Introducing Arcadia Finance
They say DeFi is dead
DeFi is not dead. It is thriving. DeFi has experienced significant growth in recent years, with decentralized exchanges (DEXs) in particular gaining significant traction. According to data from January 2020 to November 2022, Ethereum DEX volume has grown at a 402.4% CAGR. Despite the bear, DEXs on Ethereum are still doing roughly $30–40B in monthly volume. Within DEXs, AMMs have continued to gain traction over orderbooks. As of November 2022, AMM-based DEXs have almost 70% market share compared to orderbook-based DEXs.
Despite this growth, 85% of total crypto trading volume still sits on centralized exchanges, not on DEXs. This is a problem because centralized exchanges are not trustless. Users are vulnerable to security breaches and loss of control over their assets.
If decentralized exchanges are more secure, and they also have deep liquidity, why is most of the crypto trading volume still on centralized rails? One reason for this is that centralized exchanges (CEXs) offer a wider range of trading options and features that DEXs do not. For example, traders on popular DEXs like Uniswap and Curve cannot trade with advanced order types or cross-margin. In a CEX, on the other hand, they can. The wider range of features available makes the user experience on CEXs generally better than that on DEXs and traders less willing to move their trading activity to DeFi.
For DeFi to attract more volume from CEXs, it will need to offer a wider range of financial products and tools that provide a user experience comparable to traditional finance while maintaining the security benefits of decentralization.
This is where Arcadia comes in.
What is Arcadia?
Arcadia is a decentralized and composable margin protocol. Our mission is to bring the user experience and capital efficiency of TradFi to DeFi.
On Arcadia, users can access onchain leverage to trade with margin on Uniswap, Curve, and other AMMs. Traders can use this leverage to maximize their returns, manage risk more effectively or take directional bets. Before Arcadia, traders had to create a folded position on a lending protocol to access onchain leverage. In other words, repeatedly borrowing and depositing as much as you can depending on your size — not very capital efficient or user friendly.
On Arcadia, users can trade with advanced order types. Arcadia is the only place where traders can place limit orders on Uniswap V3, and soon in other AMMs too. One of the main differences between limit orders and market orders is the level of control that the trader has over the price at which the order is executed. With a limit order, the trader specifies the price at which they are willing to buy or sell the asset. This is made possible through our margin accounts, which can accept Uniswap V3 liquidity pool (LP) tokens as collateral.
On Arcadia, users can choose to trade with isolated margin or cross-margin on their favorite AMMs. With cross-margin, the trader’s entire account balance is used as collateral for their trades. This means that all of the assets in the trader’s account, including any profits or losses from previous trades, can be used to cover multiple open positions. With isolated margin, on the other hand, traders are able to use the margin in their account for a single position, but they can specify a specific amount of their account balance to be used as collateral for a particular trade and thus limit their potential losses on a given trade to the amount of collateral they have designated. With Arcadia it’s up to you to choose what’s best for your trading strategy.
In most DeFi protocols, traders often need to deposit separate collateral for each position they take, which can tie up a significant amount of capital. This can be especially challenging for traders who want to take positions in multiple assets, as it can require a large amount of capital to maintain multiple collateral deposits. Arcadia reduces the amount of capital traders need to tie up, allowing them to open more positions with the same amount of capital, increasing their overall capital efficiency, and eliminating the need to constantly adjust the amount of collateral they are using.
All of this is done through our margin account primitive.
Margin account
Traditionally, margin accounts have been offered by centralized financial institutions, such as banks, brokerage firms or clearing houses. These institutions provide the funds that investors can borrow to buy securities or other assets, but they also impose strict limitations on how those funds can be used. For example, investors may not be able to use their margin accounts to invest in certain assets, or they may have to pay high fees to access the funds in their accounts.
Arcadia’s margin accounts, on the other hand, are decentralized and composable by design. This means that users can access the funds in their margin accounts trustlessly, without having to rely on a centralized intermediary. Additionally, because these margin accounts are composable, users can easily combine them with other DeFi products to create custom financial solutions.
Arcadia’s margin accounts can price any combination of different types of assets in a single base currency. This means traders can trade multiple assets without having to convert them into a single base currency and avoid the time and effort of converting their assets, as well as the fees associated with it.
Arcadia’s margin accounts can also help traders manage risk more efficiently by providing them with the ability to adjust their leverage ratio. This means that traders can adjust the amount of leverage they are using based on their risk tolerance and the current market conditions. For example, if a trader is feeling particularly risk-averse, they can reduce their leverage ratio to reduce the amount of risk they are taking on.
With Arcadia, users don’t even have to pull out assets from their margin accounts to interact with other protocols. The account locks a certain value of assets, not the individual tokens, which means users are able to trade, swap, stake, and manage the assets within the margin account in other DeFi protocols while they are being used as collateral.
Hi, you’re still early
Without a margin account, the easiest way for users to get leverage onchain is to create a folded position on a lending protocol. In other words, repeatedly borrowing and depositing as much as you can depending on your size. This is unnecessarily complex especially as you think about creating, managing and winding down the position. With Arcadia, on the other hand, leverage is built into the protocol itself. This means increased capital efficiency and an infinite better user experience.
If you’re reading this, you’re still early. We are launching in Q1 2023! Join our private waitlist. We have limited spots available.
Thanks for reading.
Follow us on twitter and consider joining our Discord to stay updated.
