✖️Multiply

Introduction to Multiply

Multiply is an advanced leverage mechanism embedded within lending protocols, designed to empower users to strategically amplify their exposure to crypto markets. By leveraging collateralized borrowing, Multiply enables participants to enhance their potential returns — or losses — without requiring intricate derivative instruments or external trading platforms.

This feature is particularly advantageous for users aiming to optimize their investment strategies by capitalizing on anticipated price movements of assets such as SOL or ETH. Multiply supports both long and short positions, offering a versatile and efficient framework for market participation within a single click.

At the initial stage, the capital and maximum multiplier for users is $100 USD value position & 2X multiplier.

How It Works

Multiply facilitates leveraged positions through a straightforward yet powerful process: users deposit an asset as collateral and borrow another asset to adjust their exposure to market movements. The approach hinges on two distinct strategies:

• Long Position: Employed when users anticipate an appreciation in the value of the collateral asset, aiming to magnify gains from upward price trends.

• Short Position: Utilized when users expect a depreciation in the value of the borrowed asset, enabling profits from downward price movements.

The interplay between the deposited collateral and the borrowed funds, coupled with the subsequent deployment of those funds, defines the direction and extent of the leveraged exposure.

Mechanism

Long Position

A long position within the Multiply framework targets users who project an increase in the value of a volatile asset, such as SOL. The process unfolds as follows:

1

Collateral Deposit

The user deposits a volatile asset (e.g., SOL) into the lending protocol, establishing the foundation for the leveraged position.

2

Stablecoin Borrowing

Against the deposited collateral, the protocol permits borrowing of a stablecoin (e.g., USDC), typically constrained by a predetermined leverage ratio (e.g., 2X), which reflects the maximum borrowing capacity relative to the collateral value.

3

Acquisition of Additional Volatile Asset

The borrowed stablecoin is utilized to purchase additional units of the volatile asset, effectively doubling the user’s holdings of that asset compared to an unleveraged position.

4

Enhanced Market Exposure

With an increased quantity of the volatile asset, the user’s position is now more sensitive to price increases, amplifying potential returns should the asset appreciate.

Core Principle: The conversion of borrowed stablecoin into the volatile asset heightens the user’s exposure to upward price movements, leveraging the stability of the borrowed asset to enhance the volatility of the position.

Short Position

A short position caters to users anticipating a decline in the value of a volatile asset, such as SOL. The mechanism is structured as follows:

1

Collateral Deposit

The user deposits a stablecoin (e.g., USDC) into the protocol, serving as security for the leveraged position.

2

Volatile Asset Borrowing

The protocol facilitates borrowing of the volatile asset (e.g., SOL) against the stablecoin collateral, adhering to the leverage ratio.

3

Sale of Borrowed Asset

The borrowed volatile asset is immediately sold on the market, converting it into additional stablecoin and increasing the user’s stablecoin reserves.

4

Profit Realization from Price Decline

Should the volatile asset’s price decrease, the user can repurchase it at a reduced cost to repay the borrowed amount, retaining the difference as profit.

Core Principle: By borrowing and selling the volatile asset, the user establishes a position that benefits from a decline in its value, leveraging the borrowed asset’s price dynamics to generate returns in stablecoin terms.

Liquidation

Liquidation represents a pivotal safeguard within leveraged positions, activated when the collateral value fails to adequately secure the borrowed amount. This automated process ensures the protocol’s solvency but poses significant consequences for users.

• Trigger Conditions:

  • Long Position: A substantial decline in the collateral asset’s price (e.g., SOL) reduces its value below the liquidation threshold, typically defined as a percentage of the debt (e.g., 120% collateral-to-debt ratio).

  • Short Position: A significant rise in the borrowed asset’s price (e.g., SOL) increases the repayment cost beyond the collateral’s capacity, breaching the threshold.

• Process: The protocol liquidates the collateral by selling it at market rates to settle the outstanding debt, often incurring additional fees or penalties.

• Consequences: Users lose their collateral and any unrealized gains, potentially facing a net loss if the liquidation price is unfavorable.

Maintaining a collateral buffer above the liquidation threshold is critical, as rapid market movements can precipitate this event unexpectedly.

You can directly check your liquidation price of the token on your position.

Risk

Leveraged positions within Multiply entail a spectrum of risks that users must carefully evaluate:

• Amplified Losses: Adverse price movements result in magnified losses, proportional to the leverage ratio, as demonstrated in the case studies.

• Liquidation Risk: Insufficient collateral relative to debt triggers forced liquidation, potentially at suboptimal market prices, eroding capital.

• Borrowing Costs: Interest accrues on borrowed assets (e.g., 5% APY on USDC, 10% APY on SOL), diminishing net returns over time, particularly in stagnant or unprofitable positions.

• Market Volatility: The inherent unpredictability of asset prices heightens the likelihood of unfavorable outcomes, exacerbated by leverage.