Margin Trading
Last updated
Last updated
Margin Trading allows users to open positions larger than their actual capital by borrowing funds against posted collateral. In traditional finance, this is a common strategy used by hedge funds and institutional traders to amplify gains. In the DeFi ecosystem—and specifically within Arkis—margin trading is reimagined through smart contracts, portfolio margining, and rigorous risk controls.
At its core, margin trading lets an (or Borrower) use collateral to borrow additional capital and execute trades or investment strategies that exceed their original capital base. This creates leverage, expressed as a multiple of the initial capital.
For example, 5x leverage means that for every $1 of collateral, the trader can control $5 worth of positions:
$1 of their own funds
$4 borrowed from the liquidity pool
The borrowed funds can be used to trade, provide liquidity, hedge positions, or farm yields across whitelisted DeFi protocols—subject to the risk parameters and constraints set by Arkis.
Let’s say an Asset Manager has $1,000 in ETH and wants to go long on ETH using 5x leverage:
They deposit $1,000 of ETH as collateral into their Margin Account.
Arkis allows them to borrow an additional $4,000 in USDC or ETH from the Liquidity Pool to Margin Account.
With a total of $5,000, they can open a position on a whitelisted protocol (like Uniswap or Pendle) and aim to profit from price movements or yield farming.
If their position increases by 10% in value, the total position becomes $5,500. After repaying the borrowed $4,000, they’re left with $1,500—a 50% gain on the original $1,000. This illustrates the power of leverage.
However, if the trade moves against them and the portfolio value drops below a certain threshold (based on real-time risk calculations), Arkis's will automatically initiate liquidation to protect the liquidity provider’s capital.
Margin trading enables capital efficiency. Instead of deploying $5,000 to gain $5,000 exposure, traders can post just $1,000 and borrow the rest—unlocking capital for other strategies or managing larger positions with less upfront liquidity.
What makes margin trading in Arkis unique:
Smart Contract-Based Execution – Everything is onchain, secured, and auditable
Whitelisted Protocols & Assets – Asset Managers can only trade within vetted environments
Portfolio Margining – Collateral and risk are managed at the portfolio level, not per position
Transparent Liquidations – Triggered automatically by Arkis Risk Engine based on real-time health factors
No Counterparty Risk – Smart contracts and pre-agreed agreements govern everything