live Blend state every time it is read:

```
your collateral = your collateral shares ÷ all collateral shares × the vault's collateral on Blend
your debt       = your debt shares       ÷ all debt shares       × the vault's debt on Blend
```

This is why interest and liquidation losses spread across depositors automatically, with nothing to reconcile. It is also the reason for the v1 caveat in [What Is Leveraged Farming](/whalehub/leveraged-farming/what-is-leveraged-farming.md#what-you-are-taking-on): losses are shared rather than isolated.

## Closing a position

Unwinding is `repay + withdraw`, and works partially or in full:

```
You repay part of the debt
└── The vault repays Blend and withdraws that much LP collateral
    └── LP returns to your wallet
        └── Your shares burn in proportion — everyone else's position is untouched
```

In v1 you bring the asset to repay with. A self-closing unwind — flash-borrowing the repayment and settling it out of the withdrawn LP — is planned.

## If a position goes underwater

Liquidation happens on Blend, not in the vault. When collateral value falls too far against the debt, anyone can start a Blend auction on the position, and the winning liquidator unwinds it atomically: win the auction, withdraw the LP through Aquarius into its two assets, swap one leg, repay the borrow.

WhaleHub runs a liquidation bot so auctions clear from day one, and publishes an MIT-licensed reference liquidator so anyone else can run one too. Neither holds any special permission — a liquidator can only do what any other participant could do.

The interface shows a live health factor on every open position, with alerts as it approaches the liquidation boundary.

## Testnet addresses

| Contract       | Address                                                    |
| -------------- | ---------------------------------------------------------- |
| Leverage vault | `CC2JF2VP3LVNHYI7URF3R376FCVFSAI4HNVZ2WPZZHBJDAJSWX2X2PFH` |
| Zapper         | `CCUDFI62LH2IMHGSRBLLF7SIKRPDQ3LZPA4TYFBFS5ENRYWZOHOKSHT2` |
| Blend pool     | `CDSFGJOQ5RHIPK5522VVCNYNOQH4ECGRTPWZK6QBQV4XXA4IAE5BVTW4` |

Both WhaleHub contracts are upgradeable behind stable addresses, so fixes ship without migrating positions. Full engineering detail, including verification transactions, is in the technical reference.