Introducing Fringe’s two new leveraged trading facilities — Amplify and Margin Trade
Fringe Finance introduces two new leveraged trading facilities, an addition to our money market platform — Fringe Amplify and Fringe Margin Trade.
The platforms in a nutshell
The new Fringe Amplify facility enables users to amplify their exposure to a selected crypto asset, and thus accelerate their returns as prices of the asset rise. The user provides a margin amount of a given asset and then selects the additional dollar amount exposure to that asset they wish to achieve. Effectively, the user is ‘going long’ on the collateral asset and ‘going short’ on the capital asset. With Fringe Amplify, the short asset is a stablecoin.
The new Fringe Margin Trade facility enables users to take a leveraged margin trade position on a pair of crypto assets, and thus accelerate their returns in the direction of their trade. The user selects a pair of assets, one to ‘go long’ and the other to ‘go short’. The user provides a margin amount of the long asset and specifies the exposure they wish to achieve to the asset pair.
New opportunities ahead
The Amplify and Margin Trade facilities open up new opportunities for users of the Fringe Finance platform who wish to take leveraged positions to exercise their more sophisticated financial strategies. These facilities are built on the existing money market lending and saving facilities offered via Fringe Lending. Therefore Amplify and Margin Trade inherit Fringe’s core stability and protection mechanisms.
Fringe Finance has also delivered a key enabler for Amplify and Margin Trade via our Atomic Repayments enhancement which uses the user’s collateral to repay and close a loan or trading position. Atomic Repayments allow users to easily close out their leveraged positions in an atomic transaction without needing to have the lending assets on hand to settle the position’s leveraged borrowing position. This means that opening and closing leveraged positions is as seamless as possible.
Decentralized and non-custodial
Fringe Finance’s Amplify and Margin Trade leveraged facilities are built using decentralized, non-custodial smart contract technologies. Fringe Finance is acutely aware of the fraud that continues to occur in centralized finance (CeFi) and our philosophy is to deliver decentralized, on-chain, trust-minimized solutions that are diametrically opposed to CeFi’s trusted model and all its attendant problems. This means our leveraged trading facilities do not pose risks that arise from misuse of users’ funds nor the risk of embezzlement by shady people in sunny climates as has famously occurred in CeFi. Users’ funds are locked in smart contracts.
The leveraged trading protocol is automatically operated by the smart contracts and if the need arises, independent liquidators liquidate positions that fall below minimum collateralization levels to keep the Fringe platform solvent and stable.
How to open a leveraged position
With the Fringe Amplify facility, a user specifies the asset they wish to gain exposure to, the margin they wish to use, and the amplification they wish to apply.
With the Fringe Margin Trade facility, a user specifies the pair of assets they wish to gain exposure to, the amount of exposure, and either the margin they wish to supply or the safety buffer percentage to protect against liquidations (one affects the other).
For both these leveraged trading facilities, the amount of leverage that can be achieved is limited by the collateral (long) asset’s loan-to-value ratio.
Use Cases
Fringe Finance is establishing itself to take full advantage of users wishing to gain further exposure to a chosen asset, to trade pairs of assets, and to trade foreign exchange (forex) markets.
Regarding forex trading, we see stablecoins continuing to grow as a segment for the short-term to medium-term timeframe as additional reliable stablecoins emerge pegged to national currencies other than USD. Global traditional finance (TradFi) forex trading volume is very large and even dwarfs global TradFi stock trading, and Fringe sees a major opportunity to displace a portion of centralized forex market operators with our decentralized, trust-minimized, overcollateralized, permissionless leveraged trading facilities. Fringe’s leveraged trading solutions will give participants easier access to these markets at lower cost with greater assurance against counterparty risk.
Composability
Given Fringe’s leveraged trading smart contracts are open and accessible to the world, emerging DeFi management platforms can compose higher-level trading and portfolio management strategies using the leveraged trading primitives provided by Fringe.
How does it work
Fringe’s leveraged trading facilities are built on and employ Fringe’s existing lending and borrowing smart contracts. Establishing a leveraged trading position results in a regular borrowing position on the Fringe platform, so all the assurances of Fringe’s proven, in-market lending platform stability mechanisms are inherited by our new leveraged trading facilities.
For those who are interested, the mechanics of establishing a leveraged position using Fringe’s Amplify and Margin Trade facilities are as follows:
When creating a leveraged position of a user-specified notional exposure amount and the user-supplied margin, the protocol automatically undertakes the following steps:
- Capital asset is pre-emptively borrowed from the relevant Fringe lending pool. Notional Exposure amount.
- Capital asset is then automatically swapped for collateral asset via a third-party DEX.
- The loan position is now collateralized by the swapped collateral asset amount + margin amount supplied by the user.
- As a result, the pre-emptive capital borrowed in step 1 is then ‘squared off’, given sufficient collateral is now in place due to the swap. This results in a valid, over-collateralized loan that represents the leveraged position.
Fringe’s value proposition
Larger range of trading assets
Fringe differentiates itself from existing DeFi leveraged trading facilities by virtue of the large range of assets that we support. This means traders have greater flexibility in the assets they wish to trade on margin or amplify their exposure to.
Lower entry and exit costs for traders
Fringe Finance’s Amplify and Margin Trade leveraged trading facilities employ spot markets to establish and exit trading positions. This is compared with many other margin trading platforms that use internal markets to establish and exit trading positions. Fringe’s approach of using external spot markets enjoys the typically higher liquidity of such external markets which will generally result in less price impact for traders as they enter and exit positions.
Higher protections for traders against market manipulations
Fringe’s Amplify and Margin Trade leveraged trading facilities employ our new price oracle model which is central to our core lending platform and provides added protections against market manipulation attacks. This protects traders from potential costs from their positions being partially liquidated due to market manipulation attacks. Additionally, it better protects lenders’ assets against market manipulation risks.
Lower costs in the event of liquidations
Fringe’s new partial liquidation model minimizes costs for traders in that only partial liquidations are undertaken as needed. This not only results in lower liquidation costs for traders given liquidation fees are only paid on the smaller partial liquidation, but will typically result in the trader still retaining some/most of the position aligned with their original trading intent.
Summary
Fringe Finance has launched two new leveraged trading facilities, Fringe Amplify and Fringe Margin Trade, for its decentralized, non-custodial money market platform. Fringe Amplify enables users to increase their exposure to a selected crypto collateral asset, while Fringe Margin Trade allows users to take a leveraged position on a pair of crypto assets. Fringe has also integrated Atomic Repayments, which allows users to close out leveraged positions in a seamless manner using their collateral. Fringe’s advanced protocol designs to limit costs for traders and to increase protections against market manipulation attacks are key differentiators in the DeFi landscape. The new facilities are part of Fringe’s strategy to offer margin trading facilities in a decentralized, trust-minimized, overcollateralized, and permissionless manner. Fringe’s leveraged trading facilities are built using decentralized smart contract technologies and are well placed to be adopted by users who are already familiar with DeFi leveraged trading, by users who are looking to migrate from CeFi venues to avoid their pitfalls, and by new users who wish to start using our intuitive leverage trading facilities.
Fringe Finance. DeFi for everyone.
