Inverse Finance Protocol

1 min read

Pronunciation

[in-vurs fye-nans proh-tuh-kawl]

Analogy

Like taking out a loan to borrow shares you don’t own, selling them, and profiting if the price falls, except managed via smart contracts.

Definition

A lending that allows users to borrow synthetic inverse tokens—whose value moves opposite to underlying assets—enabling on‑chain short positions without centralized intermediaries.

Key Points Intro

Inverse Finance issues negative‑peg tokens to let users profit from asset price declines .

Key Points

Inverse tokens: iUSD, iBTC decline when underlying rises.

Collateralized debt: Users post collateral and mint inverse tokens.

Automated market maker: Liquidity for minting and redemption.

Liquidation: Under-collateralized positions are liquidated.

Example

A user deposits 150 USDC collateral and mints iBTC; if BTC price falls 10%, their iBTC position gains 10% relative value.

Technical Deep Dive

uses collateral vaults with LTV ratios. Minting contract calculates inverse issuance: amount = collateral × LTV / price. AMM pools facilitate swaps between inverse and tokens. feeds drive price updates for collateral health checks.

Security Warning

Inverse tokens carry amplified risk; rapid price moves can trigger liquidations and in AMM pools.

Caveat

Inverse exposure resets require careful risk management; not suitable for long-term holding.

Related Terms

Synthetic Asset

Oracle

Blockchain & Cryptocurrency Glossary

Inverse Finance Protocol - Related Articles