How Marginly helps AMM DEXs gain superpowers

Marginly
6 min readJun 21, 2023

Challenges AMM DEXs face

Have you noticed how EVM blockchains are crowded with AMM DEXs with the majority of them being Uniswap forks? Quite often, these projects look no different to others and their futures don’t seem particularly promising due to difficulties with retaining users and liquidity. Let’s explore some key challenges they face.

It’s obvious that liquidity and users are a corner stone of success for a DEX. One way to get them is to have an exceptional product. Most DEXs struggle to stand out as they offer the same lineup of services as contenders do with limited meaningful innovation. Despite some minor design improvements, most of them are either very similar to Uniswap or direct forks. And it’s so tough to defeat Goliath, isn’t it?

This forces DEXs to engage in an emissions race by offering higher APRs on liquidity farming to be competitive and throw away outrageous shares of native token supplies. This model is unsustainable in the long term as it usually attracts farmers who dump rewards and move on as soon as emission rates decline. Protocols either run themselves into the ground trying to keep up in the rewards game or reduce emissions.They often end up without both liquidity and users, while getting abused by the desperate few native token holders with devalued token supply on their hands.

Leverage trading: the savior of AMM DEXs

Marginly, a decentralized leverage protocol, introduces a smart solution to these challenges. By enabling margin trading and derivatives on top of existing AMM liquidity Marginly provides a scalable and efficient approach to meaningfully expanding the product lines offered by classic DEXs. All of this without any significant development effort from the AMM side. Here is how it becomes possible.

In a nutshell, Marginly acts as a side pool for any DEX running all leverage funding mechanics (interest rates, position management, margin calls etc.) on its side. The only thing required from the DEX is executing actual trades, which aligns well with its original functionality. Besides plug-and-play leverage, Marginly includes in-built order routing that gives DEXs access to aggregated liquidity, helps execute sizable trades, and increases trading volume.

The ability to quickly and seamlessly integrate Marginly as a toggle for leveraged trading is invaluable for any classic AMM DEX. It modifies the uninspiring product offering to instantly become much more appealing for both traders and liquidity providers. Eventually, this leads to improved user retention and organic growth, opening the path to sustainability for many protocols.

How DEXs benefit

As said above, one of the main advantages is a significantly extended lineup of services that DEXs can now offer their users thanks to Marginly. The list of additional features is not limited to margin trading, earning on margin funding, options, and delta hedging. All of these add-ons are easy to plug on-chain and integrate in existing client-facing applications of DEXs. For this purpose, Marginly introduces a universal JS-based integration kit and helps DEXs integrate them with its on-chain trade router.

Also, existing AMM liquidity now has another powerful use case and can benefit from trades routed through it. Revenue from newly generated trading activity can bring new life to AMM DEXs even if they don’t possess deep or niche liquidity pairs. Besides trading volume boost (and related rise in collected fees), DEXs can earn from Marginly’s on-chain RevShare program.

On-chain RevShare means that DEXs can directly capitalize on these new opportunities by integrating Marginly. The protocol shares trading and funding fees with partner DEXs every time a trade is routed through partner DEX. This revenue caps out at 50% of total fees. A pleasant bonus, isn’t it?

The indirect benefits are perhaps even more important for DEXs than an additional revenue stream. As we described above it is both vitally important and exceedingly difficult for a DEX to have a product that stands out amongst its competitors. Marginly is set to be that killer feature that makes a DEX pop, a transition away from the broken and unsustainable model that sadly plagues so many of these platforms. Imagine what an active and passionate trading community could do to revitalize a project that has underutilized liquidity idling away.

Unfair advantages for your DEX in a competitive space

By integrating with Marginly, your DEX is uniquely positioned to have an edge over the other trading protocols. This is the breakdown of Marginly’s hidden superpowers that your DEX inherit via integration:

  • Risk Segregation: Marginly implements a risk-based framework where each liquidity pool contains a single volatile asset alongside a stablecoin. This isolation of risk allows for more predictable and manageable outcomes, enabling efficient utilization of borrowed capital while maintaining strict control over pool solvency.
  • No Impermanent Loss: since quote asset is a stablecoin, such pairs negate the risk of Impermanent Loss for liquidity providers in margin trading pools.
  • Loans without maturity: by design users can keep their positions open as long as they can afford to pay the fees to liquidity providers for borrowing their assets.
  • Easy integrations and on-chain RevShare: you get an additional income thanks to the on-chain RevShare program. To remind you, Marginly shares up to 50% of commission fees with DEX partners who executed particular trades.

How Marginly outperforms other leverage markets

Marginly protocol has a unique design that is fully trustless and requires twice less TVL to be more efficient than regular spot margin trading apps. Here is a brief overview of the main protocol features that outstand Marginly:

  • 100% decentralized: Marginly is non-custodial and doesn’t rely on any off-chain data. This approach ensures transparency and trustlessness, delivering a truly decentralized trading experience.
  • Liquidity Infinity Loop: Marginly introduces a self-reinforcing cycle wherein the resulting assets from trades can be reused as leverage for reverse trades by the opposite party. This innovative approach creates a symbiotic relationship between long and short positions, facilitating the transfer of payments between traders without relying on external mechanisms. This means greater capital efficiency compared to other margin trading protocols.
  • Deleveraging vs. Liquidations: In the event of margin calls, Marginly’s system automatically reduces the debt within a portfolio by reversing trades within its pools. This process eliminates the need for auctioning positions on linked DEXes, promoting a more efficient and cost-effective deleveraging mechanism.
  • Order Routing: Marginly is designed to execute spot trading across multiple DeFi protocols and blockchains. Target L2s include Polygon, Arbitrum, and ZK Sync.This capability allows for the aggregation of liquidity, enabling traders to access long-tail assets and fostering a more diverse trading ecosystem.

Besides these primarily technical features, Marginly sets itself apart with its sleek and intuitive user interfaces, which have been purposefully designed with a mobile-first approach.

To conclude, Marginly is an extremely flexible modular solution that helps existing DEXs become differentiated to contenders and boost their trading volumes. Integration with Marginly is easy-to-implement and for earning additional yield, you just need to book a slot in our integration pipeline. Our devs will help implement a smart contract connector between your DEX and our on-chain trade router and we provide you with a handy UI-kit for frontend integration.

Join our Discord to access Marginly documentation. We are gearing up for our launch so follow our socials for updates. Feel free to reach out to our team for business inquiries.

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Marginly

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