Not so long time ago leverage trading was an exclusive domain of highly-trained investment professionals. Crypto has changed this forever — currently, all major cryptocurrency exchanges offer margin trading accounts. However, on centralized trading platforms their operators have full control over leveraged trading rules, including decisions on capital lending rates, assets, available for leveraged trading, and liquidation procedures.
W😮Wswap democratizes leveraged trading further by giving all power 💪to the community. With WOW protocol liquidity providers can create and operate common liquidity pools 🏊♀️, and traders can borrow these funds for their leveraged trades according to the rules collectively established by WOW token holders.
At launch 2️⃣8️⃣tokens are added for leveraged trading by the project team, and anyone can add more tokens via WOWswap Governance.
Opening 👐and closing 🔐leveraged trading positions.
If you have traded on WOWswap sneak preview and have proxy-tokens in your wallet, please make sure you swap back from proxy-tokens to BNB or BUSD, because the proxy-tokens contracts have been redeployed. The interface for sneak preview will still be available on wowswap.io until May 12, 2021.
Unlike margin trading accounts on centralized exchanges, WOWswap has an extremely simple interface: just select a token you want to buy for BNB or BUSD and move the leverage slider to the right to set the leverage coefficient 😎.
Leverage can vary from x1️⃣ (no leverage) to x5️⃣ (maximum leverage). At launch for a few days the maximum leverage is set to x3️⃣— this constraint will be removed shortly.
When you buy a token with leverage you finance only a portion of the purchase with your own capital — the rest of the funds you borrow from a liquidity pool. In the lower part of the swap screen you can see information about your loan and Hourly Interest Rate (HIR). Offered HIR depends on the utilization ratio of the liquidity pool and the leverage coefficient set by you. However, once you make a swap, the HIR for this swap will remain constant until the position gets closed or is liquidated.
After you complete a swap you will get “proxy-tokens”, which are pegged 1:1 to real tokens held by WOW smart contract 🤓on your behalf. Proxy-tokens are needed for the protocol to guarantee the repayment of your loan once you sell proxy-tokens back for BNB or BUSD: the protocol will change proxy-tokens to real tokens, exchange real tokens for BNB/BUSD on Pancakeswap, repay the loan to the liquidity pool and transfer the rest of the funds to you 🎉
Proxy-tokens are transferable ERC-20 tokens, you can add them to your Metamask wallet by clicking the button on the confirmation screen.
Alternatively, you can add proxy-tokens to your Metamask wallet by going to Assets -> Add Token -> Custom Token and providing the proxy-token smart contract’s address, which you can obtain from the purchase transaction information on BSCscan.
Note: if you buy more of the same token, your new purchase will be merged with the previous one, and the balance of your proxy-tokens will be summarized. Also, your existing loan to the liquidity pool will be merged with a new one. Finally, the HIR for the combined loan will be updated as a weighed average of interest rates for both loans.
If you want to close your leveraged trading position you can simply press on any arrow ⬇ or manually select tokens for a swap. Please, note that in version 1 you can only sell tokens for the same currency that you bought them for.
Adding/ Removing liquidity.
You can become a liquidity provider by supplying liquidity in BNB or BUSD to the liquidity pool. To supply liquidity you need to convert BNB/BUSD into ibBNB/ibBUSD, which are interest-bearing tokens.
Please note, that the exchange rates of ibBNB/BNB and ibBUSD/BUSD are supposed to be growing over time, so when you supply liquidity they will not be equal to 1.
To remove liquidity from liquidity pools simply convert ib-tokens back to BNB/BUSD.
Tracking your portfolio 💼
After successfully swapping any token available on WOWswap your position information will be available in the portfolio💼 section.
The portfolio💼 will show your current position size in the token you bought and its value in BNB or BUSD. The debt is shown in the asset you borrowed for the leveraged trade with the Hourly Interest Rate displayed below. The net value is the position size minus debt.
Your position health👩⚕️ is shown in percentage. The higher the percentage, the lower the liquidation risk. When the health falls to 0% your position is liquidated.
A liquidation event can’t happen by itself, it should be triggered by a margin caller — a person🧑 or a company 🏢that runs special software capable of tracing numerous leveraged trading positions. Anyone can become a margin caller by downloading and installing the liquidation software which will be provided by in a few days after the launch.
In case of a successful liquidation, a margin caller receives a liquidation reward💰, calculated as a percentage of the total position size. The liquidation reward is currently set at 5️⃣% but can be changed via the Governance.
When a margin caller makes a liquidation transaction, WOWswap’s smart contract verifies whether the liquidation condition is satisfied, and, if so, proceeds with the liquidation.
During the liquidation, all parties are paid according to the following order:
1️⃣ the margin caller gets a liquidation reward (LR);
2️⃣ the liquidity pool receives the debt with accrued interest;
3️⃣if any funds are left, the trader receives the rest of the funds.