Margin Trading Update — Sept. 2022
Margin Trading at Sifchain: DeFi with Real Revenue
Welcome to DeFi with real revenue. The margin trading platform on Sifchain is set to generate non-inflationary income for liquidity providers. This article will give an update on the development and launch of Margin Trading v1.0: The Long Game.
Important note on the launch: The initial launch of The Long Game will be open to whitelisted addresses only. Anyone can sign up to be on the whitelist. Whitelisted users will be trading with their own real funds on the live product. Click here to sign up: https://forms.gle/qeSJYxtTE4w2ppvm9
This whitelist-only period will last until the team addresses any final tweaks to the product and gets insights/feedback from the whitelisted participants. After the whitelist, the product will open to the public.
Launch Timing
The team spent all weekend performing regression testing to ensure that the margin platform’s code works seamlessly with the existing DEX code, and testing on the Front End to make sure there is a fast and smooth product experience.
Once the team is satisfied with the testing results, there will be an on-chain proposal raised to make the software upgrade live. The product will go live for whitelisted addresses 48–96 hours after the proposal is raised.
The team is aiming to raise the proposal this week, the week of September 12. Please monitor Twitter and project announcements on Discord or Telegram to stay aware of the updates.
Fireside Chat with Friedqi, Sifchain Chief of Engineering
Sifchain’s Chief of Engineering will be hosting a Fireside Chat in Discord to talk about the latest Margin Trading updates on Wednesday, September 14, at 5PM Pacific Time. Submit questions in advance at https://pollev.com/sifdao.
Product Demo: Margin Trading v1.0: The Long Game
About Margin Trading v1.0: The Long Game
Margin Trading v1.0: The Long Game allows traders to open long positions on ROWAN:TKN, and TKN:ROWAN by borrowing from and paying interest to the margin-enabled pools on the DEX. TKN is an abbreviation that means a token other than ROWAN.
The first pools that will be margin-enabled will be ATOM:ROWAN, ETH:ROWAN, FRAX:ROWAN, and USDC:ROWAN. More pools will be added on a regular basis.
Margin Trading at Sifchain is a continuous development process. The v1.0: The Long Game is the first of many releases, each with its own product & UX improvements.
This staged development is vital because our engineers have built a rich domain model on the back-end of the platform. It allows not just direct margin trading, but also delivers the building blocks for derivative vertical services either adjacent to or on top of margin. This makes Margin Trading an enabler for other teams, products, and companies to build on Sifchain.
Make sure to check out the product documentation and resources:
- Margin Trading v1.0: The Long Game Product Docs, FAQ & Walkthrough
- Implementation specification for Margin Trading v1.0: The Long Game
- Technical Whitepaper for Margin Trading at Sifchain
How the Real Revenue Cycle will Work
Liquidity providers pool assets that traders use in leveraged margin trading positions, and traders pay interest on the borrowed funds to keep their positions open. They also pay a small fee to open their position.
Non-Inflationary versus Inflationary Revenue
The fees that margin traders pay are non-inflationary revenue. Non-inflationary means that no new tokens are minted during this process.
This can be a bit confusing because Sifchain also has an inflationary rewards program at the same time that Margin Trading will launch. This is the same rewards program, Sif’s Ascension, that has been going on for several months. No new tokens will be minted and inflation on ROWAN will not increase as a result of Margin Trading v1.0: The Long Game.
Therefore, liquidity providers in margin-enabled pools will earn both non-inflationary revenue from margin trading positions, and they will also earn inflationary revenue from the ongoing Sif’s Ascension rewards program.
The ultimate goal of the Real Revenue Cycle is to be able to eventually phase out the inflationary rewards in favor of solely non-inflationary revenue. This would take place in collaboration with SifDAO and depend upon market conditions and protocol adoption, among other variables.
Margin Trading’s Non-Inflationary Revenue creates a System
The non-inflationary revenue generated by margin trading will grow as more people partake in the system of providing liquidity & borrowing funds to open margin positions. Basically, non-inflationary revenue will grow as trading volume grows.
The more margin positions that are open, the higher the non-inflationary APYs will be, which will attract more liquidity to the DEX, and so on.
Revenue generated by margin trading will be split between the margin-enabled pools & a fund. The fund will support various initiatives like a layer of protection for liquidity providers, protocol revenue, & ROWAN buy & burn.
The real revenue cycle is supported by DEX upgrades called monetary policies, which act as checks and balances to keep the system healthy, like monetary policies aim to do in the non-crypto world. They support keeping the pools balanced, help reduce market manipulation by bad actors, and provide additional income to liquidity providers. Read more about these below.
