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Leverage and Losses: Managing Highly Volatile Blockchain Trades
Today I’ll be speaking with John Brian Carthy and we’ll talk about his experience building Levana. Let’s get straight to the point!
Please tell us your name, what you do, and how you got into the blockchain space
My name is John Brian Carthy, marketing and social manager at Levana. In 2020 I purchased my first sat after many years of curiously looking and have never looked back! From there it all began and I embarked on a journey of learning and exploration, writing, interviewing and making videos. All of this has brought me to now, where my belief in the importance of decentralization is strong and I am immersed in the space of my work with Levana and Helios Staking.
What inspired the creation of Levana within the Delphi Labs program and how does it differ from other projects launched under the same initiative?
Delphi Labs initially incubated several projects on Earth such as Mars, Astroport and Levana, before the crash. After the crash each project was deployed across multiple chains on Cosmos.
What makes Levana different is simple. Levana saw an opportunity to create a platform that would first allow people to leverage trading using their native assets like BTC, ETH, and INJ as collateral, allowing for more passive exposure to the upside potential of cryptocurrencies while being able to trade.
Second, people can take those assets and provide liquidity to the markets on Levana, essentially making money by acting as counter-liquidity for traders – and profiting from traders’ statistical unprofitability, profiting on their asset of choice.
Levana wants to create a self-sustaining business ecosystem where the community can benefit at all levels. These two opportunities are unique in the DeFi space and set Levana apart from other projects.
Could you detail your platform’s specific trading options for commodities such as gold, Chinese yuan, euro, British pound and silver?
Levana offers Crypto, Commodities and Forex markets. People can use some of their favorite crypto assets such as BTC, ETH, INJ and others as collateral, along with stablecoins, to trade a wide range of markets including Bitcoin, Ethereum, Gold, Silver, Euro and Chinese Yuan.
Levana is also the only platform that allows users to leverage liquid staking tokens, allowing them to benefit from a triple compound effect of accumulating staking rewards, benefiting from price increases of the underlying asset, and earning more from the asset itself by providing liquidity. or leveraged trading.
What challenges did Levana face in integrating these commodities into a DeFi context and how were they overcome?
The biggest challenge in integrating commodities into Levana has been getting accurate and reliable price feeds for things like gold and silver.
Levana wanted to create a protocol that could support any asset, so the main challenge was to quickly and reliably integrate smart contract-compatible price feeds for real-world assets (RWAs).
Pyth’s Oracle allows Levana to integrate hundreds of smart contract-compatible price feeds into the platform, which is critical for these integrations. The support of other partners and the work of Levana’s exceptional team have also been crucial and continue to be.
Levana allows users to profit from other traders’ commissions or losses, just like “being the house” in a casino. How does this feature work and what has been the response from users?
With other platforms the only way to make money is to trade, trading is statistically unprofitable for most, but not all. Levana allows users to “be the house” and provide liquidity for traders to trade with as LPs. Users can simply passively benefit from the statistical probability that most traders will lose money.
The more people come and trade, the more Levana LPs earn. Rather uniquely, Levana markets are backed across a wide range of assets. Therefore there is a wide range of assets available to deposit and earn on that same asset. For example, users can deposit INJ into the LP on Levana’s INJ/USD market and earn all their rewards in INJ, maintaining greater exposure to the asset with greater upside potential.
Could you describe the mechanism behind transforming non-functioning cryptocurrencies into functioning assets through collateralized markets?
Let’s take Bitcoin for example. It is fundamentally a broken asset, but DeFi changes this dynamic.
On Levana, you can deposit BTC packaged into our heavily vetted contracts and put them to good use. You then get paid LP commissions by counter-collateralizing traders’ positions, and fortunately for LPs, most traders lose. We do the same for Liquid Staking tokens, the native tokens, and offer a more dynamic way to leverage the asset for significant return compared to staking and spot trading.
Levana offers 30x leverage on native token trades. What measures are in place to manage the risks associated with high leverage?
Levana takes a robust and comprehensive approach to launching new markets, with certain criteria that must be met. These criteria ensure minimal risk of spot price manipulation by providing minimum thresholds for trading volume and liquidity. The protocol is carefully designed to minimize risks for users and ensure the integrity of the markets and assets listed on Levana.
How do you maintain zero default risk and what does this mean for the safety of your users’ profits and losses (PnL)?
When traders open positions on Levana, the platform sets a maximum gain or the user sets a manual TP point. Once there are no more counter-guarantees to pay the theoretical maximum winnings open on the market, it is no longer possible to open positions. So essentially Levana always has enough liquidity to pay the maximum profit of each open position.
Following the collapse of the Terra blockchain, Levana had to change direction significantly. What were the main changes and what impact did they have on the platform strategy?
On Terra, Levana had broader applications, including a leveraged ETF, options trading, NFTs, GameFi, and Perps. After the incident, the team was cut and Levana’s main focus shifted to creating a new platform for criminals.
I wasn’t with the team at the time, but I would say the biggest challenge was rebuilding the community. Much of our core community was significantly affected by those events and left. It’s definitely been a challenge, but the team has never stopped building and now it’s time to find the next wave of community members.
Levana is proud to have had the resourcefulness and ingenuity to overcome these challenges, after seeing other promising projects shut down due to turbulence.
The vision and roadmap needed to change and we have brought and continue to work hard to bring Levana to new audiences on Cosmos, with whom her values and the opportunity she presents resonate. This is reflected in the numbers with over $2.5 billion in trading volume and over $3 million in rewards distributed to Levana LPs.
How has Levana integrated with other platforms such as Osmosis, Sei and Injective and what has been the impact of these integrations on your user base and liquidity?
It made sense to choose these chains because they offer a solid technology stack to build on in terms of cost, speed and user experience. The respective foundations have offered us great support and boosted the platform’s activity, so the integrations have been nothing but positive.
The expansion and growth to new chains is in line with Levana’s mission to enable users to leverage any asset, as it means the platform can integrate native assets from the respective chains.
The expansion and integration of new chains are also in line with Levana’s overall growth in terms of users and trading volume. More expansion is planned in terms of integrating new ecosystems into Levana, so keep your eyes peeled!
How do you foresee the market for these trading options evolving in the coming years?
I can only see the demand for DeFi and, by extension, the trading options offered by Levana growing, especially as the digital asset market matures, and the trust and credibility of both the assets and the on-chain opportunities it presents are largely consolidated with education, awareness and integration. Advances like account abstraction will play a huge role in onboarding new users to the blockchain, allowing them to maintain self-custody while at the same time allowing them to circumnavigate its complexity. People will use blockchain without knowing what it is.
How might upcoming regulatory changes affect leveraged trading practices?
Levana hopes that greater regulatory clarity will emerge in the near future, and we are optimistic that the value that decentralized technologies can bring to society as a whole will be recognized by those with the power to create an environment in which DeFi can grow and thrive . Levana will remain agile and continue to take all appropriate steps to comply with regulations as they emerge and become clear.