Margin Trading

This section explains to users how they can perform margin trading related actions using ZeroLend's isolated pools.

Margin trading introduces one of the core use cases of a lending market: the ability for users to leverage their position with only a portion of capital upfront.

With the help of flash loans, users can leverage their exposure into an asset as long as there is enough liquidity in a ZeroLend pool to borrow the asset.

Margin trading introduces multiple new avenues for users on ZeroLend. Users can

• Create leveraged positions just like perps with low funding

• Lever up on the yield of liquid staking and restaking assets, like stETH or eETH

• Lever up on the fixed yield of Pendle's PTs

• Lever up on memecoins and riskier asset classes.

• Create delta-neutral plays to farm funding rates

• Arbitrage rates differentials on stablecoins

• Farm rewards, airdrops, points on leverage

How does Margin Trading work in ZeroLend?

ZeroLend margin trading works similarly to Contango using a flashloan.

When a trader opens a long ETH/USDC position with USDC as margin, the protocol gets the remaining USDC from a flash loan, swaps all USDC for ETH on the spot market, and lends ETH back on the money market, to borrow USDC and repay the flash loan.