Launch of Rabbit Finance V2 Defining New Product of Margin Trading

The new update will provide risk-hedging tools as well as a brand new margin trading feature.

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September 1, 2021
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Following leveraged yield farming, Rabbit Finance will introduce a major update of the project, Rabbit Finance V2, together with a new family member, Margin Trading, which will not only enrich the whole ecosystem by providing a risk hedging tool for leveraged farmers but also offer a decentralized and reliable margin trading tool for traders.

We will analyze Margin Trading of Rabbit Finance V2 in detail from the perspective of product design and gameplay.


Functions and UI

The first version of Margin Trading will support 3 assets: BTC/ETH/BNB, allowing traders to borrow funds from the Bank on margin to short or long target assets.

The demo design is shown below:

Similar to leveraged yield farming, traders provide principal (margin) and borrow funds from the Bank, entrusting strategic contracts to execute transactions through DEX by buying / selling target assets. With long ETH as an example, the process of Margin Trading is as follows:

1. Traders provide principal in ETH and borrow USDT from the Bank

2. The strategic contract swaps USDT into ETH

3. ETH price fluctuates and rises up

4. Close position (sell ETH/pay the debt and interest to the Bank / get back principal + long gains)

Simply put, when price of ETH is 3000 USDT, traders:

  • Provide 1 ETH as principal, choose 3x leverage to long ETH, borrow 6000 USDT to buy 2 ETH, that is, 3x long ETH.
  • Provide 3000 USDT as principal, choose 3x leverage to short ETH, borrow 2 ETH to sell 6000 USDT, that is, 3x short ETH.

 

Use Case

We will use a simple case to show the process of Margin Trading:

Steven is a trader. He predicts BTC is about to rise while the current price of BTC is 50,000 USDT. Steven plans to provide 1 BTC as principal and open a long position with 3x leverage.

Steven chooses margin on 1 BTC and 3x leverage on the setting page. The contract will then borrow 100,000 USDT from the Bank of Rabbit Finance, and swap 100,000 USDT into 2 BTC. At this time, the trading is completed, and Steven's position of about 3 BTC will be entrusted to the vault contract of Rabbit Finance.

A few days later, BTC surges to 60,000 USDT, Steven decides to close the position and receive about 80,000 USDT. The profit is about 30,000 BUSD to long BTC.

In the opposite instance, if BTC drops to 40,000 USDT, Steven closes the position and gets about 20,000 USDT. The loss is about 30,000 BUSD to long BTC.

In order to simplify the case, costs such as borrowing interests and trading fees are not considered. When Steven shorts BTC, vice versa.

 

Rates and Incentives

Traders carry out margin trading by borrowing funds from the bank on margin and entrusting strategic contracts to actually buy or sell target assets. Only a small amount of borrowing interest needs to be paid to win leveraged time gains by short or long target assets and RABBIT rewards in this process.

Costs and rewards of Margin Trading include: borrowing interest of the Bank, DEX trading fee , Margin Trading fee and RABBIT rewards. The relevant details are as follows:

1. Traders can do either long or short positions. Open/close positions are charged only once, no more than 0.2% of the position value.

2. RABBIT rewards will be distributed to traders, the longer positions are held, the more rewards will be received.

 

Future Plans

The first version of Margin Trading on Rabbit Finance V2 will support 3 assets in BTC/ETH/BNB, and subsequent version will update mainly in the following 4 aspects:

a. More target assets supporting - allowing to long/short more target assets.

b. Optimizing liquidity - integration of more DEXs to provide better and deeper liquidity.

c. Increasing leverage times - providing higher leverage for assets with good liquidity.

d. Empowering RABBIT - supporting deductions of trading fees with RABBIT or discount according to holding/lock-up amount of RABBIT.

 

Security measures

Security First

Security has always been the top priority of Rabbit Finance team since the project started, and 3 overall audits have been fulfilled by the three world class audit institutions, CertiK, ChainsGuard and PeckShield. PeckShield has also completed the audit report of margin trading products separately.

Time-Locked Smart Contracts

Timelock is a contract for delaying changes to the protocol. This contract is an owner of all the major contracts on Rabbit Finance. This is a security feature that enables the community to see all upcoming updates and preparation in advance. If anything looks suspicious, investors can pull their funds back from the protocol before the update takes effect.

Flash Loan Attack Avoidance Measures

  • Contracts of Rabbit Finance open to EOA (Externally Owned Accounts) only, which evades potential risks that attackers can open a position to borrow massively for flash loan attack.
  • Rabbit Finance liquidates leveraged positions through liquidation bot instead of bounty hunter like some other projects. This design will be able to cut the profit source of the attacks.
  • The maximum limit of positions on Rabbit Finance is more strict than other products, which improves security by avoiding sharp fluctuations of token price due to attackers manipulating prices through opening large positions.

 

Liquidation system

The "Gemini Liquidation System" ensures accurate and safe liquidation.

The liquidation strategy of some other products is the oracle feed price and record it on the oracle contract, the price from oracle contract determine the liquidation price. But this liquidation strategy is not good enough, as we have seen too many cases in which users suffer from capital loss caused by the oracle failing to provide the correct price.

Rabbit Finance invented the "Gemini Liquidation System" based on the liquidation strategy of other products, The specific rules are as follows:

The oracle reads and compares price from both DEXes and CEXes in a 1 minute time interval, when a position qualified to get liquidating for the first time, and the price difference from CEX and DEX is within 5%, then it will be listed in a liquidating waiting list, then it will be liquidated only if the next price verification from oracle also proves this position is qualified for liquidation. The price verification from CEX is also double checked, the price is acquired from both Huobi and Binance, in this way, thoroughly avoids capital loss of users due to price verification not in time and inaccuracy. 

 

Summary

A rapid development is expected due to the enormous potential of the margin trading products field. Furthermore, there are intrinsic advantages for Margin Trading on Rabbit Finance V2 compared with its competitors considering the overall mechanism and characteristics, which mainly benefit from its outstanding core tokenomics and designs. 

Based on the above, we substantially believe that Rabbit Finance V2 will win the opportunity to occupy a larger share of the decentralized trading market in the near future.

To learn more about Rabbit Finance, visit the following links:

Website

Twitter

Telegram

Medium

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