docs: add mechanism section

x/leveragelp/spec/02_mechanism.md

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+
+# Mechanism
+
+The LeverageLP module enables participants to leverage their liquidity position in the AMM pool by borrowing USDC tokens bonded in the StableStake module. This interaction results in a leveraged position that is tracked and managed within the LeverageLP module.
+
+## Dependencies
+
+The LeverageLP module depends on two other modules:
+
+1. **StableStake**: Manages the bonding of USDC tokens by participants.
+2. **AMM**: Facilitates liquidity provision and trading.
+
+## Overview
+
+Participants in the system engage with the modules as follows:
+
+1. **Bonding USDC to StableStake**:
+
+   - Participants bond their USDC tokens to the StableStake module.
+   - These bonded tokens become available for borrowing by other participants.
+
+2. **Leveraging Liquidity with LeverageLP**:
+   - Participants borrow USDC tokens from the StableStake module using the LeverageLP module.
+   - The borrowed tokens are used to enhance their liquidity position in the AMM pool.
+   - This results in a debt recorded within the StableStake module.
+
+## Key Equations
+
+To maintain the stability and health of the pool, the following equations are used:
+
+1. **Pool Health**:
+
+   $\text{Pool Health} = \frac{\text{Total Shares} - \text{Leveraged LP Amount}}{\text{Total Shares}}$
+
+   - **Total Shares**: The total number of shares in the pool.
+   - **Leveraged LP Amount**: The amount of liquidity added to the pool through leveraged positions.
+
+   The Pool Health metric is monitored to ensure it does not fall below the Safety Factor threshold, which is set at 10%. Lower Pool Health indicates higher risk of leveraged positions being liquidated.
+
+2. **Position Health and Liquidation Mechanism**:
+
+   $\text{Position Health} = \frac{\text{Position Value}}{\text{Borrowed Amount} + \text{Interest Staked} + \text{Interest Paid}}$
+
+   - **Position Value**: The current value of the leveraged position.
+   - **Borrowed Amount**: The total amount of USDC borrowed from the StableStake module.
+   - **Interest Staked**: The amount of interest accrued on the borrowed amount.
+   - **Interest Paid**: The amount of interest paid by the participant.
+
+   If Position Health falls below the Safety Factor threshold (10%), the leveraged LP position is automatically liquidated to protect the underlying liquidity pool.

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 # Usage

x/leveragelp/spec/03_keeper.md → x/leveragelp/spec/04_keeper.md

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 # Keeper

x/leveragelp/spec/04_protobuf_definitions.md → x/leveragelp/spec/05_protobuf_definitions.md

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 # Types, Messages, Queries, and States

x/leveragelp/spec/05_functions.md → x/leveragelp/spec/06_functions.md

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 # Functions

x/leveragelp/spec/README.md

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 ## Contents
 
 1. **[Concepts](01_concepts.md)**
-2. **[Usage](02_usage.md)**
-3. **[Keeper](03_keeper.md)**
-4. **[Protobuf Definitions](04_protobuf_definitions.md)**
-5. **[Functions](05_functions.md)**
+2. **[Mechanism](02_mechanism.md)**
+3. **[Usage](03_usage.md)**
+4. **[Keeper](04_keeper.md)**
+5. **[Protobuf Definitions](05_protobuf_definitions.md)**
+6. **[Functions](06_functions.md)**
 
 ## References