The explosion of decentralized finance allows KYC-free trading to grow rapidly in terms of liquidity and volume. A secure, permissionless, scalable, and secure leveraged trading facility that caters to the DeFi market is necessary to completely realize DeFi’s vision of global financial access. Growth that is both quick and long-term. Today, I’ll show you how to use OpenLeverage, an escrow protocol. Let’s find out with GTA research!
OpenLeverage is a margin trading protocol that allows traders trade any trading pair on the DEX without KYC efficiently and safely.
Decentralized Margin Trading
Margin trading is a method of trading assets using funds provided by a third party. When compared to regular trading accounts, margin accounts give traders access to a larger amount of capital, allowing them to profit from their advantages Margin trading, in essence, magnifies trading results so that traders can profit more from good deals.
In centralized cryptocurrency markets, borrowed funds are usually provided by an intermediary, such as an exchange or centralized broker. However, in a decentralized cryptocurrency trading environment, funds are typically provided by other anonymous users who earn interest based on market demand for margin funds. Borrowers and transactions will remain anonymous, but they will be visible and adhere to the smart contract’s regulations. All money is held in smart contracts until all requirements are met, at which point they are released to terminate trading positions and lend as needed.
Anyone can create lending pools for a specific pair on the DEX.
You are interested in leveraged trading on the FEI/USDC pair, so you can create two lending pools for the Uniswap FEI/USDC pair. Anyone can create separate groups for users to lend or borrow for margin trades.
Next, users can provide liquidity in the FEI → USDC pool, which means lending FEI to buy USDC. Or users can choose to provide liquidity in the USDC → FEI pool i.e. lending USDC to buy FEI. Lenders will receive variable interest rates based on pool usage. This is similar to how the Compound protocol works.
Lenders receive interest in LToken, which can then be staked back to other Yield Farms for additional rewards.
Traders can choose to borrow from either pool to swap to another token as leverage. In this example, to execute a 2X margin trade, a trader borrows USDC by pledging the same amount of USDC as collateral, swaps to FEI positions with Uniswap liquidity pools, and locks in a smart contract. By leveraging liquidity on the DEX, we don’t have to create separate liquidity or order books for leveraged trading.
10% interest is collected from the pool and 1/3 of the trading fee of this currency pair is used as insurance to compensate the lender if the loan fails to maintain the solvency of the group. Furthermore, each group of loans will have 20% of the accrued interest set aside.
After the trader closes the position, the protocol swaps the FEI position back to USDC by repaying the loan with interest, which returns the deposit plus or minus any gain or loss for traders.
To avoid quick loan attacks, there are restrictions implemented in the protocol design that no opening, closing, or liquidation can be performed in the same transaction. Liquidation occurs in two transactions to avoid attackers manipulating prices, triggering liquidations for profit, or creating cascade liquidation events.
Features of OpenLeverage
These features make OpenLeverage the most scalable margin trading protocol:
Q/2022 and the future
OpenLeverage received $1.8M from investors such as: Signum Capital, LD Capital, FBG Capital, Continue Capital, YBB Foundation, MDEX, AKG Ventures, and Mr. Block
Token use case
OLE is the project’s governance token, minted using the protocol, allowing holders to vote, staking for rewards and protocol privileges
Fees Treasury: 1/3 of the trading fee of this currency pair is used as insurance to compensate the lender if the loan fails to maintain the solvency of the group.
Boost OLE Earning– Increase OLE income by lending
Fees Discount Higher Leverage – Making Discount Fees Higher Leverage
Information about OLE token
OLE tokens are allocated as follows:
OLE tokens are stored using an ERC-20 platform wallet.
To understand what is outstanding about OpenLeverage compared to other Dex protocols and exchanges, let’s take a look at the comparison table below.
After reading the article and viewing the summary table above, you must have understood somewhat about OpenLeverage.The information in this article comes from the GTA Research team’s research on the OpenLeverage project, and it is not investment advice. We hope that this article has provided you with enough information to make an informed decision about the project. Thank you!
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