Phase 1: Credit Synthesizer
What if we could create undercollateralized credit positions on overcollateralized lending protocols?
Theory:
The basic invariant of any overcollateralized protocol is that if you deposit X you cannot withdraw more than X.
However, there are two ways of turning X into a position worth more than X:
Recursive deposits (looping)
Flash loans.
Recursive Deposits:
Recursive depositing involves the re-use of borrowed funds as additional collateral. Here's how it works:
Deposit collateral in one token
Borrow against it in another token
Swap the borrowed token back to the collateral token
Redeposit and repeat
While conceptually simple, manual execution of this method is just inefficient due to slippage, transaction costs and being a hassle to do 10 - 15 recursive deposits.
Flashloans:
What if we could automate the above recursive deposits in 1 click? Enter flashloans:
Initiate a flash loan to to borrow a precisely calculated amount.
Use the flash loan to deposit collateral and borrow in a single transaction
Repay the flash loan with the borrowed funds.
This method allows users to create leveraged positions efficiently with minimal slippage.
In fact, flash loans don’t just increase capital efficiency - they also fundamentally expand the design space of overcollateralized lending. Specifically, they enable us to buy not only tokens, but also NFT's. Anything that can be tokenized and used as collateral, whether Mad Lads or tokenized real estate in the future, can be "mortgaged" this way. This would not work via recursive deposits, because there is no way to buy 20% of an NFT, but flash loans allow us to complete the entire process in one step.
Usecases:
Please refer to this section: What can you do?
Demo
Features:
Professional Trading Terminal: margin traders used to Hyperliquid/Jup Perps UI will feel right at home.
Liquidity: $2B aggregated across all lending protocols under a single interface.
Smart order routing: borrower will be recommended the best lending protocol to route their margin borrow through.
Risk Management: borrower will have TP/SL tools to manage their risks.
Single View:
open multiple positions in single lending protocol
open multiple positions across multiple lending protocols.
Who will use Asgard Credit Synthesizer?
Farmers: can farm LST/LRT/Stablecoin Interest Rate Differentials yields as well points & airdrops running on underlying lending protocols.
Loopers: 20 loop transactions becomes 1 transaction.
Leverage Traders: Open leverage positions like perps with 2x cheaper fees and less volatility than funding rates.
Airdrop Hedgers: Hedge unlocks of vested airdrops from high FDV, low-supply projects by placing a short. Close the position through airdrop when it unlocks.
Memecoin Traders: find single venue to long/short across 8 different protocols and 12 different interfaces.
Memecoin Bulls: single venue to ape into lending yields on your memecoin bags.
Permissionless Pool Operators: Wrap Asgard around your permisionless pool to make it efficient to take leverage from the pool's liquidity.
Check more details here: Who will use?
Why Choose Asgard's Credit Synthesizer Over Perpetual Exchanges?
While perpetual exchanges are popular for leveraged trading, Asgard's Credit Synthesizer offers unique advantages:
Lower Fees:
Lending spreads are typically 2-3x cheaper than funding rates on perp exchanges.
Reduce them more by farming yields eg: use jitoSOL/USDC recursive deposit over SOL/USDC.
Predictable Costs: More stable lending spreads lead to more predictable long-term costs.
Asset Ownership: Users actually borrow and control underlying assets, enabling participation in rewards and incentives
Higher Liquidity: Access to the deep liquidity of lending protocols (e.g., ~$2B on Solana) for easier entry/exit of large positions
Lower Liquidation Risk: Due to lower and less volatile fees, positions are less likely to face liquidation.
To back the above asserts, we recommended reading "Leverage Trading via Lending Platforms" - a paper written by University of Edinburg and University College London - where they compare a leverage loan position with perps.
TL;DR insights:
The study compares DeFi loan positions to 8 major CEX and DEXs (Binance, Bybit, OKX, Huobi, Gate, Bitget, CoinEX, dYdX)
Cost efficiency: lower and significant less volatile funding rates suggest potential cost advantages for DeFi loan positions, especially for longer-term holdings.
Consistent performance across assets: for most analyzed crypto assets (BTC, LINK, UNI, AAVE, CRV, SNX), defi loan positions show one of the lowest funding rate volatilities among all platforms.
Even for ETH and MKR the defi loan stands in the middle between all the 8 exchanges surveyed.
Last updated