AIP 33: Leverage trading feature implementation

That is a draft that is welcome to be discussed and improved.

Summary

Goal is to increase the trading volumes and to attract new makers to the AirSwap protocol. The proposal is to create commission free leverage option for traders on AirSwap. That also creates an opportunity for users to provide liquidity to the new pools on AirSwap and earn the addition fees from makers trades done with leverage.

Specification

  1. New liquidity pools.
    The new liquidity pools will be created to provide liquidity for leverage trading (can be started from USDT, USDC and DAI pools). Each trade done using leverage funds deducts ~ 0.05-0.15% to the certain pool as the liquidity providers reward (for example if leverage trade was done with the debt USDT so USDT liquidity providers get the fee). The rewards fee will be divided between all liquidity providers of the certain pool.

  2. Leverage trading mechanics.
    Each maker who wants to trade using leverage should provide collateral to the margin address (margin could be isolated or not because we are using only stable coins for leverage at start). The max leverage could be configurable and set to x3 for start. So if maker provides $100,000 collateral, he is able to take additional $200,000 to trade. The initial collateral level is 3, if maker takes $100,000 it becomes 2, if maker takes $200,000 it becomes 1 etc. If makers leverage trading loses reach $100,000 and his collateral level drops to 0 his positions are sold and collateral is liquidated. Maker could withdraw his funds from margin address only while the collateral level is 3 or bigger.

  3. Some basic math example.
    On 2021-04-16 makers have done the $13.5 millions of trading volume. That has generated $40,688 to the fee pool.
    For example if makers have used the x3 leverage the results should be the next: Total trading volume would be $40.5 millions which would generate $122,064 of the fees to the current fee pool and $27,000 of fees to the liquidity providers pools.

Rationale

  1. Increasing protocol trading volumes
  2. Attracting new makers from the classic trading sector
  3. Create additional passive cashflow for the liquidity providers
  4. No impermanent loss or slippage for LPs

Credits

Copyright — All proposals are public domain via CC0.

1 Like

After a coordinator review we believe this is an interesting idea but it should not be a focus area at the moment. Possibly this is a feature we can add at a later stage in the web app. Our makers haven’t indicated they are struggling with liquidity. Perhaps, read AIP 16 and see if this can be combined with that idea. Furthermore, with future integrations our makers will be able to support more trades. @don to change AIP status to deferred.