BNB Chain Spotlight: OpenLeverage

Today we're bringing you an interview with Jackie, the co-founder and CEO of OpenLeverage on BNB Chain. OpenLeverage is an EVM-compatible, permissionless margin trading protocol with aggregated DEX liquidity, enabling traders to long or short thousands of trading pairs on DEXs efficiently and securely, with no permission required.

Without further ado, let's get into the interview!

IMPORTANT: Please note the following content does not constitute an endorsement or approval of any of the products or services of the project, organization, or individual.

Q1: It’s great to be talking to you, Jackie. As this is your first time under the Spotlight, let’s start with a brief introduction. Tell us what you do and what’s unique about OpenLeverage.

Hi there, I’m Jackie, the co-founder and CEO of OpenLeverage. I’m a serial blockchain fintech entrepreneur with over 14 years of experience in derivatives trading, risk management, and blockchain-based financial system design. I previously worked at Goldman Sachs on quantitative asset management and FX derivatives electronic trading, then joined HSBC in the equity derivatives space. Before OpenLeverage, I founded a fintech company building a blockchain-based fintech solution for banks and enterprises. I earned my master’s degree in Computer Science from the University of Manchester in the UK.

OpenLeverage is a permissionless margin trading protocol with aggregated DEX liquidity, enabling traders to long or short thousands of trading pairs on DEXs efficiently and securely, with no permission required. It allows anyone to create lending pools and margin trading markets, offer funds to borrow, and connect to decentralized exchanges to serve unmet needs in the unsatisfied market. At the same time, projects can also easily integrate with OpenLeverage to facilitate leverage trading.

OpenLeverage is EVM-compatible, and we aim to deploy it on as many chains that will connect to top DEXs in the fast-moving and long-tail market. This is something that many other protocols won’t pursue because they find it very difficult to do.

Q2: How did you come up with the name OpenLeverage, and when was the whole idea born?

The idea for OpenLeverage came during DeFi summer, at the end of 2020. DEXs grew rapidly and were the center of growth while serving different market segments.

We observed that existing centralized exchanges and decentralized protocols were permissioned markets with huge entry barriers and were very costly to set up, providing minimal pairs and market depth. The permissionless nature of decentralized exchanges changed the landscape by allowing token listings at the cost of an on-chain transaction. Many long-tail trading pairs have appeared on DEXs with promising liquidity and volume, allowing users to trade many interesting and innovative products without KYC.

There are a few reasons why we have the name OpenLeverage. Being permissionless is very important throughout blockchain development, and we embraced that theme to allow for major infrastructure development in blockchain lending and margin trading. We’ve incorporated these two features into our protocol to create markets, aiming to facilitate existing markets instead of competing against them. We believe in being open – we want to enable anyone to create markets and allow anyone to trade with no barriers.

Another reason why we embrace “open” was that during our product development, we wanted to have “open” as a continuous theme. When we think about the product, we want to emphasize the openness of the protocol to market it.

Lastly, the concept of “openness” is the daily driving force for our team. The OpenLeverage team is a flat organization that allows everyone on the team to shine without barriers in the work culture. We are free to express our ideas openly, and our product and work culture reflect that.

Q3: Can you briefly introduce us to your team? What’s your team's experience?

There are two co-founders on the OpenLeverage team, Tom and myself. We met over four years ago as I built a blockchain-based fintech solution for supply chain finance and received funding from Tom’s investment firm. Tom worked as a senior practitioner for over six years in the blockchain industry and has worked as a trader in the international commodity market. He’s been involved in successfully incubating more than 30 crypto-related projects and brings his rich experience and professionalism to our project.

The rest of the team is split into core development and marketing. The core development team came from either a blockchain solutions background or fintech, which is telling through OpenLeverage’s optimized lending and trading experience compared to other DeFi products. The marketing team consists of seasoned professionals that have experience in corporate, blockchain, and DeFi projects.

Q4: Why did you choose to launch a margin trading protocol on a DEX?

We believe in having an open infrastructure. There are a few key points why we decided to launch a margin trading protocol on decentralized exchanges. DEXs have made a huge difference – there are many pairs on DEXs with lots of liquidity and volume.

Existing centralized exchanges and decentralized protocols are permissioned markets with substantial entry barriers and are costly, providing minimal pairs and market depth.

We are here to enable all tokens to be margin-traded. Compared to other leveraged trading protocols that provide limited 20-30 mainstream pairs supported by a traditional order book model, we aim to support thousands of pairs across many DEXs and blockchains and help projects and DEXs improve volume and liquidity by providing lending and margin trading support.

Q5: How does OpenLeverage benefit other projects when they come onto your platform?

The open design of OpenLeverage can be used to implement and mutually benefit our project and our partners in many ways. Every protocol is potentially a new partnership that we can integrate with in some way.

OpenLeverage can easily collaborate with decentralized exchanges, as we can integrate with multiple DEXs simultaneously and automatically suggest optimized trade routes, based on the user’s best interest. We are a trading volume booster to DEXs since we work hand-in-hand to expand the market and utilize lending and trading for tokens on exchanges. As we help DEXs improve volume, we also improve their TVL and liquidity, which provides more fees for liquidity providers.

Yield aggregators can deposit their assets to OpenLeverage to generate alpha, generated by lending interest while also earning OLE tokens and rewards that we allocate to different lending pools.

We have an entirely on-chain API for asset management-type protocols to open or close positions, so they can capture leveraging opportunities to long or short any tokens provided on the OpenLeverage platform.

For projects listed on DEXs with more than USD 1 million in TVL, we are happy to set up lending pools and margin trading markets for trading pairs to help improve token trading volumes and liquidity DEXs. We run different campaigns with different partners to enhance their trading while incentivizing trades with OLE trading rewards. OpenLeverage boosts these projects’ community and enables them to get familiar with lending and margin trading with their tokens.