Development Updates
The Sifchain Engineering Team has been working 24/7 to get the margin updates out the door. From regression testing to ETL optimization and UI & UX tweaks, the team is focused on delivering the best possible product.
DEX Upgrades
Swap Fees
The Sifchain swap fee has been changed from slippage-based to an ultra-low flat fee amount of 0.05% per TKN:ROWAN swap, equating to 0.1% for TKN:TKN swaps. Revenue from interest payments from traders will go back into margin-enabled pools as income for liquidity providers, making these industry-leading fees possible.
Monetary Policies
Monetary Policies are key to Sifchain’s Margin Trading solution. These mechanisms aim to keep the system in balance by encouraging behavior that benefits the system participants.
Refer to the below documentation for details.
Liquidity Mining Rewards
Liquidity mining rewards are inflationary APY rewards provided to liquidity poolers. The current live rewards program is Sif’s Ascension. APYs for Sif’s Ascension gradually decrease over time in accordance with the schedule set by SifDAO. Margin Trading does not change inflationary APY rewards.
Read the Product Docs & the Design Document (currently in use by Sif’s Ascension).
Liquidity Provider Distribution
Liquidity Provider Distribution is a new DEX upgrade to support Margin Trading that assists in maintaining or improving the purchasing power of ROWAN. It is a feature that removes an amount of ROWAN from all liquidity pools and distributes it back to the liquidity providers. The overall value of a liquidity provider’s position in a liquidity pool will remain the same when ROWAN is removed and distributed.
Read the Product Docs & the Design Document.
Ratio Shifting
Ratio Shifting is a method for adjusting the purchasing power of Rowan. It functions by adjusting the exchange rate of Rowan on Sifchain, where it is most liquid, in tiny increments every block.
Read the Product Docs & the Design Document.
DEX Liquidity Protection
DEX Liquidity Protection is a new DEX upgrade to support Margin Trading. It protects the quantity of external (non-Rowan) liquidity on the Sifchain DEX by controlling how much external liquidity can be bought from Sifchain’s DEX using Rowan during a defined multi-block time period, called an epoch. This automatic circuit breaker helps prevent large quantities of ROWAN being sold all at once on the DEX.
Read the Product Docs & the Design Document.
Frequently Asked Questions
1. What token do liquidity providers earn interest revenue in?
Liquidity Providers can earn interest in both ROWAN and in the non-ROWAN token for margin-enabled pools where they provide liquidity.
The launch pools for Margin v1.0: The Long Game will be ATOM:ROWAN, ETH:ROWAN, FRAX:ROWAN, and USDC:ROWAN. This means that a liquidity provider in the ATOM:ROWAN pool will earn interest in both ATOM and ROWAN tokens. For example, if a user in the USDC:ROWAN pool takes a long position on ROWAN, interest is paid in ROWAN. If they go long ATOM, interest is paid in ATOM.
For details on why interest payments will happen in both ROWAN and non-ROWAN tokens, read the walkthrough on position management in the v1.0 product docs.
2. Why is the team not delaying the launch of margin trading until non-ROWAN pools are added to the DEX?
Adding non-ROWAN pools could certainly help with the TVL of the protocol, but adding new pools would not increase the amount of TVL that is useable for margin positions. Here’s why:
Margin v1.0: The Long Game allows for long positions for ROWAN:TKN, and TKN:ROWAN. TKN means a non-ROWAN token in a margin-enabled pool. For example, a trader could long ROWAN:ATOM or ATOM:ROWAN in this version.
This version of margin does not yet allow for trades involving non-ROWAN tokens. Being able to open a position like ATOM:ETH will be available in subsequent versions of the margin trading product. Therefore, non-ROWAN pools would not increase the amount of available TVL for margin trading.
3. Will the low liquidity in the pools change the margin trading experience?
Low liquidity on pools may create race conditions, where traders compete to open positions from the available liquidity. The greater the pool depth, the more positions that can be opened from that particular pool.
Further, each liquidity pool must maintain a balance between the quantity of funds available for borrowing and the quantity of funds maintained as the buffer for liquidity providers. Read more about this in the product docs.
For margin traders: low-liquidity pools will offer more volatile price swings than deeper pools. Traders are encouraged to maintain an adequate health ratio to help avoid liquidation.
Get Early Access by Signing Up for the Whitelist
The whitelist is now open for early access to Margin Trading v1.0: The Long Game. These users will get access to the live version of The Long Game prior to the platform opening for public use.
Sign up now: https://forms.gle/98dcDheRQ1deDbb36
Get in Touch
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Media & content creators, contact us at communications@sifchain.finance.
