Will traders have access to 10,000x leverage on all assets?

The short answer is no. The maximum leverage available initially will depend on the volatility of the underlying asset pair and the utilization rate in the market (demand vs. supply). For example, pegged asset pairs (ie. USDC/USDT, stETH/ETH) can have access to those levels of leverage but more volatile pairs (ie. shitcoins) will be limited to ~500x or less.

If traders can't get liquidated, does that mean they can keep a position open forever?

No, traders can only keep their position open as long as they pay the interest for their leverage. InfinityPools uses deposited collateral (margin) and/or the trader's unrealized PnL to pay the interest rate.

All trades therefore have a base amount of time that they can last, and if a trade is successful then it can be extended indefinitely by using unrealized profits. If a position runs out of collateral and unrealized profits to pay for interest, and it is not closed by the trader, then it will get closed with no liquidation penalties (either via TWAP or market order).

What are the fees to enter and exit positions?

InfinityPools traders are able to get the best price in the entire spot market when executing their orders.

This is because they can enter and exit their trades using any spot DEX or DEX aggregator. The InfinityPools UI abstracts this away and uses a DEX aggregator (currently 1inch) in its backend to execute orders. For example, if a trader wanted to long ETH, InfinityPools would borrow USDC using its AMM liquidity and then swap that USDC for ETH using a DEX aggregator.

Will the interest rates always be in line with options premiums?

No, the two may be completely different at times. However, there are a few strategies that traders can execute to bring the two rates closer. For example:

  • If the rates on InfinityPools are below options premiums (traders are underpaying for volatility), then traders can create a strangle (going long and short simultaneously on the asset). This strategy buys up cheap volatility and pushes InfinityPools rates up. This strategy will only initially be possible by trading with two separate wallets or by interacting directly with the InfinityPools smart contracts.

  • If the rates on InfinityPools are consistently above options premiums, then traders can provide liquidity to the protocol and hedge their exposure with options.

What is counterparty risk and what are some other risks to be mindful of?

Counterparty risk is the probability that the other party in an investment, credit, or trading transaction may not fulfill its part of the deal and may default on the contractual obligations.

This risk usually occurs in crypto because of inefficient liquidations, oracle manipulation or because exchanges (like FTX) misappropriate assets. InfinityPools doesn’t have liquidations (positions are mathematically predetermined to settle correctly), is oracle-less and non custodial.

Like with any other protocol, users must always be mindful of smart contract risk and do their own research on the mechanism. All funds could be lost due to an exploit. That said, security is a top priority for InfinityPools, and amongst other measures, the protocol will undergo audits to increase user confidence in the resiliency of the smart contracts.

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