How Everlong Works

High-level flow:

1. User deposits asset into an Everlong vault.

2. Vault flash-mints a stablecoin equal to the deposit value and pairs it with the user’s asset to create LP tokens on an AMM (UniswapV3-ALM).

3. Vault posts the LP as CDP collateral and mints stablecoins to repay the flashloan. The vault continually manages rebalancing to target leverage.

4. The depositor receives vault shares (re-hypothecatable ERC-4626 style) - effectively full exposure to BTC/ETH with additional yield captured from LP fees and incentives.

Where the yield comes from

Everlong generates yield from trading fees earned by providing concentrated liquidity on an AMM. When the vault supplies liquidity into an AMM range, the pool charges fees on trades that cross that range. Those fees accumulate to the LP position and are captured when the ALM withdraws liquidity or rebalances. Everlong’s vaults convert those fee accruals into value for depositors while preserving exposure to the underlying asset.

Key points:

• Fee capture is the primary source of yield. The ALM concentrates liquidity where most volume occurs, maximising fees per unit of capital.

• Fee capture vs impermanent loss (IL). For assets with relatively lower volatility and high trading volume (today: BTC and ETH in our tests), fee income can offset IL. We calibrate tick widths, weights, and rebalancing frequency to favour fee capture while limiting IL risk. See backtested performance here.

How Everlong can outperform holding

When you deposit an asset into Everlong you keep full exposure to the underlying asset, while the vault uses a looped LP-as-collateral structure so more of your capital is put to work in fee-generating liquidity without sacrificing your directional exposure.

Step-by-step overview:

1. You deposit 1 unit of the asset (for example 1 BTC). You remain long that asset through the vault share accounting.

2. Vault flash-mints stablecoins equal to the deposit value. The vault pairs stablecoins with your BTC and supplies both sides into the AMM . That creates an LP position where the non-volatile side is the stablecoin (debt) and the volatile side is your equity.

3. LP is posted as collateral. The LP is used as CDP collateral to mint the stablecoins to repay the flashmint.

Because the other side of the LP is (debt), you maintain directional exposure. Price gains in the volatile asset accrue to the depositor, while the stablecoin side is a debt exposure - this design keeps the depositor effectively “long” the asset while earning LP fees.

What that delivers in practice

• Twice the liquidity earning fees. Because of the stablecoin debt side you have double the amount of liquidty in the AMM. This means you get double the fees.

• Lower rebalancing cost per unit of exposure. Because half of your liquidity is debt, that decreases rebalancing costs as you can mint and repay stablecoins vs having to buy or sell.

Example

• If you deposit 1 BTC, the vault mints stablecoins worth 1 BTC and supplies 1 BTC + 1 BTC worth of stablecoins into the AMM (then loops by using the LP as collateral). The result is more liquidity working for you (fee capture) while the vault’s accounting preserves your 1 BTC directional exposure. Over time, fees earned reduce the net cost of maintaining that exposure (and in onchain tested and simulated scenarios continouslty produces net positive yield after IL and costs).

Note: the specific multiple and the net outcome depend on ALM parameters (tick widths, weights, rebalance cadence), pool depth, and realised trade volume. We tested extensively on BTC and ETH to calibrate these parameters.

Risk-reduction mechanisms that help outperform a simple hold

• Controlled leverage band. We run inside explicit top/bottom leverage bands so the vault cannot overextend and is always kept above audited collateralisation limits. This reduces tail liquidation risk compared with naive looping.

• ALM tick placement and liquidity allocation. Tick ranges and liquidity weights are computed by our quant models to maximise swap fees while reducing IL. Widths of liquidity bands are adjusted dynamically to tighten around active price action when it is profitable to do so.