Arcadia Protocol (Part 2/3) — the Accounts

In our last post we introduced the Arcadia Registry, the foundational building block of the protocol.

In this new post we will introduce another key compponent of the Arcadia Protocol design, the Arcadia Accounts. Below we shed light on this novel DeFi primitive.

Arcadia Accounts are user-controlled smart contract wallets. They are engineered to streamline asset management and enforce margin requirements, enabling the utilization of diversified portfolios as collateral within a single account framework.

We created Accounts after noticing a gap: those who could write smart contracts were at a distinct advantage in navigating DeFi, leaving others behind. Accounts give everyone all the benefits of smart contracts without needing to write a single line of code or dive deep into how it all functions.

Key Features of Arcadia Accounts

1. Multi-Asset Support: Users can build diversified portfolios by depositing multiple types of assets into a single Account. Accounts are designed to be token-standard agnostic, supporting not just ERC-20 tokens but also ERC-721 and ERC-1155 assets.
2. ERC-721 Composability: Accounts themselves adhere to the ERC-721 standard, making them fully composable with existing infrastructure and capable of being transferred or sold as a single asset. You could buy/sell/trade entire Arcadia Accounts like you would NFTs on Blur.
3. Flash Actions: Flash Actions are innovative features within the Arcadia Accounts framework that significantly expand upon the concept of flash loans. These allow account owners to perform complex transactions within a single on-chain action, enhancing flexibility in managing assets and liabilities. These actions harness the atomic nature of smart contracts, ensuring that a series of operations within a single transaction either completes in full or fails entirely, maintaining the integrity and security of the financial operations involved.
4. Portfolio Margining: By default, Arcadia Accounts use portfolio margin calculations, which are more capital efficient than isolated margin systems. This approach allows for the offsetting of wins and losses across different positions without distinguishing between realized and unrealized profits, enhancing capital efficiency.
5. Enforced Margin Requirements: The Accounts ensure the total value of assets always exceeds liabilities, mitigating counterparty risk for creditors. Margin requirements are enforced on-chain, with automated mechanisms to revert any action that risks under-collateralization and to trigger margin calls when necessary.
6. Upgradable Account Logic: Arcadia Accounts are based on the ERC-1967 standard, allowing for the periodic upgrade of account logic to introduce new features or improvements. This upgradability is opt-in — only the Account owner can decide to upgrade.
7. Automated Asset Management: Account owners can appoint Asset Managers, including external smart contracts, to automate account actions or manage assets on their behalf.

Benefits over Incumbents’ Architecture

1. Comprehensive Collateral Utilization: Arcadia Accounts’ ability to use diversified portfolios as collateral for multiple creditors in a single account is a significant advancement over incumbent DeFi platforms that often require separate accounts or contracts for each creditor.
2. Capital Efficiency: The use of portfolio margin calculations enables more efficient use of capital, reducing unnecessary liquidations and fees associated with rebalancing positions.
3. Flexibility and Composability: The token-standard agnostic nature of Arcadia Accounts and their ability to interact optimistically with third-party protocols enhance interoperability within the DeFi ecosystem. The support for multiple asset types, along with the account’s composability as an ERC-721 asset, provide unparalleled flexibility for users to build complex strategies that interface with multiple protocols at the same time.
4. Future-Proofing Through Upgradability: The upgradable nature of account logic ensures that Arcadia Accounts can adapt to new token standards and features, without requiring users to migrate assets or open new accounts.
5. Streamlining User Experience: Arcadia Accounts simplify the DeFi user experience by enabling complex financial actions (e.g., managing multiple assets and liabilities) through a single account interface. This approach reduces the complexity associated with managing separate contracts or accounts for different DeFi interactions.

In short, Arcadia Accounts bring some of the efficiencies and user experiences of centralized finance into the DeFi space while maintaining the security benefits of decentralization, addressing key shortcomings related to capital efficiency, risk management, user experience, and interoperability and enabling a wide-range of new use cases.

We will explore the first use case built by leveraging Arcadia Accounts (and the Arcadia Registry) in our next post.

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