FlashFlow Overview
What is the Flashflow protocol?
Last updated
What is the Flashflow protocol?
Last updated
Top DeFi lending protocols have a combined TVL of approximately $10 billion, and this is only on the Ethereum blockchain. However, it has not been possible to use these platforms for margin trading – until now.
FlashFlow is a top level protocol that unlocks and combines liquidity from top lending protocols for margin trading. Margin trading on FlashFlow consists of three main components:
Lending protocols and their liquidity (AAVE, Compound, MakerDAO,etc.)
Protocols providing flash loans (AAVE, MakerDAO, Balancer)
Crypto swap decentralized applications (Uniswap, 1inch, Paraswap, etc)
The trading smart contracts we created determine the best routing and conditions for each transaction. With the help of fast loan technology, we provide our users the ability to take advantage of each DeFi service's benefits. The start and end of transactions involve various separate stages, but for users, it appears as a single transaction.
The general principle of FlashFlow can be summarized in 5 steps:
The user selects the collateral for the trade, the desired leverage, and the asset they wish to long/short. For instance, a user may opt to open a long position on wBTC, using 1,000 USDT of their own funds and a 10x leverage.
Given the 10x leverage, the total order size amounts to 10,000 USDT. The protocol then procures a flash loan for the outstanding 9,000 USDT.
The 10,000 USDT is converted into wBTC at the most favorable rate available across various DeFi liquidity pools (Uniswap, 1inch, Paraswap, etc.).
The wBTC is subsequently deposited as collateral into a lending protocol, such as AAVE, Compound or any other popular ones.
With wBTC as collateral, the protocol borrows 9,000 USDT and repays the flash loan.
To close a user's position, the following steps should be taken:
Take a flash loan of 9,000 USDT.
Return the loan to the lending protocol.
Once done, the WBTC will be unlocked.
Swap the 0.3333 WBTC for USDT at the new rate. For example, if the user closes the trade at a rate of 1 WBTC = $40,000, he will receive 13,332 USDT.
Use 9,000 USDT to repay the flash loan from step 1. 1,000 USDT is the user's initial investment, and his net profit will be: 13,332 - 9,000 - 1,000 = 3,332 USDT.
All these actions occur within a single transaction. Mentioned steps are seamless and all actions are executed on the blockchain. The user simply needs to click one button to open/close a position.
