Lendefi: Leveraged Trading Through Undercollateralized Lending

The future of leveraged trading delivers opportunities and value for borrowers and lenders.

Lendefi Protocol
Jun 20 · 3 min read

Lendefi’s innovative protocol is bringing significant opportunities to the markets for leveraged trading of digital assets. Advantages are delivered to both lenders and borrowers within a secure, decentralized protocol.

As Lendefi moves rapidly towards mainnet release on the 12th of July, it is valuable to elaborate on the user experience embodied within our protocol.

There are two parties involved within the Lendefi equation:

  1. Borrowers: Traders wishing to profit from leveraged trading.

Both parties in the equation are secured by Lendefi’s protocol and benefit from the value inherent within leveraged trading and secured lending.

The Borrowers: Decentralized Leveraged Trading

Within cryptocurrency markets, leveraged trading occurs when traders borrow digital assets to increase their exposure to a trade. This allows traders to leverage their position and multiply gains through that leverage. Losses are also leveraged, making it incumbent upon the trader to mitigate risks.

The Lendefi protocol allows borrowers to access digital assets to borrow against their deposits. This creates an opportunity to leverage their trading position. The base currency for lending and borrowing within the Lendefi protocol will be BUSD (Paxos) and BNB.

When a borrower deposits assets into the Lendefi protocol, they can choose the amount of leverage they desire: up to 5x. They can also decide which of the approved assets they wish to invest in. Approved investment assets will include, but not be limited to, BTCB and CAKE.

Once the loan is approved, the protocol initiates a swap into the chosen digital investment asset. The Lendefi protocol then secures and monitors the investment position until it is closed.

If the trading position rises, the borrower can close the position and extract their deposit and profits from the Lendefi protocol. If the trading position falls below a defined margin limit, the protocol closes the trading position.

The Lenders: Generating Interest From Secured Lending

Lendefi’s protocol allows lenders to generate profits through hourly interest payments from borrowers. Lenders deposit assets into Lendefi’s lending pool and loans are made to borrowers. The security of the lending pool’s assets is the primary operational function of the Lendefi protocol.

When borrowers access funds for leveraged trading, their deposit secures the lending pool’s loan against market fluctuations. To ensure security, the Lendefi protocol retains management over the trading position. If the position falls and endangers the lending pool’s assets, the protocol initiates a liquidation event to close the trade. The loaned assets and outstanding interest are then returned to the lending pool. Residual assets are returned to the borrower.

A Growing Suite Of Investment Tools

After mainnet launch, Lendefi will begin development on a suite of trading tools to enhance the protocol. These tools will provide functionality that improves the leveraged trading experience and delivers additional features for traders.

Some of the features being considered for integration include; the addition of trade management functionalities, such as stop-loss settings. These additions will deliver a robust leveraged trading protocol that can meet the needs of sophisticated digital asset traders.

The Lendefi protocol will eventually transition into a Digital Autonomous Organization (DAO) and operate across several blockchain platforms. By migrating into a DAO, control over the protocol’s core functionality will be managed by the owners of Lendefi’s native LDFI tokens.

The Lendefi protocol will revolutionize leveraged trading within decentralised digital asset markets, through access to undercollateralized loans. Lendefi facilitates a trustless relationship between lender and borrower, managed by the protocol, to remove counterparty risk.

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Leveraged trading via secured undercollateralized loans.