What is BNB 2x Auto-Leverage Index?
CDzExchange introduces BNB 2x Auto-Leverage Index
CDzExchange is excited to announce that we are launching the BNB 2x Auto-Leverage Index (BNB2x-ALI) Beta as we promised in our previous roadmap piece for 2022 product rollouts. The BNB2x-ALI helps traders to establish fully collateralized, leveraged positions on BNB and eases them of the burden of constantly monitoring liquidation risks.
Here’s what you’ll learn from this piece:
- What is BNB2x-ALI?
- Why BNB2x-ALI?
- How it works
What is BNB2x-ALI?
Leveraging is a major game-changer in the DeFi ecosystem and a major aspect of derivatives trading. This is also why CDzExchange forms a major part of our product rollouts. However, one unique difference with CDzExchange is that, we aim to make your participation in crypto derivatives trading as easy and simple as possible hence our launch of the BNB2x-ALI.
The BNB 2x Auto-Leverage Index abstracts collateralized debt management into a simple deposit, which enables you to get leveraged exposure to BNB using collateralized debt, without having to manually manage collateralized debt positions or monitor liquidation risks.
This is what this means for you:
- You can stake BNB with leveraged exposure as the underlying asset.
- The smart contracts handles and takes care of all tasks related with managing a leveraged position. In other words, you don’t have to monitor your leveraged position 24/7.
- The Auto-Leveraged Index (ALI) smart contracts automatically manages your leveraged ratio. This means you have a higher level of protection in the event of market volatility and your chances of liquidation are reduced substantially.
- The responsive UI ensures your transactions are speedily updated.
- Depositing collateral will no longer be necessary. The collateral in this scenario is essentially the original BNB you deposit, which uses the funds to automatically balance leveraged positions.
- You trade with leverage easily and securely.
There are 3 key reasons why BNB2x-ALI is an optimal choice for you:
- Drastically reduces risk of liquidations while benefiting from the power of leveraged positions
- Ease of use with automated risk management
- Lower fees by optimizing transactions behind the scene
Minimized Risk Levels
The BNB2x-ALI has an “Auto Repay” mechanism. In the case of a market plunge, this mechanism helps to drastically reduce liquidation risks by automatically repaying your debt.
It also has an “Emergency Withdrawal” function that aids you in adjusting the Leverage Ratio in the event of market volatility or price plunge thus drastically reducing the debt amount in a timely fashion. This helps to build resistance to market volatility.
In essence, these features offers you a higher level of protection against liquidation risks.
BNB2x-ALI spares you the tedious task of managing margin requirements or the need to deposit additional collateral. You gain access to leveraged trading with ease and have the necessary management functions fully automated by the smart contracts managing BNB2x-ALI. You also get a huge cost reduction as BNB2x-ALI helps to minimize gas fees. This simplifies leveraged trading by a huge margin.
Typically during periods of extreme volatility and network congestion, transactions tend to lag. However, with ALI, you avoid these mishaps and added tasks.
This should certainly be an exciting factor for you. Who doesn’t want minimized costs? High gas fees are usually a major deterrent for investors in DeFi. However, BNB2x-ALI operates on the Binance Smart Chain that requires lower gas fees compared to other popular protocols e.g. Index Coop on Ethereum.
Also when compared with other leveraged cryptocurrency index, ALI tokens offer you the lowest fees where you only pay 1% deposit fee. Better yet, there is no withdrawal fee!
How does BNB2x-ALI work?
The BNB2x-ALI operates on the Binance Smart Chain (BSC) and uses Cream Finance as its underlying protocol.
Here’s a simple run down of how it would flow if you use BNB2x-ALI:
- The strategy accepts BNB from the user and deposits to Cream Finance to mint crBNB.
- Deposited BNB is used as collateral to borrow USDC.
- Borrowed USDC is swapped to BNB and deposited into Cream Finance, thus leveraging the position.
- Leverage is maintained between 1.7x to 2.2x.
- In profit conditions, you can withdraw more BNB than the deposited amount.
- During withdrawal, the USDC debt is paid by selling the BNB to USDC and the remaining BNB is withdrawn.
- If the price has decreased, you will withdraw less than the deposited amount as your BNB is sold to repay the USDC debt.
- When the price of BNB increases, the leverage percentage will decrease thus, more USDC can be borrowed to increase the leverage and vice versa.
Overall, BNB2x-ALI has several advantages over legacy leveraged tokens. With BNB2x-ALI, there are no tokens minted. The unique ALI algorithm reduces rebalancing needs by a huge margin. And in the case of black swan events, it has its emergency deleveraging feature to give you additional fund safety.
We are excited to roll out this product. It demonstrates our utmost desire to ensure crypto derivatives trading is easily accessible and user friendly for you.
Click here to kick off your magic experience!