Deep dive into leverage
Learn how leverage works, what risks are associated with it, and how to manage them
Leverage is an optional feature in JPool’s Direct Staking that lets you amplify your stake without adding extra SOL. By temporarily borrowing additional SOL via a flash loan and using it to stake more, you can boost your staking rewards. In essence, you stake a larger amount than you initially deposit, resulting in a higher APY on your position. This comes with a minimal risk of liquidation (if interest costs ever outpace rewards), but JPool provides tools to monitor and manage that risk.
Where additional yield comes from
The additional yield comes from earning rewards on the amplified stake (JPool's APY), while paying the interest rate (borrow APR) on the outstanding debt to the lending platform. The positive difference between these two rates is reflected by the Leverage APY.
Leverage multiplier
The leverage multiplier expresses how many times larger your effective stake becomes once borrowed SOL is added to the SOL you supply. It is determined by the target Loan-to-Value (LTV) set for the position and by the small borrow fee taken by the lending platform:
Multiplier = 1 / (1 − LTV × (1 − Borrow Fee))
A higher multiplier draws more SOL from the lending pool, increasing the stake and boosting APY. At the same time, it raises LTV and reduces the Health Factor, moving the position closer to its liquidation threshold. Select a multiplier that delivers the yield you want while keeping the Health Factor in a range you consider safe.
How leverage works
When you stake with leverage, JPool executes a complex sequence in one atomic transaction to increase your staked amount. Here’s how the process works under the hood:
When you stake with leverage
Take a flash loan for extra SOL: JPool takes out a flash loan to instantly provide the extra SOL needed for leverage. This is a temporary loan that must be repaid within the same transaction.
Stake borrowed SOL: The flash-loaned SOL are staked to your chosen validator through JPool, just like normal direct stake. This larger combined amount earns rewards.
Mint JSOL and deposit it as collateral: In return for the stake, JPool mints the equivalent JSOL tokens. These newly minted JSOL (representing the full staked amount) are immediately deposited to the lending platform as collateral.
Borrow SOL against collateral: Using the JSOL collateral, JPool borrows fresh SOL from the lending platform (up to the allowed Loan-to-Value ratio).
Repay flash loan: Your initial SOL and part of the borrowed SOL are used to repay the flash loan within the same transaction.
All of the above happens within a single transaction on Solana’s blockchain, so the leverage setup is seamless and atomic (either it all succeeds or it fails/doesn’t execute). After this, you end up with a leveraged staking position: your JSOL is locked as collateral on the lending platform and you have an outstanding SOL loan, but you’ve successfully staked a larger amount than you originally had.
Example: Staking with leverage
Suppose you stake 100 SOL with a 2.5× leverage multiplier (60% LTV). Assume a JSOL/SOL rate of 1.2, staking APY of 8%, and borrow APR of 5%.
When you leverage, JPool flash-borrows 150 SOL and stakes it alongside your 100 SOL, totaling 250 SOL. This yields 208.33 JSOL (250 SOL / 1.2), which JPool deposits as collateral. JPool then borrows 150 SOL against this collateral (matching the 60% LTV), repays the flash loan, and leaves you with 208.33 JSOL collateral and a 150 SOL debt.
Your 250 SOL stake earns 20 SOL/year (8% APY). Interest on the borrowed 150 SOL costs 7.5 SOL/year (5% APR). Your net yield is 12.5 SOL/year, effectively boosting your APY from 8% (without leverage) to about 12.5%.
When you deleverage
Take a flash loan to repay the debt: JPool takes a new flash loan of SOL equal to your current debt on the lending platform.
Clear the loan: The flash-loan SOL is used to fully repay your outstanding borrowed amount. This frees up (unlocks) the JSOL collateral you had deposited.
Unstake just enough JSOL: JPool then unstakes just enough JSOL from your collateral to obtain the SOL required to pay back the flash loan. It only converts the portion needed to cover that loan.
Return remaining JSOL to you: Any leftover JSOL is returned to your wallet in its “de-multiplied” form (now simply your regular staked position without leverage).
