Leveraged Trading
What is Leverage?
Leverage is like using a magnifying glass on your assets. It lets you amplify your position in the market without needing more funds. Think of it this way: with EVAA, if you deposit 100 TON, you might be able to borrow another 60 TON. This gives you a leverage ratio of 1.6:1.
Introducing EVAA's Platform
EVAA has created a safe space for traders to increase their market positions using borrowed assets. But here's the catch - every loan has to be backed by more assets than its worth (over-collateralized). This setup has two big benefits:
Safety First: If a user can't pay back, EVAA can sell the deposited assets and get the borrowed amount back.
Keeping Everyone Honest: Since crypto transactions can be anonymous, making sure people deposit more than they borrow ensures they return to repay their loans.
Scenario with Lisa and TON
Imagine Lisa, who's pretty sure TON's price will go up. She has 100 TON and wants to make the most of her prediction.
Steps
Step 1 - Deposit: Lisa puts her 100 TON in EVAA. This allows her to borrow up to 60 TON.
Step 2 - Borrow and Boost: She borrows 60 TON, giving her 160 TON to play with.
Step 3 - Trade and Win: Lisa's guess was right, and TON's price doubled! She now sells her TON for a profit.
Repeat Process (using 60% rule): This step is somewhat ambiguous. If Lisa's 160 TON doubled in value to 320 TON and she sells it, she now has the value of 320 TON. If she wants to repeat the process, she must repay her initial loan first. After repaying the initial 60 TON, she has 260 TON left. If she deposits this and borrows 60% of it, she'd get an additional 156 TON. Clarity is needed on how many times she's leveraging and repaying.
Step 4 - Settling Debts: The step is clear, but mentioning that she's still in profit after returning the borrowed TON and interest would be beneficial.
Suggested Improvement:
After Step 3, insert:
Potential Downside: If Lisa's prediction had been incorrect, and the price of TON had fallen significantly, she could risk having her deposited assets liquidated by EVAA to cover the loan.
After Repeat Process:
Clarification: Each time Lisa wants to repeat the process, she first repays her initial loan and then deposits the remaining amount to borrow 60% of its value.
The Key Things to Keep in Mind
The Liquidation Threat: If TON's price dropped instead of rising, Lisa could face liquidation. It means EVAA might sell her deposited TON to recover the loan.
Balancing Act: While leverage can give bigger profits, it also comes with bigger risks. If things don't go as planned, losses can be magnified.
Going Beyond Simple Trades
Leveraging isn't just for direct trading. In the world of DeFi, there are many other ways to use your borrowed assets, like staking or different farming schemes. These can be lucrative but also complex. While we won't dive deep into these strategies here, there's a world of information. Look for expert insights on Twitter or DeFi forums to learn more.
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