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DeFi fans who like to bet big have a reason to celebrate. You can now trade Ethereum with up to six times leverage—and supposedly, with no third party involved.
Opyn, a decentralized margin trading platform built on top of a bunch of decentralized finance (DeFi) protocols announced yesterday that it now provides an interface for users to trade Ethereum with big-time leverage. It claims to offer the highest available leveraging position for Ethereum in all of DeFi.
That’s great—or terrible—news for investors. While leverage trading allows someone to amplify their winnings, it equally amplifies their losses and can be very dangerous. That’s particularly true in the highly volatile cryptocurrency market that critics claim is prone to price manipulation.
Opyn launched its mainnet back in June. Later that month it released leverage trading up to 3.5 times, before raising it to five times in August. The latest news takes it now to six times. And for those so inclined, the fact you can do this, without trusting any third party with your money, is a pretty big deal.
The exchange is built using five tools of the decentralized web: Compound, Uniswap, Maker, dYdX and Kyber Network. These provide the means for users to borrow or lend ether and trade different Ethereum tokens. Opyn brings them together into one singular package. And unlike most dapps, it’s surprisingly simple to use.
To leverage Ethereum on Opyn, you give them some ether as collateral and take out a long or short position, based on whether you think the price of ether will rise or fall. And that’s about all the user sees.
In the background though, it’s a much more complicated process. In short, Opyn uses the ether you provide as collateral to take out a loan of DAI—which can then earn interest. The money this makes is used to fund winning trades.
But, while your funds are kept in your own wallets (the whole process in non-custodial), some of them will get held up in smart contracts. And to get them back, you’ll need the DAI that Opyn has.
While that shouldn’t be a problem, unless something goes majorly wrong for Opyn, it does cast doubt on how decentralized this whole thing is.