The Lendroid Auction: Liquidity Not Just Pooled, but Flowinghttps://blog.lendroid.com/the-lendroid-auction-liquidity-not-just-pooled-but-flowing-b4bd38c41248
Underperforming margin accounts, and all the positions therein, are typically liquidated. Not on Lendroid. #LendroidExplains the auction process, an antidote to unimaginative liquidation.
Margin Trading is risky business, and there’s usually only one way in which a centralized system deals with risky business — by assuming unilateral control of the account. And when the account dips below a certain pre-determined level, it is liquidated. The trader doesn’t have a say in these proceedings. Besides, in a conventional, centralized system, the balance of liquidity is rather delicate and sudden liquidation of a number of accounts can trigger what is known as a flash crash.
But we’re getting ahead of ourselves. For those who came in late, here’s a quick (and light) look at what Margin Trading is, and what it could mean for the blockchain.
On Lendroid, the margin account is monitored by incentivised, off-chain entities called Wranglers. When they identify accounts that are dropping, they get to earn a bounty. This bounty is baked into the smart contract when the Margin Trader borrows funds. Here’s a look at how the decentralized lending process works. Once the loan is availed, the trader calibrates positions in his margin account. He has no direct access to the funds, not without repaying the loan. But the positions and levels are completely transparent and under his control.
For a trader, his margin account is his canvas. Carefully calibrated positions, in anticipation of or in response to, market movement. Multiple assets pitted against each other in a volatile contest. Win or lose, it’s still a work of art, and certainly not for instant, unimaginative liquidation.
