Abstract

Marnotaur’s plan is to offer increased capital efficiency to all DeFi market participants by introducing Personal External Vaults – a new primitive for leveraged, cross-chain exchange of liquidity in the DeFi space. Personal External Vaults will be present in the form of smart contracts in isolated environments with a number of whitelisted commands and assets. Such architecture provides stronger protection for users’ funds while in the possession of traders and LPs. In this vein, Marnotaur gives users and DeFi protocols access to leverage that can be used for leveraged trading and farming.

1. Introduction

Marnotaur is the first AMM-based, decentralized, cross-chain, margin trading platform where users can easily earn interest through lending and trading with leverage on multiple blockchains. Powered by its own margin pools and external DEXs like Uniswap, Marnotaur can significantly boost your trading efficiency and asset diversification. With Marnotaur, users can trade using an intuitive trading interface across different DEXs and blockchains in the DeFi space.

Margin positions can be created by borrowing from liquidity providers via Marnotaur’s leverage mechanism. By using a margin deposit on Marnotaur, traders can open a leveraged position with up to 10x leverage. Other than serving as collateral, your margin can be used for earning an APY - if you choose to split it between liquidity provision and trading. By doing so, you both increase your funds’ security and create a passive income for yourself.

2. Personal External Vault

PEV is a remote wallet that is isolated from the main account and the funds cointained therein are stored most securely. Upon taking out the first loan, every user generates a smart contract (a vault) which is a remote space for storing cryptocurrencies and working with the borrowed funds. Other users of Marnotaur will not have access to this vault and will not be able to deposit, withdraw or borrow funds from it as it is controlled by the wallet that generated it. The system resembles the MakerDAO CDP or the multi-sig wallet of Gnosis and requires only one signature instead of multiple signatures.

2.1 The entire loan is inside the vault

• As the funds in this vault are stored in isolation, their interaction is only permitted with pre-agreed contacts and coins. To keep liquidity providers’ assets safe and to mitigate against the possibility of low liquid assets taking a sharp drop, Marnotaur holds traders’ positions and tokens in isolation. For the time being, transactions are only possible with pairs that have top liquidity on an AMM.
• Funds in the vault can only be withdrawn when there is no outstanding loan to repay. The safety of liquidity providers' funds is insured by the fact that traders cannot withdraw funds from their PEV until the loan is paid off. Thus, liquidity always stays inside the protocol in the form of collateral (users’ deposited funds) and open positions.
• The mixing of assets inside a vault is never permitted. Therefore, loans always remain in the same currency that they were initially deposited. For example, if the deposit is in DAI, the loan will also be in DAI. Users are furthermore not permitted to borrow different assets in the same storage. However, opening a position and taking out a loan does not restrict users from opening multiple positions. They will have isolated balance sheets and isolated payment systems.

2.2. The value of the vault - Current balance

The current assessment of the vault’s value (Current Balance - CB) is made in the cryptocurrency that was escrowed, borrowed (remember that changes are not possible) and swapped for other assets.

https://lh3.googleusercontent.com/vq6L2HghLGw05tRT3qaBQXVhCVlAx7oivIg57pkFmR8-KoBpXyvH3XMa86GFb1PAZ_AGb7apX9FIbUUJDb4k9CAnhtfaRwjNrse7igxKC1Q2Pk3OoiXPkEPL1TyD3PYmFIapa6rC=s0

CB - Current Balance

P - price of asset i

Q - quantity of asset i

Current Balance = the sum of the assets’ value, denominated in the vault’s underlying assets. For example: if the deposit was created in UNI, the loan taken would have been in UNI and if the user sold all their UNI in exchange for DAI, the loan will still be denominated in UNI, despite the fact that the user now has DAI in their vault.

Risk assessment