What defines DeFi is its permissionless nature: the ability to do anything without having to request approval or rely on a centralized party. However, traders today still difficult to find permissionless markets when looking for leverage trading. Most existing decentralized leverage trading protocols provide only minimal pairs, lack market depth, and cannot scale to meet demand from rapid market development. OpenLeverage is here to provide a permissionless, decentralized, scalable, and secure leveraged trading facility that serves the long tail and fast-growing DeFi market.
With the growing popularity of DEX trading such as Uniswap, the threshold for issuing new tokens and creating volume has significantly been reduced. Many blockchain projects no longer need to have a difficult negotiation with centralized exchanges to list their token. Instead, they can self-list with any DEX with just a couple of blockchain transactions. This allows a community adoption to begin trading instantly in a permissionless fashion — decreasing time to market and the associated costs with listing.
Leveraged trading has been prevalent on Centralized Exchanges for many years because it allows a trader to make money both on the rise or fall of a token and can be done with borrowed margin. However, centralized exchanges present a significant risk in that they could easily manipulate the price maliciously to cause a liquidation or become unavailable during peak trading activities. DEX trading avoids the potential for price manipulation or capacity failures.
However, as DEX does not commonly leverage trading positions, listing a token exclusively on a DEX can reduce the volume for token trading. The OpenLeverage protocol bridges the gap from Centralized Exchanges to DEX by providing a common way to create long or short positions using margin obtained from community-sourced liquidity pools. Anyone can create a trading pair in a DEX and subsequently create a margin trading pool for this pair using OpenLeverage using the permissionless nature of DeFi.
For example, imagine a new token is created and becomes widely popular over a short period. To quickly enable trading, the token is placed in a DEX pair with USDC on Uniswap. To boost trading volume, anyone in the token’s community can create margin trading pools for the token pair on OpenLeverage so traders can borrow against this pool to create long or short leveraged positions. The OpenLeverage protocol has solved the problem of allowing tokens to boost their trading on DEX while incentivizing users to deposit their tokens to gain yield.
We’ll be back soon with more on OpenLeverage’s advantages and features. Stay tuned!