WOWSwap: The First Leveraged Trading Protocol on Binance Smart Chain

WOWswap is the first trading protocol for leveraged trading on PancakeSwap ( Binance Smart Chain) and Quickswap (Polygon Network). It is a fully community-owned decentralized protocol that allows users to gain up to 5X leverage when trading BSC and Polygon tokens such as $CAKE, $AUTO, $VAI, $BAKE, $BUNNY, $FUEL, $FRIES, $KEBAB, $LIT, $BIFI and more.

By
Robert D. Knight
on
April 27, 2021
Category:
BSC News

What is Leverage?

Leverage is when a person uses borrowed funds to make a larger trade than they could self-finance. Leveraged trading allows a person to amplify their profits and to gain greater market exposure a limited amount of starting capital. The trader only trades with a portion of the leveraged position, but their profit and loss will be based on the full value of the trade. This allows the trader to multiply their profits should the asset value increase. As a trade-off, leveraged trading also holds a greater degree of concomitant risk. A leveraged position may be liquidated if conditions are met, such as the value of the asset dropping below a certain level, meaning that the user’s funds are lost.


On centralized exchanges, leverage is provided by brokers and exchange operators who set the lending rates, fees, and liquidation conditions. For decentralized protocols to offer truly decentralized leveraged trading, a different system is required.

What is WOWswap?

WOWswap is a way and means by which leveraged trading can occur on PancakeSwap/Quickswap without the need for any centralized authority. With the aid of WOWswap’s smart contracts, individuals can contribute to shared liquidity pools. These pools can then be leveraged by users for their trading activities.

Key Features

-Decentralized leverage up to 5x

-Community liquidity pools

-Community set protocol fees, interest rates and liquidation ratios with WOW governance token


Making Swaps

WOWswaps are designed to be as simple as regular PancakeSwap transactions. For instance, if you wish to trade 1 BNB worth of assets, WOWswap will 5x that to 5 BNB worth of assets. Since this is a leveraged trade operating through the WOWswap protocol, there are some slight differences that should be considered. For instance, if trading BNB for CAKE the tokens you actually receive will be wCAKE tokens. These wCAKE tokens enjoy a 1:1 peg with CAKE tokens, holding the exact same value.


If the value of CAKE/wCAKE rises it can be traded back for BNB, and the user collects the profit minus 5% in fees. Those fees are split with 2.5% going to the community fund and a further 2.5% is used for buyback and burn WOW tokens. If the value of CAKE/wCAKE falls below the liquidation threshold then another user known as a margin caller can liquidate the trade. The margin caller is incentivized to liquidate these trades with a cut of the rewards. The liquidation reward for margin callers is currently set at 5️% but can be changed via the WOW governance token.


Seamless UI/UX

Using WOWswap could not be simpler. A button at the top right of the page invites the user to connect their wallet and the WOWswap interface connects quite seamlessly with any MetaMask set up for BSC. WOWswap is supporting 3x trading on launch and will roll out 5x in the near future once the protocol is established.



The leverage slider is simple to use and displays the leverage up to two decimal places. At the very bottom of the page, some crucial information is displayed including the total debt to the liquidity pool and the interest on that extra capital - your debt.


To close the leveraged position simply press on the down-facing arrows. In the current iteration of WOWswap, leveraged trading positions can only be closed and swapped back into the original currency in which they were bought. So if you purchased tokens in BNB it is BNB you will receive, if you purchased in BUSD it is BUSD you will receive.



Users can track all of their currently open WOWswap trading positions from the portfolio page. The portfolio displays all of the positions currently open from that user, their value, and their current health score. When health hits 0% the position is liquidated.




WOW Token

WOWswap has a fixed total supply of 1,000,000 WOW tokens. WOW token is the governance token of the protocol with protocol fees, interest rates for lenders and borrowers, liquidation ratios, and other factors decided by the community.


Community WOW tokens will be distributed to protocol users over a period of 18 months:

  • 200,000 tokens are earmarked for liquidity providers
  • 100,000 tokens for leveraged traders
  • 50,000 tokens are for margin callers
  • A further 200,000 tokens are reserved for WOWswap marketing activities, community contests, bounty campaigns, white hacking rewards, and airdrops.

Roadmap

There are a number of areas in which WOWswap will be developing over the short to medium term.


  • Leverage will increase from 3x to 5x
  • The number of available tokens will increase from the initial 28.
  • Adding new blockchains (Launched on Polygon on April 26).
  • Launching Instant Governance and statistics page.


Concluding Thoughts

Thanks to WOWswap leveraged trading on PancakeSwap is not only possible but incredibly easy to accomplish. What was once only possible for investment professionals on centralized exchanges, is now thoroughly democratized. Anyone can get to grips with the basic functions of WOWswap in minutes.


Better still, WOWswap hands all of the power to the people. Liquidity providers operate common liquidity pools and traders take advantage of these pools to leverage their trades. Other users - margin callers - monitor for trades that have hit the liquidation threshold and act accordingly. At every stage of the process, it is the users who have the power, and it is users who decide the future direction of the protocol with WOW tokens.



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Overall it is vital to proceed with caution when purchasing tokens that have just been listed. For those who have not already read our articles on safety in the BSC it is crucial to reference the following items, HERE and HERE.

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Robert D. Knight

Robert D. Knight is an experienced journalist and copywriter who has been working in crypto for 4+ years. His bags are heavy and he also hodls some cryptocurrency.