1656304870 Phezzan Protocol Multi collateral Guide

Phezzan Protocol Multi-collateral Guide

Multi-collateral support provide traders with greater flexibility, allowing them to use different assets as collateral when trading on Phezzan. If a user, say Alice, puts ETH as collateral, Alice’s exposure of ETH will be maintained and Alice won’t miss out the upside of ETH. Alice’s trading experience will also be greatly improved, as Alice can deposit ETH directly and starts trading, eliminating the fees of swapping for the required collateral.

While multi-collateral brings benefits to Alice, there are also some risks to be aware of. If Alice trades with stablecoins as margin, then the value of her collateral will only depend on the profitability of Alice’s position.

The price of crypto assets like ETH can go up or down, which can boost Alice’s earnings with profitable derivatives positions. If the price of ETH rises, Alice can hold a larger position because her collateral will be more valuable in USD. But here’s the downside: if the price of ETH falls too far, then Alice may need to add more collateral to cover the maintenance margin on her open positions. So, with multi-collateral, Alice’s free collateral is not only determined by the profitability of her open positions, but also by the value of assets Alice uses as collateral.

1656304866 724 Phezzan Protocol Multi collateral Guide

* Weight is used to calculate collateral value. For more details, please refer to section “Multi-collateral Calculation”.

** Discount ratio is used for liquidation calculation. For more details, please refer to section “Multi-collateral Liquidation”.

Right now Phezzan Protocol testnet supports USDC and ETH/WETH. Users’ collateral will be converted to Buying Power (in USD). The Phezzan team will add more assets, including interest-earning assets like stETH, in the future.

To deposit, click the ‘Deposit’ button, and users can change collateral type with the dropdown menu. If a users deposits both ETH and WETH, the value will be combined.

Please note that the Phezzan team recommends users to maintain some USDC balance to cover exchange fees, funding payments, and negative PnL. Withdrawals will be disabled if a user’s account carries a negative USDC balance (Withdraw Restrictions).

To withdraw, click the ‘withdraw’ button, and a user can change collateral with the dropdown menu. Users can only withdraw the “available” amount. For the combined ETH and WETH, a user can withdraw in ETH or WETH.

  • Total Collateral = the deposit amount of the collateral × the weight, in USD value
  • Free Collateral = the available amount of the collateral × the weight + PnL, in USD value

Let’s say Alice has deposited $100 USDC and 1 WETH (the price of WETH is $1,000). Alice’s account value in USD will be $1,100, the total collateral will be $925, 925 = (100 x 1) + (1 x 1,000 x 0.825)

The USD price of non-USDC such as ETH/WETH will also impact the total/free collateral of Alice’s account. If the price of ETH rises, Alice can hold a larger position because her collateral will be more valuable in USD, and vice versa.

Users’ collateral will be converted to USDC if one of the following events happen:

  • USDC debt > non-USDC token value × 0.75,
  • USDC debt > $10,000,
  • Margin ratio < 6.75% (6.75% = 6.25% + 0.50%, the position maintenance margin threshold is 6.25%, buffer is 0.50%).

When liquidation happens, users’ non-USDC collateral will be converted by the following formula:

USD price of non-USDC collateral = (index price x amount) x (1 — discount ratio) — (IF fee rate), IF fee = 1.25%.

Please be aware that there is no rule on which asset will be liquidated first.

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