Introduction

OpenLeverage is a permissionless lending margin trading protocol that enables traders or other applications to be long or short on any trading pair on DEXs efficiently and securely.

The permissionless nature of Decentralized Finance allows any tokens to be listed and traded with rapid growth in liquidity and volume. But users today are still difficult to find permissionless markets when looking for leverage trading. Centralized exchanges are under immense regulatory pressure and are costly to make any market due to their self-centered business model. Existing Decentralized Leverage Trading Protocols provide only minimal pairs and market depth and cannot scale to meet demand from rapid market development. To truly build DeFi’s vision of global financial access, there needs to be a decentralized, permissionless, scalable, secure leverage trading facility that serves the long tail and fast-growing DeFi market.

Anyone can create isolated pools for users to lend or borrow for margin trades.

Next, a user can provide liquidity in the FEI → USDC pool, which means providing FEI to be borrowed to buy USDC. Or users can choose to provide liquidity in the USDC → FEI pool instead. Lenders will receive variable interest based on the pool’s utilization. This is similar to how the Compound protocol works.

Lenders receive LToken of the pool as an interest-bearing token, which can then be re-staked to other yield farms to receive further rewards.

Traders can choose to borrow from either pool to swap to another token as a leveraged position. In this example, the trader borrows USDC by putting down the same amount of USDC as collateral to make a 2X margin trade, swapped into FEI position with the liquidity pools of Uniswap, and locked in the smart contract. By taking advantage of liquidity on a DEX, we don’t have to create separate liquidity or an order book for leverage trading.

Once 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 profit or loss back to the trader.