You can choose to deleverage completely, repaying the entire loan and removing all leverage, or partially, repaying only a part of the loan. The mechanism remains the same; a flash loan is used to reduce the position proportional to how much collateral you withdraw.
Example: Deleveraging
When you fully close your leveraged position, JPool flash-borrows 150 SOL, repays your 150 SOL debt, and unlocks the 208.33 JSOL collateral. Then it burns 125 JSOL (125 JSOL × 1.2 = 150 SOL) to repay the flash loan, leaving you with 83.33 JSOL (equivalent to your original 100 SOL stake, plus accrued rewards). You are now fully deleveraged: no debt remains, and liquidation risk is eliminated.
For partial deleveraging, the same steps happen proportionally, reducing debt and collateral while improving your LTV and Health Factor.
Liquidation risk
Leverage can boost your yield, but it also introduces some additional risk factors that you should monitor. The good news is that these risks are minimal under normal conditions, and JPool provides clear indicators (LTV and Health Factor) and alerts to help you manage them. Nonetheless, it’s important not to neglect them.
Liquidation becomes a threat if borrow interest remains higher than staking rewards for an extended period. In that case, debt grows faster than your JSOL collateral compounds, LTV rises, and the Health Factor falls. If the Health Factor drops below 1.0—meaning your LTV has crossed the platform’s threshold—Save can liquidate part of your JSOL to cover the loan.
In practice, liquidation on a JPool leverage position would require an extreme and prolonged scenario (borrow rate exceeding staking APY for long enough), but it’s still important to keep an eye on these indicators.
Risk alerts
JPool helps you manage the liquidation risk with real-time monitoring and alerts. Press Alerting, toggle Enable Alerting, and enter your Telegram handle to receive alerts when your LTV drops to dangerous levels. JPool will alert you via Telegram so you can take action, such as adding more collateral or deleveraging some of your position to bring LTV down. To add collateral, set the Leverage Multiplier slider to zero.
Position monitoring
Press the Details button to open a detailed view of your leveraged position metrics. Each metric helps you understand the status of your position and the effects of leverage. Here’s what you’ll typically find and what each item means:
Advanced tab
Health Factor
A unified safety score representing the risk level of your leveraged position, derived from LTV and platform parameters. Above 1.0 is safe; at 1.0, you reach the liquidation threshold; below 1.0, liquidation can be triggered.
Utilization rate (LTV)
Ratio of loan debt to collateral value. An LTV of 60% means the debt equals 60% of collateral value. Lower LTV indicates a safer position.
Deposit
Asset Balance (Collateral)
Total JSOL tokens deposited as collateral.
Current Price
Market price of JSOL in USD, adjusted by the JSOL/SOL rate.
JSOL APY (JPool's APY)
Annual yield percentage earned from your staked collateral.
Borrow
Asset Balance (Borrowed SOL)
Amount of SOL borrowed from the lending platform.
Current Price
Market price of SOL in USD.
Borrow APR
Annual interest rate charged for borrowing SOL, accruing continuously.
APY tab
Total APY over time
Visual historical representation of leveraged staking yield across various multipliers.
Underlying APYs of JSOL/SOL
Historical spread between staking APY (JSOL) and borrow APR (SOL).
Breakdowns tab
Green bar (Borrow)
Current borrowed amount relative to collateral value.
Blue marker (Borrow Limit)
Initial borrowing limit at position open, based on initial collateral and LTV.
Red marker (Liquidation Threshold)
Collateral value threshold below which liquidation can occur if debt grows too high relative to collateral.
Borrow APR and fees
Leveraged staking involves the following rates and fees charged by the Save lending platform:
Borrow APR: The variable interest rate that accrues continuously on the SOL you borrow. This value is already included in the Leverage APY you see in JPool.Borrow fee: A small one-time fee charged each time you open or close a leveraged position. It covers the protocol’s operational cost for issuing or settling the loan.Flash loan fee: A minimal one-time fee for borrowing SOL via flash loan during leverage and deleverage transactions.
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