Trading with leverage, also known as margin trading, revolutionized the trading industry when it first emerged, as it allowed traders to collect massive rewards — much larger ones than what they could afford to win with the value of their account alone. However, the trick is that this can only happen for seasoned traders who know what they are doing, and anyone else trading with leverage is likely to lose their money, and allow the platform to benefit.
This is due to the fact that margin trading comes with massive amounts of risk, and you really need to know what you are doing in order to pull it off. But, if you do, then it is definitely worth it.
Trading with leverage also became possible in the crypto industry, relatively quickly after the industry started to gain the attention of people who were not intimidated by its technology in the early days. However, one problem with the crypto industry is that trading is still primarily done on centralized exchanges. With the industry’s goal to be as decentralized as possible, this did not fit with a wider narrative.
Decentralized exchanges did emerge after a while, but they had low liquidity, poor technology, and they did not attract interest. Until last year, at least, when the DeFi sector emerged, launching DEXes and all other decentralized projects meant for more than just basic crypto trading higher up than anyone would ever believe it was possible.
And it’s still growing. This is why Degen Protocol — a protocol that finally figured out a way to bring decentralized margin trading to crypto — has chosen a perfect timing to emerge, and why it is going so big right now.
What is Degen Protocol?
Let’s start from the beginning. Degen protocol is a decentralized protocol that brings margin trading to DeFi. The protocol is highly customizable, allowing traders to choose anything, from leverages to pairs, liquidity pools, and more. As of mid-March 2021, the protocol is present on both, Ethereum blockchain and Binance Smart Chain.
The way it works is quite interesting also, as it offers four roles that the protocol users can fill in. Users can be either pool creators, lenders, stakers, or traders.
How Does it Work?
Pool creators, as the name suggests, have the ability to create pools. They are typically imagined as crypto enthusiasts and token owners who can add any trading pair pool to Degen, and promote it to other participants. Pool creators can customize different pool settings, including creator and lender’s fee, leverage, pool max utilization, lenders’ day interest, and more.
Then, there are stakers, who are essentially crypto owners who wish to earn more crypto by using crypto, without losing the coins that they already have. Staking is, therefore, a perfect solution for them, as it requires them to lock up their coins and receive new ones as rewards from the system. Meanwhile, they also play a role in the project’s governance, and earn a profit on platform trades, so being a staker seems to be one of the best roles in the project’s ecosystem.
Then, there are lenders, whose role is similar to that of stakers. They are also people who do not wish to trade away their coins and risk them in a highly speculative market, but instead desire to receive rewards while not exposing themselves to risks. The coins that they provide are used by pools for trades and subsequently are awarded fees from each pool trade.
And, of course, there are traders. Traders are the final piece of the puzzle, but their role is just as crucial as the others, as they are the force that drives the rest of the well-oiled machine that Degen protocol was created to be. They use tokens in pools, attempt to turn a profit, and then return them to the pool afterward. They also conduct trades and pay fees that are used to pay lenders and stakers. So, while other roles are setting the stage, it is traders who are fueling the entire system.
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