The world of crypto leverage is a SCARY. That $5000 5x sure thing long you just took on ETH became a $25,000 margin call after some flash crash shenanigans dramatically hits the one exchange you happen to be on. Its a daily occurrence in the fiat stock market, and its even worse in the unregulated frontier of decentralized finance where governments are still playing catch up. But as a true degen who just cant wait for the next four digit APY yield farm, how are you supposed to play the game of derivatives without the inherent risk of unbound losses resulting in a margin call?
Fret no more as I have found a home for you degens where the waters are sweet, and without the bitter aftertaste of premature liquidations or margin calls: CompliFi.
The CompliFi platform is a decentralized Automated Market Maker (AMM; think Uniswap) but for issuing and trading derivatives. With the CompliFi platform and the $5000 5x ETH Long example above, the loss is limited strictly to the $5000 the user swapped into the derivative. No flash crash or “exchange maintenance” could ever cause the user to lose beyond what they swapped into the derivative, even if the market happens to move against their position in a dramatic fashion. Take note, there ARE still potential for losses up to the $5000 in this example, but never beyond what the user initially swapped with; No Margin Calls!
But if potential losses now have a cap, it also means potential returns must also be capped. In the game of derivatives, the winner is being paid by a loser who took the opposite side of the bet. The other benefit with CompliFi is removing premature liquidations. When you lose too much, a centralized exchange will close your bet and will even ask you for more money than you initially bet (margin call). But closing you out too early means your losses are immediately realized with no potential for a comeback. At CompliFi, the derivatives are settled in monthly cycles, so even if you happened to be on the wrong side of a market bet and your token goes to $0 on day 10 of the period, you still have ~20 days for the market to reverse and reverse your fortunes. Your position will never be forcibly closed at CompliFi due to losses.
Lets do a quick ELI5 walkthrough of the CompliFi protocol so you can see, and then experience for yourself the power of leverage without the devastating consequences of a margin call:
This is the “homepage” of the CompliFi application where derivative degenerates will live and die by their trading actions. From here a user can see what derivative strategies are available and the cost of purchasing one derivative (spot price; between 0 - $2.00). When the user has decided which market they want to ape into, they simply select the currency (USDC) to swap from, the amount, and which market they want to swap into. The system will then display how much you can purchase with that amount, and if there will be any additional penalties (slippage). Once you click Swap, you now own tokens in the game of derivatives where with 5x leverage, a 20% move in the markets could mean up to 100% gain in your balance.
Looking at the above screenshot, in just seven days a 5x Long would be nearing its payout threshold. And when you feel the market has topped and is ready to start moving in the other direction, you don’t even need to swap your gains into USDC first, you can easily keep the degen train rolling and swap directly into the opposite position, or even a different market like Bitcoin.
Similar to AMMs like Uniswap, the Pool section is where individuals all over the world deposit liquidity into CompliFi so the system can perform its function of creating a market for the Swap portion of the protocol. Here in the Pool section, users are not necessarily depositing to play the game of derivatives itself, but instead act as market makers who create the pool of derivates which are traded on the Swap page. These market makers earn the trading and spread fees from those who are actively using the Swap function and playing the game of derivatives.
While the lure of 5x market action is appealing to many, the savvy hedge fund manager can see the potential of taking the safer position with continuous opportunity for fee generation instead of relying on market movements alone. Remember it was those who sold the shovels during gold rushes who became the richest…
**Be warned, while not directly playing the derivatives market itself as a liquidity provider, if the pool becomes unbalanced by traders buying too much of one position on the Swap page, and the market moves in favor of those traders, the liquidity providers would experience a loss in assets.
To manage this potential exposure, the CompliFi AMM sets a hard limit on imbalances in the LP and utilizes dynamic fees that increase sharply with the amount of risk created by a trader unbalancing the LPs.
This is your Hall of Fame. Here you will track your LP deposits and/or any derivatives you might hold, so when you are firing off tweets to cement your god status during the next boom or bust in the market, you have all the proof in the world. When a market settles after its 30 day cycle, you will have the option to redeem your deposited assets, with your earnings or losses netted into the amount. Additionally you can click each line item to see performance graphs over the period.
TLDR; 5x leverage on ETH or BTC with no forced liquidations or margin calls, no KYC or credit checks. Pick which market you want to Long / Short, and swap in with a few clicks. Or be the Market Maker and deposit into the Pool to earn fees from derivative swappers.
If you are interested in the high flier life of 5x leverage without the knee breaking consequences of margin calls, or just want more information about CompliFi and its governance token COMFI, please visit our social media channels and documentation hubs listed below.