📈Leveraged Trading
Below are the topics that we will be covering in this section:
Zeno's Collateral Management Model
Collateral management is one of the key differentiating features of Zeno. Specifically, Zeno is the only pool-based decentralized perpetual protocol that offers cross-margin collateral management while also allowing users to use multiple types of assets as collateral:
Cross-margin Collateral
Zeno offers cross-margin collateral management, which allows for the sharing of margin balances across multiple positions. With this feature, traders will be able to manage their portfolio holistically in a much more efficient and convenient manner. Capital efficiency will be enhanced, improving the flexibility through the reduction of margin requirements.
The cross-margin collateral support allows Zeno to offer the experience of using a centralized protocol without sacrificing on the security benefits of decentralization.
If users still wish to use an isolated margin (e.g., for risk management), they can still do so by utilizing the sub-account feature.
Multi-asset Collateral Support
Zeno accepts multiple assets as traders’ collateral. Allowing users to utilize mulitple assets as collateral provides two key benefits to the users:
Users do not have to convert their holdings into specific assets to start trading
Users can effectively execute many strategies such as carry trade strategy or max long strategy (e.g., use ETH as collateral to long ETH)
As part of the risk management procedure, Zeno will assign the LTV (loan-to-value) to each collateral asset, which will determine the borrowing power. The borrowing power will then function as the variable that determines the liquidation threshold and the health of the account against all open positions under that account.
Below is table summarizing the current supported collateral assets
Zeno's Other Innovative Offerings:
In addition to Zeno's unique collateral management model, Zeno also offers various other enhancements that elevate the trading experience on the platform, making it the most seamless and user-centric decentralized leveraged trading platform. Some of these features include:
📱 Progressive Web App: Develop a mobile application that offers users an app-like trading experience, closely resembling that of a Centralized Exchange (CEX) application while retaining the advantages of decentralization.
⛽️ Gasless Trading & Order Management: Execute trades and manage orders on Zeno effortlessly through an intent-based architecture without the need for funding wallets with gas.
👤 Subaccount Support: Trade using different sub accounts under the same wallet address, creating a better user-experience and convenience for position risk management. This feature also allows traders to use isolated-margin for trading.
🐍 Python SDK API: Empower traders to utilize Zeno as their preferred platform for automated and algorithmic trading, thereby boosting the overall trading volume on the platform.
⚖️ Velocity-based Funding Fee: Introduce an incentive mechanism to maintain a balance between long and short Open Interest (OI), thereby minimizing the risk of capital loss for LPs. Users can also employ carry-trade strategies to profit from funding fees while maintaining delta neutrality.
🖱️ Account Abstraction (1-click Trading): Simplify the trading process by enabling one-click trading through account abstraction, providing a user experience similar to a CEX.
📈 On-chart Trading: Provide users with the capability to adjust Take Profit (TP) and Stop Loss (SL) prices effortlessly by clicking and dragging directly on the chart.
Asset Classes Listing
Zeno currently offers the trading of three asset classes, including cryptocurrencies, FX, and commodities. Below is the list of assets supported by Zeno and their maximum leverage.
For the full list of asset listing, please visit here.
Fees
Zeno charges the following fees to its traders:
Trading Fee (Position Opening & Closing):
The trading fee is charged as a percentage of the trader’s position size when a trader opens & closes their leveraged positions. The trading fees charged at Zeno will vary based on different asset classes.
You can find the trading fee for each asset class here.
Adaptive Trading Fee:
The adaptive trading fee (ATF) will take our security to the next level and improve user experience at the same time as it enables us to:
List more crypto markets including ones with lower market cap
Increase Max. Trade Size
We will implement the adaptive trading fees on ALL crypto markets EXCEPT BTC and ETH, where users can still enjoy the same flat low 0.02% trading fees. ATF is calculated based on various variables including asset’s volatility and trading size relative to asset’s liquidity depth on CEX. For the formula and the example calculation of the Adaptive Trading Fee, please visit here.
It is important to note that the objective for ATF is to simulate the effect of price impact when executing a large order, in order to prevent potential bad actors from profiting through price manipulation.
The example below compares the total fee when trading on Zeno vs. the fee + price impact that would happen on the same trade on CEX (i.e., Binance) when opening a MEMEUSD long position with a size of 100,000 USD.
Given:
1% Ask order book depth = 267,000 USD (i.e., market buy 267k USD would move the price up 1% on Binance)
epochDelta = 0; (only trade in the 5-min window on this asset on Zeno)
Volatility of MEME is 0.003
k1 = 1.25, k2 = 0.005
MEME’s fixed trading fee = 0.05%
Plugging all the values into the formula, we see that the adaptive fee for Bob is 0.05% + 0.04% = 0.09%
On the other hand, if Bob were to open MEMEUSDT long position with the same size on Binance. Bob would have to pay the maker fee of 0.05% and the price impact of 0.225% to fill the whole order. Thus, Bob will have to pay a total of 0.05% + 0.225% = 0.275%.
For the sample data and the example calculation, please visit here.
Borrowing Fee:
The Borrowing Fee is charged on the size of the position of the trader and functions as a way for Zeno to compensate the market makers (ZLP depositors) for their cost of liquidity. The borrowing rate is determined by the asset utilization rate of the ZLP vault.
More details on the Borrowing Fee, please visit here here.
Velocity-based Funding Fee:
The Funding Fee is charged on the traders’ position, similar to the borrowing rate. The Funding Fee helps bring a balance between long and short OI on Zeno, thus ensuring our LPs are not too exposed to one side of the market. Zeno has a velocity-based funding rate model, where the funding rate will gradually increase or decrease based on the market skew. Heavily skewed market will see one side of traders gradually paying more funding fee to the other side. For more information on the Funding Rate model, please visit here.
Note that the Funding Fee accrues over time and get settled every time a position is modified, opened, or closed. You can find the specific parameters for the Funding Fee for each asset class here.
Liquidation Fee:
The liquidation fee is incurred when the trader’s position is liquidated by the platform. It is charged at a flat rate of $5.0 and is used to cover the gas and operation costs when liquidating high-risk positions.
For more details on the liquidation process, please visit this link.
Margin Fractions (IMF & MMF)
There are two margin fractions, which determine the traders' margin requirements, at Zeno:
Initial Margin Fraction (IMF): The Initial Margin Fraction is a parameter set by Zeno, and is used to determine the initial margin requirement. It is displayed as a percentage & different asset classes will have different IMF.
Maintenance Margin Fraction (MMF): The Maintenance Margin Fraction is a parameter set by Zeno, and is used to determine the Maintenance Margin Requirement. It is displayed as a percentage & similar to IMF, the MMF will be different for different asset classes.
Below is the table representing Initial Margin Fraction (IMF) & Maintenance Margin Fraction (MMF) for each asset class.
Adaptive Pricing Mechanism
Zeno employs a mechanism called "Adaptive Pricing" to help bring balance between the long and short open interest of each trading asset. When a user opens or closes a trading position, the Adaptive Pricing mechanism applies a premium or a discount on top of the oracle price based on the resulting skew after the transaction is executed between the long and short open interest of the asset.
If the long open interest is larger than the short open interest, a premium will be applied to the price of the asset. On the other hand, if the short open interest is larger than the long open interest, a discount will be applied to the oracle asset price. The premium/discount from the Adaptive Pricing mechanism will encourage or discourage traders to open long or short positions on the asset accordingly.
Below is a table summarizing the premium and discount applied to the price in different scenarios.
For the formula and the example calculation of the Adaptive Pricing Mechanism, please visit here.
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