Q6: You have to protect a lot of funds and user data. What is your security strategy?

With so much going on in the crypto space, security has been our top priority throughout our product and technical design. It’s always a challenge to be completely open and safe simultaneously, and we finely define the boundary of risk and liquidity and trading flow so we can have an open, safe, and optimized user experience.

We’ve introduced time-weighted average price (TWAP) to calculate risk and determine the actual real-time market condition instead of relying on trading oracles. This security device enables us to support creating permissionless markets. If you have a support market on Uniswap-style DEXs, you have a TWAP-value you can refer to and support.

At the same time, we have spent a lot of time formulating solutions for the OnDemand Oracle, which uses TWAP prices provided by the DEX to detect price manipulation and force price updates to make it valid for trading and liquidation. We've constructed an extra structure with time-constraint and price-constraint and different TWAP models to detect price manipulation. We have tested with different market scenarios to ensure that the system is optimized for our community.

We have followed secure development best practices throughout OpenLeverage’s development. Along with creating solutions, we have had security reviews from Certik and Peckshield and a partnership with Code4rena for a one-week audit contest to fine-tune security settings and gas optimization.

We ensure that our permissionless markets have decent liquidity and still maintain flexibility. There is no cost to set up a market and maintain the price fees.

One of the questions we mostly get asked is – how do we protect markets that have very low liquidity on the DEXs? Our answer is that we are showing objective numbers that inform people what kind of market they’re entering. We’re very much like Uniswap in this regard and how they show objective figures – liquidity, history of trading, and how long the market’s been created. At the same time, we’re also showing the volatility of the pair, the stability of the liquidity on DEXs, and how it’s been trading. We want to provide objective numbers to let traders know what kind of markets they’re entering, and that’s the strategy we’re taking.

Q7: Why did you decide to build on BNB Chain?

When building, we had to consider various factors. BNB Chain ultimately was the ideal chain. BNB Chain is the second-biggest chain in terms of TVL and is the number one chain in terms of active daily users. Projects are created on BNB Chain daily, and it is a very long-tail market. There are plenty of tokens that are natively listed on BNB Chain which have good liquidity and volume that are not listed anywhere else. Gas fees are low and enable a wider audience to experience OpenLeverage at an affordable cost. Our team considered these as significant factors to expand onto BNB Chain.

Regarding infrastructure, we’re able to collaborate with a significant number of great projects and DEXs like PancakeSwap and Biswap to promote our growth on BNB Chain. As a result, we have surpassed milestones of over USD 480 million in trading volume in just three months, with USD 12 million in TVL, which is remarkable despite no token launch. Overall, building on BNB Chain has been a great experience and is essential for OpenLeverage.

Q8: What’s on the roadmap for OpenLeverage?

OpenLeverage launched on Ethereum in December 2021, onto tBNB Chain in February 2022, and most recently onto KCC in April. Since our BNB Chain launch, protocol adoption has been growing tremendously. We have surpassed milestones of more than USD 12.4 million TVL in three months and over USD 480 million in trading volume.

We aim to execute our multi-chain strategy to deploy on Avalanche, Polygon, Fantom, and many other EVM-compatible chains, connecting to decentralized exchanges like Uniswap and SushiSwap, PancakeSwap, MojitoSwap, and more, supporting thousands of pairs out there.

We will also extend our product offering, such as limit orders for spot and margin trading, to support potentially thousands of pairs on any DEX and EVM-compatible chains. We will expand our features to have over-collateralized borrowing, a smart vault, decentralized asset management, and a Layer-2 solution on Arbitrum and Optimism.

Q9: As we’re getting to the end of the interview, let’s talk about the future. What do you see as the main challenge for the future of DeFi? What new features can we expect from you in the upcoming months?

If you look at the growth rate of DeFi, it’s been growing exponentially since DeFi summer. Despite some setbacks, like what happened to Terra Luna, it’s been proven that DeFi has value and a place in the global technology of financial markets.

To that end, there are two significant challenges DeFi needs to overcome to elevate itself to the next level.

The first challenge would be increasing the trust and understanding of DeFi. With the nature of blockchain and its complexity, many users find DeFi difficult to use. Many retail users are not very experienced in financial market products, so there’s a big hurdle to make sure users fully understand DeFi products and how they work. Users will never put substantial amounts of capital into DeFi projects, and that’s part of the challenge. There needs to be time, effort, and allocations from key opinion leaders (KOLs) to increase awareness and the underlying DeFi infrastructure.

I think another challenge would be regulation. When people speak about DeFi, it's synonymous with being permissionless. Non-KYC helped the market's exponential growth. With the downfall of Terra Luna and UST, some regulators will come in, analyze the market, and try to place reforms.

It’s my observation that through time, regulations will help guide the markets to develop in a more positive way and elevate the industry to get better and stronger. It’s the right path we’ll have to follow and one of the growing pains we’ll experience to propel ourselves forward.

We’ve been working tirelessly at OpenLeverage. We’re planning to add a few features that we think users will definitely like, such as limit order, which we know is essential to margin trading. Another interesting feature users want to look out for will be over-collateralized borrowing. Currently, lenders can deposit funds and open a margin trade, but the assets will be locked up in the smart contract, and users cannot take it out to their wallets.

In the future, users can stake altcoins as collateral and then borrow out some BNB, ETH, stables, or other coins to fund their living expenses. Users can also use these assets to catch other opportunities in the market and use them to support other pairs with good liquidity on the DEX and lending pool.

We also intend to implement a smart vault to help people automatically allocate assets in our lending pool, making it easier for them to capture the best opportunities. At the same time, we intend to maximize our capital efficiency.