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How Loopscale Collateralizes CLMM Liquidity Positions

Concentrated liquidity positions are a significant asset class on Solana, operating within defined price ranges earning yield from trading fees. But before Loopscale, they couldn’t be used as collateral anywhere. On Loopscale, LP tokens from Orca and Raydium can be posted as collateral for borrowing, something only possible because Loopscale’s order book architecture prices each position on its own terms rather than running it through a pooled lending model.

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Why pool-based lending can’t price LP collateral

Pool-based lending protocols set a single borrow rate based on utilization. That rate applies regardless of what collateral is backing the loan. A borrow against USDT gets the same rate as a borrow against a concentrated liquidity position, which makes no sense from a risk-pricing perspective. LP positions are structurally different from standard tokens. A concentrated liquidity position has a price range, a fee tier, and exposure to two underlying assets. Pricing this kind of collateral requires evaluating each position individually — its composition, its range, its underlying assets. Pool-based models aren’t built for that. They’re built for single tokens with a single oracle price.

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How Loopscale’s order book handles it

Loopscale’s order book architecture matches lenders and borrowers directly, with each loan priced per collateral. A lender decides what collateral they’ll accept, at what LTV, at what rate, for what duration. If a lender is comfortable with a USDT-USDC Whirlpool position as collateral — a stablecoin pair with tight range and predictable behavior — they can offer terms that reflect that specific risk profile. A different lender might price a volatile LP pair differently. In practice, most LP lending happens through Vaults. Orca launched dedicated Vaults on Loopscale — one for USDC and one for USDG — that fund borrowing against Orca LP positions. The underlying mechanism is the same whether the lender is a Vault or an individual: per-collateral pricing, isolated risk, and fixed rates.

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How to borrow against LP positions

To borrow against a concentrated liquidity position, go to app.loopscale.com/borrow and select the asset you want to borrow. Available collateral types are typically scoped to the borrow asset — a USDC borrow will show USDC-paired LP positions as eligible collateral, a SOL borrow will show SOL-paired positions, and so on. Select your LP position, set your desired LTV, and confirm the transaction. For users looking to utilize the full power of Loopscale: these positions can be manually looped to gain leverage on a CLMM LP. Concentrated liquidity positions are some of the most powerful on-chain primitives in DeFi. Supporting them as collateral requires a lending model that can evaluate each position individually — that’s Loopscale’s order book-based markets.