Marqet combines Aave credit entrustment with Synthetix P2C (point-to-contract) trading, providing synthetic assets with trustless margin trading services in a unique way, and there will be no slippage.
Written by: Marqet Team
Compiler: Zhang Gaijuan
In traditional markets, funds borrowed from margin trading are usually provided by investment brokers or banks. In the cryptocurrency market, there are mainly two types of margin trading platforms, namely a centralized trading platform and a decentralized trading platform.
Among them, the working principle of the centralized trading platform is similar to that of the traditional market, that is, the exchange acts as a liquidity provider and broker. In contrast, the funds of the decentralized trading platform are provided by other traders, and these traders who provide liquidity can earn corresponding interest according to the market’s demand for margin trading.
As we all know, margin trading can bring the following advantages to investors:
- Magnify revenue
- Allow investors to use a small amount of assets as collateral to open a large number of positions, thereby improving the efficiency of capital utilization;
- It can avoid the transfer of large amounts of funds between different accounts or wallets, thereby improving the efficiency of asset management.
The margin trading platforms currently operating in the cryptocurrency market can be divided into the following three categories:
Centralized exchanges (such as Binance) that act as liquidity providers . In this type of trading platform, the borrowing funds of margin traders are provided by the exchange itself, and the interest rate is completely determined and charged by the exchange.
Centralized exchanges (such as Bitfinex) that act as brokers . Using the request for quotation (RFQ) method, the exchange acts as an intermediary between the margin trader and the lender. The lender first indicates the borrowing interest rate it is willing to receive, and then the exchange generates a “funding order book”, and then the margin trader pays the determined borrowing interest rate when using the liquid funds provided. At the same time, the exchange will take 15% of the interest earned by the lender as a handling fee.
Decentralized exchanges (such as dYdX). The “Pool to Pool” method is adopted. In this case, users can participate in it by acting as both a debit and a credit through AMM (automatic market maker) or order book. Similar to the DeFi loan agreement, the interest rate will be defined according to the usage of the pool and added to the lender.
For the first two trading platforms, although liquidity and order book depth are high and efficient, they require custody, registration, and KYC certification, which are cumbersome and face potential market manipulation risks.
The decentralized exchanges currently on the market solve the above custody and registration problems, that is, custody, registration and KYC certification are not required, and all assets are eligible for interest. But at the same time, there are also inconveniences such as insufficient liquidity and order depth, expensive liquidation costs, and the need to pay gas fees.
There is an urgent need in the market for a margin trading platform that can absorb the liquidity and in-depth advantages of centralized platforms and the convenience of decentralized platforms that do not require custody, registration, and authentication. And margin trading has to solve nothing more than these issues such as loan credit, leverage, liquidity and transaction depth.
Aave is the most representative of the solution to borrowing credit. Its “credit entrustment service” allows Aave depositors to entrust their credit line to another party, allowing users to borrow without collateral.
In terms of transactions, Synthetix has no slippage and theoretically has unlimited liquidity, which basically eliminates traders’ concerns about transaction depth and liquidity.
As the Three Arrows Capital co-founder of the Su Zhu said that , if neither side of a center to promote initial liquidity, may occur chicken or the egg problem. Composability is important for acquiring assets on other DeFi protocols and making them available to margin traders.
Marqet: A margin trading platform combining the best of Aave and Synthetix
Marqet is taking advantage of the composability of DeFi to combine the two protocols of Aave and Synthetix, and will create a new margin trading platform on this basis. The margin trading platform will provide lending services through Aave credit entrustment, and the liquidity of the order book will be provided unlimitedly by Synthetix point-to-contract (P2C) transactions.
Therefore, users can deposit initial margin on Marqet and use Aave to borrow, and then use any available assets on Synthetix for margin long or short trading.
It can be imagined that the combination of Aave and Synthetix solves the key problems existing in the centralized margin trading platform, such as:
Liquidity : Aave depositors will receive additional income incentives after entrusting their credit lines to Marqet, and the entrusted credit can be used for borrowing purposes. SNX minters will also be incentivized when they mint new sUSD and provide them to Marqet traders. This incentive behavior will greatly enhance the liquidity of the platform;
Order book depth : On Marqet, the integration of Synthetix exchange transactions means that users can trade at spot prices without slippage. Obviously, this is better than centralized trading platforms;
Liquidation risk : Decentralized margin trading platforms face high liquidation risks. In the liquidation process, the trader’s collateral will be sold, and if there is not enough liquidity in the order book, very high slippage will occur. On Marqet, liquidation is performed through transactions on Synthetix. Due to unlimited liquidity and zero slippage, for liquidators and platforms, the risk of liquidation is zero;
Leverage multiples : reducing the risk of liquidation helps to reduce the minimum mortgage rate of margin positions, which means that in the absence of slippage, there is a chance to obtain higher leverage under the same risk level;
Gas fees : Once the 2-tier solution is up and running, Marqet will migrate the protocol with Synthetix to reduce gas fees to almost zero while allowing a level of leverage similar to that provided by centralized derivatives platforms.
In addition, Marqet is a ” positive sum game ” for Aave, Synthetix and their respective token holders, which can achieve a “multi-win” situation, thereby continuously increasing market liquidity.
Specifically, users using the Marqet platform to conduct transactions can continuously promote transactions in the following links or processes, for example,
- Increase the trading volume of Synthetix Exchange;
- More loans from Aave;
- The loan interest rate on Aave is attractive;
- Increase in the number of minted sUSD on Synthetix;
- Increase in deposits on Aave;
- Increase in the total locked value (TVL) on Aave and Synthetix;
- Incur more fees for AAVE and SNX holders;
- Empower the value of AAVE and SNX.
It is worth mentioning that Marqet is also the first project to be selected as “Fair Launch Capital” . “Fair Launch Capital” was launched by IDEO CoLab Ventures investors Gavin McDermott and Joe Gerber and well-known cryptocurrency consultant Reuben Bramanathan. It is committed to providing “Fair Launch” funding and related experience to crypto project founders. “Fair Launch Capital” will pay the startup fee (through entrusted credit) for Marqet and help it design an effective token economic model.
In addition, “Fair Launch Capital” advisors include Synthetix founder Kain Warwick and Aave founder Stani Kulechov. This means that with the support of the two founders of Synthetix and Aave, the start-up process and development of Marqet may be smoother.
According to Marqet’s tweets in early October, Marqet is currently evaluating four token distribution and governance options with advisors. In addition, after BitMEX was investigated by regulatory authorities, Marqet is still looking for feasible solutions that comply with regulations. In addition, according to information released by the Fair Launch Capital community telegram group, currently, the Marqet team is still building the platform.
Source link: medium.com
