Learn | What is The Arena? Marginfi introduces liquidity solution for Solana memecoins
marginfi is a popular DeFi application on the Solana blockchain, The Arena is their new application which introduces liquidity for small market-cap tokens while expanding trading options.
For the first time on Solana, take leveraged long and short positions on any asset (e.g., memecoins, celebrity coins, major market cap tokens) and permissionlessly create your own isolated banks for any token, using any collateral.
What is The Arena?
TL;DR easily create a liquidity for any Solana token
The Arena utilizes marginfi's permissionless groups (also known as banks), a mechanism that enables teams to create lending pools of crypto assets. Users have the ability to choose the tokens, parameters of pool and oracles.
Traders can now place short/long positions in The Arena:
to long, deposit tokens and borrow USDC to buy more of the target token
to short, deposit USDC and borrow the target token (then sell for USDC)
Leveraged trades are made possible with marginfi flashloans. marginfi-v2 flashloans bundle multiple borrow and lend instructions within a single transaction, circumventing the routine health-check that executes when you withdraw liquidity from marginfi.
The Arena uses flashloans to create a secure and flexible method for optimizing capital and enabling long and short strategies.
Users who do not wish to trade can still earn in The Arena by providing USDC needed to collateralize token trading and receive payment in return.
The token banks created in The Arena are completely separated from marginfi's main liquidity pool and activity in The Arena does not impact it. The Arena is not an AMM, and there is no impermanent loss.
What is a token bank?
marginfi token banks allow users to deposit tokens for collateral in order to borrow a different asset.
Based on the value of the deposited collateral, a user can borrow other cryptocurrencies. Typically the borrowed amount maximum is a defined percentage of the collateral's value.
If the value of the deposited collateral goes below certain thresholds then the assets are liquidated and the user loses access to them.
Are you a fan of Iggy Azalea? Permissionlessly create a bank for $MOTHER and open a max-leveraged long position.
When you decide you're tired of her music, open a short position. Share the bank you created with others; invite them to make trades with you. You're in the driver's seat.
What is Marginfi?
Marginfi is a decentralized finance (defi) protocol that allows users to borrow and lend various cryptocurrencies.
The Marginfi Token Bank is a component of this protocol, functioning as a system where users can deposit tokens as collateral to borrow other assets.
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