The Ones in the Arena: OpenLeverage
“Security services in the form of auditing firms might not fit or scale; they could (or should) become a DAO.” —Silence, Community Manager, OpenLeverage
Despite all the talk about “money legos” in DeFi, permissionless leverage trading has remained somewhat limited. Constraints around which pairs are supported and ease of use have kept this facet of the DeFi space from being able to scale.
Enter OpenLeverage, a project that aims to address these shortcomings head-on, by supporting as many token pairs as possible and ultimately, opening up the potential for thousands of tokens to be longed and shorted. If OpenLeverage succeeds, we’ll be seeing a lot of platforms setting up margin trading markets alongside their liquidity pools.
Just ahead of OpenLeverage’s $75K Code4rena audit contest, we asked their community manager, Silence, to share some insights into what OpenLeverage is building and how their team thinks about security.
What are you building, and what sets it apart from similar offerings in the space?
OpenLeverage aims to provide an infrastructure to enable a permissionless margin trading market, allowing anyone to create markets, lend and borrow, and connect to trading venues to serve the unsatisfied market. No permission is needed to create a margin trading market for any pair with isolated lending pools and market-adjusted risk controls.
Unlike similar offerings, OpenLeverage can support margin trading for thousands of different trading pairs by accessing the DEX’s depth; more pairs mean more opportunities for traders and lenders. Traders can long and short any pair on DEXs with sufficient liquidity.
“With OpenLeverage, anyone can create a margin trading market as easily as creating a liquidity pool on a platform — allowing hundreds, if not thousands, of tokens to be longed or shorted.”
What’s your vision for your project? What are you building towards in the longer view?
The idea of the project was born from the perceived potential and limitations of trading cryptocurrencies. There is a lot of DeFi growth intertwined with the permissionless nature of finance. While the premise of decentralized finance sounds alluring, users find it challenging to find permissionless markets when looking for leverage trading. Current decentralized leverage trading protocols provide limited pairs and market depth and cannot scale to meet the demand from rapid market development. The need exists for a secure and permissionless leverage trading facility that serves the fast-growing DeFi market.
OpenLeverage wants to enhance the trading experience for the user. The team envisioned building a permissionless lending and margin trading protocol with aggregated DEX liquidity, which would enable traders to long and short any trading pair on DEXs efficiently and securely.
For the long term, OpenLeverage aims to build a decentralized crypto securities service to retail and institutional clients, providing decentralized lending, derivatives trading, and asset management infrastructure, which integrates with the global DeFi ecosystem.
What’s the most innovative idea in your protocol?
With OpenLeverage, anyone can create a margin trading market as easily as creating a liquidity pool on a platform—allowing hundreds, if not thousands, of tokens to be longed or shorted. OpenLeverage wants to support as many token pairs as possible on DEXs, while other leverage trading protocols only support 20–30 mainstream pairs. New projects can create lending pools to support margin trading from day one of launch, which is not currently possible.
Also, there are many other features that users find very promising:
- Risk-isolated pools according to pairs’ volatility and calculated risks with prices referenced directly from real-time data from DEXs;
- An anti-price manipulation mechanism that detects unreasonable price spikes referred to the TWAP prices from the DEX;
- Insurance accumulated from transaction fees and interest earned, which compensates lenders if an insolvency event occurs;
- Integration with the global DeFi ecosystems through yield farms, LToken, and social trading;
- Yield farms that will be deployed to incentivize liquidity providers (LP holders) of supported trading pairs on DEXs, encouraging deeper liquidity and ultimately helping traders get less slippage;
- LTokens allow third-party projects and attract their community to provide liquidity to the lending pool, supporting leverage trading to trading pairs on the DEX; and
- An intuitive user interface that is informative and easy to use.
It takes courage to undergo a public audit by a swarm of anonymous security researchers. It also says a lot about how much you prioritize security. What advice would you give to those on the fence?
We believe security is the most important thing for our community and have followed secure development best practices throughout its development.
We are confident about OpenLeverage. Making a new DeFi protocol with more options is not easy. Still, we firmly believe that a permissionless margin trading protocol that supports as many token pairs of DEXs as possible will significantly impact the DeFi world.
We are very open to suggestions from the community, and we will strive to make changes that will benefit the community. We will also continue to work on the bug bounty program.
“The [OpenLeverage] team is just a small part of the community.”
Security has become an increasingly vital topic in DeFi. How do you think the ecosystem needs to evolve in order to rise to the challenge?
More security checks need to be conducted, but there are limited resources available to support large-scale, quality, stable audits. Security services in the form of auditing firms might not fit or scale; they could (or should) become a DAO, where they can attract more talent, create more efficiency, lower costs, and increase quality. This would also help to build up a pipeline of talent to join the DAO.
What gets you most excited about DeFi?
DeFi allows anyone to build a permissionless and usable financial system through smart contracts. It will change the boundaries of the traditional financial systems and allow for more features for users.
Complete the following sentence: “I wish more DeFi projects would…”
I wish more DeFi projects would continue to combine and form bridges with other projects, and that each DeFi project could be combined seamlessly into the global DeFi ecosystem.
What DeFi project name do you wish you’d thought of first?
Uniswap and Compound.
What do you geek out about, beyond DeFi?
Many OpenLeverage team members have extensive backgrounds in finance and IT. We are very interested in many new ideas in the crypto world, such as DAOs. We were so curious, in fact, that we’ve based OpenLeverage as a DAO where every community member’s voice matters. The community governs OpenLeverage through $OLE and the team is just a small part of the community.
Learn more about OpenLeverage:
- openleverage.finance
- Twitter: twitter.com/OpenLeverage
- Medium: openleverage.medium.com
OpenLeverage’s $75K security audit contest opens January 27, 2022, and runs for one week. Details at code4rena.com.
The Ones in the Arena spotlights emerging and established DeFi projects and their founders, with an eye to celebrating and learning from them. The series’ name is inspired in part by Teddy Roosevelt’s famous quote, which has a central place in Code4rena’s philosophy.
