Calling all DeFi Buildoors... A really cool use case is unlocked for AMMs if you enable the rehypothecation of idle liquidity into money markets and simultaneously enable those assets as collateral. This is possible with hooks. You can borrow against your LP tokens without creating a new borrow/lend market simply by tapping into existing liquidity. Imagine I am supplying $1000 of ETH - USDC on an AMM and choose to rehypothecate idle liquidity into Aave (You can already do this on @bunni_xyz) I can now borrow against that $1000 in Aave and when a swap goes through my pool the collateral composition changes ie, if ETH price goes up: 1. Hook withdraws ETH from Aave and sent to buyer 2. USDC from buyer deposited into Aave This is similar to what Fluid does with smart collateral, but way more composable. ETH max LTV on aave v3 core market is 93% and USDC is 75% So for that $1000 in my LP, I can borrow a maximum of $840 from the get-go Remember, when some swaps through your pool the amount of eth & usdc rehypothecated in Aave changes, along with your liquidation threshold. You can get liquidated. Why would someone do this? 1. Makes capital more productive. Imagine there's a new opportunity to earn yield on BTC. To capitalize on the opportunity, I could borrow WBTC on Aave against my LP. 2. Hedging I could borrow against the LP position and long volatility on @GammaSwapLabs 3. Unique and levered LP payoffs I would also have automatic access to levered Lping. I could also take a more directional view and borrow only ETH or USDC against the LP and rebalance into the LP position to disproportionately profit if ETH goes up or down. This is possible in theory, but can someone build it? It would make sense to build it on @bunni_xyz since they already allow you to rehypothecate idle liquidity into any ERC4626 vault + the other features to boost LP profitability. My DMs are open.