Skip to main content
At a high level, Lora Finance functions as a marketplace between two sides:
  • On one side, we have users who want upside exposure to an asset (let’s call them “renters” of upside). These users open positions in Lora to simulate holding more of an asset than they actually own, in exchange for paying a fee over time.
  • On the other side, we have liquidity providers (LPs) who supply assets to a vault in the Lora protocol. These LPs are essentially making their assets available to back the exposure that renters seek, and in return they earn the fees that renters pay.

​
How do these sides interact?

When a user opens a position for, say, 1 unit of Asset X’s upside, the protocol will ensure that the vault allocates 1 unit of Asset X to cover this position. The user starts paying a streaming fee (denominated in a payment asset, e.g., a stablecoin or the asset itself depending on design) that flows to the LPs. This fee is essentially the “rent” for using that 1 unit of Asset X’s worth of exposure. Behind the scenes, Lora’s smart contracts dynamically adjust balances: the user’s position is credited with the chosen exposure amount, and the vault’s available liquidity is reduced by that amount (since it’s now tied to the user’s position). The continuous fees from the user go into the vault or to the LPs, compensating them for the opportunity cost of letting the user capture the asset’s upside.

​
Profit and Loss

Profit and loss for the position are determined by the asset’s price movement:
  • If Asset X’s price increases while the position is open, the user’s position accumulates profit (just as if they held Asset X directly). This profit will ultimately come out of the vault’s assets when the position is closed *(transferred to the user)**.
  • If Asset X’s price decreases, the position accrues a loss. However, the user doesn’t face a liquidation. They can choose to keep the position open (hoping for a recovery) or close it to stop paying further fees. If they close at a loss, essentially they walk away having paid fees and with no profit (similar to someone who bought the asset and saw it drop in value, then sold).
  • In either case, the streaming fees ensure that LPs are compensated. If the user made a profit, the LPs effectively funded that profit via their asset’s appreciation, but they earned the rental fees in the meantime (much like an insurance premium). If the user made a loss, the LPs keep the fees and also suffer the asset’s price drop on their side (similar to just holding the asset through a dip, but with extra fee income to offset it).
Crucially, because the user’s obligation is only to keep paying the streaming fee, there is never a sudden margin call. The position will only terminate when the user decides to close it or if the user’s streaming payments run out (for example, if their payment balance is exhausted – in which case the protocol can automatically close the position safely). This design removes the timing risk for users; they aren’t forced out of their position at the worst possible moment by automated liquidation, a major differentiator from traditional leveraged trading.