Trading with leverage, also known as margin trading, revolutionized the trading industry when it first emerged, as it allowed traders to collect rewards on a large scale – which they alone would value their account. People much larger than they could afford to win together. However, the trick is that this can only happen to experienced traders who know what they are doing, and anyone else trading with leverage is likely to lose their money, and allow the platform to profit is.
This is due to the fact that margin trading comes with a huge amount of risk, and you really need to know what you are doing to pull it off. But, if you do this, it is definitely worth it.
Trade with leverage also became possible in the crypto industry, relatively quickly the industry began to attract the attention of those who were not intimidated by its technology in the early days. However, a problem with the crypto industry is that trading is still primarily done on centralized exchanges. It did not fit with a broader narrative, with the goal of the industry being as decentralized as possible.
Decentralized exchanges emerged after some time, but they had low liquidity, poor technology and did not attract interest. Until last year, at least, when the DFI sector emerged, launching Dex and all other decentralized projects meant for basic crypto trading more than anyone.
And it is still growing. This is why the Degen Protocol – a protocol that eventually took a path to bring decentralized margin trading for crypto – has chosen an ideal time to emerge, and why it is going so big right now.
What is Degen Protocol?
Let’s start from the beginning. The Degen Protocol is a decentralized protocol that brings margin trading for DFIs. The protocol is highly customizable, allowing merchants to select anything, add to leverage, liquidity pools and more. As of mid-March 2021, the protocol exists on both the Ethoram blockchain and the Binance Smart Chain.
The way it works is also quite interesting, as it provides four roles that protocol users can fill. Users can either be pool creators, lenders, stackers or traders.
How Does it Work?
Pool creators, as the name suggests, have the ability to create pools. They are typically envisioned as crypto enthusiasts and token owners who can add any trading pair pool to Degen, and promote it to other participants. Pool creators can customize various pool settings, including manufacturer and lender fees, leverage, pool maximum usage, lenders’ day interest, and more.
Then, there are the stackers, who are essentially crypto owners who want to earn more cryptos using crypto, without losing the coins they already have. Therefore, stacking is an ideal solution for them, as it requires them to lock their coins and get new ones as rewards from the system. Meanwhile, they also play a role in the governance of the project, and make a profit on stage trades, so being a stakeholder seems to be one of the best roles in the project ecosystem.
Then there are lenders, whose role is similar to that of the stackers. They are also people who do not want to trade their coins away and risk them in a highly speculative market, but instead desire to receive rewards, while not exposing themselves to risk. The coins they provide are used by the pool for trades and each pool trade is subsequently charged.
And yes, there are traders. The merchants are the final piece of the puzzle, but their role is just as important as the others, as they are the force that drives the rest of the well-oiled machine that was designed by the Dezeen Protocol. They use tokens in the pool, try to convert the gains, and then return them to the pool later. They also conduct trades and pay fees that are used to pay lenders and stakeholders. So, while other roles are setting the stage, it is the merchants who are instigating the entire system.