Introducing: Mango Markets
This article has been translated here
Mango Markets offers the industry standard for decentralized, cross-margin trading. With lightning-speed trade execution, up to 5x leverage, near-zero fees, and attractive interest rates for lenders, the Mango Markets experience competes head on with centralized exchanges without any compromise. Mango harnesses the power of Solana, a high-performance blockchain, as well as Serum DEX, a decentralized, permissionless, full limit order book. Mango Markets is currently in public beta.
How does it work?
There are a few core mechanics and benefits to Mango Markets.
Firstly, the Mango protocol enables users to trade with up to 5x leverage, long or short, with limit orders on Serum DEX as a maker or taker. Mango users earn interest on both deposits and positions for extra profit, so you may be earning net interest on your margin position.
Second, Mango users save substantially on Serum DEX trading fees. Serum’s tier structure determines fee rates based on the amount of SRM held in an account; the more SRM in an account, the less you pay in fees and the more you earn as a maker. The highest tier is 1 MegaSerum(MSRM), worth 1 million SRM, and unrealistic for most people to obtain. Luckily, Mango margin accounts are structured such that SRM deposits are combined with all users to collectively reach a higher tier and benefit together when trading on the platform. SRM deposits are exempt from liquidation and not counted toward margin collateral.
Fueling these leveraged positions is our lending infrastructure. Interest rates are a function of utilization: amount of the token borrowed divided by the amount deposited.
Note that as trade volume increases, the more you will earn in interest. Mango enables users to protect against inflation, utilize idle funds, and maintain custody.
Third, a new branch for users to make profit is created by the platform decentralizing the liquidation function, something previously monopolized by centralized exchanges. Anyone can create and run a liquidator on Mango; users are encouraged to build their own and implement unique, creative strategies. Mango will pen source its own liquidator in a couple weeks.
Traders are asked to maintain a 110% margin collateral ratio, calculated by the value of the user’s deposits and positions divided by the value of their loans.
If an account falls below the 110% threshold, a liquidator absorbs your position.
Completely decentralized, Mango minimizes counterparty risks protecting users from custodial exchange account freezes, steep lending fees, and complacency in ecosystem development. Additionally, current on-chain protocols carry too high gas prices and are not deterministic in securing your market position. Trade or market make, Mango has the necessary tools to do it right.
Risks
Mango protocol charges 0 fees, which is nice, but as a result the protocol does not have an insurance fund. When a margin account has negative equity, the losses are socialized among the lenders. There is obviously the risk that a user loses his margin account to a liquidator when his account goes below the required maintenance collateral ratio (MCR) of 110%. But there is an even bigger risk to the ecosystem when a margin account falls below 100% collateral ratio. At this point, the value of the account’s liabilities are larger than the value of assets. In this situation, the liquidator is provided a 1% incentive to liquidate and lenders collectively take the negative equity of the account. In rare circumstances, this could even trigger a liquidation cascade where the socialized losses trigger more accounts to fall below 100% collateral ratio.
Users should certainly be aware of all the risks. That being said, it’s believed that socialized losses and especially liquidation cascades are extremely unlikely events. Given Solana’s speed, a liquidator will most likely be able to liquidate an account as soon as it falls below MCR.
Smart contract bugs are another major risk. We are working with the Solana team to get other experienced devs to critically read the smart contract before it is open source. After it’s open source, there will have bug bounties for developers to privately share any bugs in the code with us. While caution is encouraged in these initial days, in the long run, open source and transparent protocols will be a safer way to trade and store your money than centralized alternatives.
Join the Community
The Mango team is committed to providing a fully decentralized, open source, leveraged trading platform capable of matching a centralized-exchange feel with all the unique benefits of DeFi. We are excited to launch Mango Markets and continue bringing new leveraged trading products to life in decentralized form. Visit us at mango.markets to trade and lend.
Follow Mango Markets on Twitter and join the Discord for the latest updates.
twitter: https://twitter.com/mangomarkets
discord: https://discord.gg/4FzUQweg
