Rethinking the decentralized brokerage with 1Delta DAO

4 min readFeb 7, 2023

Lending protocol TVL and low borrow rates are mostly inaccessible

Some of the largest protocols in DeFi are lending protocols with staggering TVLs and low borrow rates. However, accessing their liquidity for trading purposes has been a pain.

A user generally has to deposit funds which in return allows them to borrow from the protocol, however, lending protocols are overcollateralized, meaning that a user can only borrow less than the amount they deposited in a single transaction.

For example, a user depositing $1,000 in USDT means that they only can borrow $700 in WBTC (this would correspond to a collateral factor of 70%). The user can extend the position by swapping the borrowed WBTC to USDT and re-supply the received $700 worth of USDT. That gives an additional 70% x $700 = $490 borrowing capacity. The total percentage of borrowable funds based on the original deposit is now 70%+70%²= 119%. The user now can borrow again, swap and re-supply until they get their desired position size or leverage.

The following chart shows the process flow.

1) A first USDT deposit is required for taking out a loan; 2) we can borrow WBTC to our wallet; 3) we swap WBTC to USDT on a DEX; 4) we deposit USDT to the lender; we repeat from step 2) until we reach the desired position size.

The problems here are clear:

  1. The process usually spans multiple dApps, e.g. Uniswap, 1Inch and Compound
  2. It is error prone, as many manual user-inputs are required for each step
  3. Users usually want to capture a price move that they already might have missed after the first borrow transaction

We, ourselves DeFi traders, built 1Delta to solve all of these issues while still giving full control to the user. This means that a user should still be able to enter the same configuration for their trades that a conventional DEX interface would allow.

1Delta Abstract Accounts are able to compose margin trades in a single transaction

1Delta Accounts are user-controlled smart contracts that allow the automation of lending pool interactions and their connecting swaps. Flash loans / swaps are used to execute the interactions in a single transaction — this would mostly be impossible without abstract accounts on lending protocols similar to Compound.

Illustration of an abstract account that can open positions (borrow and supply) with flash swaps or flash loans in only two steps. As the 1Delta account is a smart contract, these steps can also be batch-executed in a single transaction.

We designed 1Delta to have a simple and familiar UX. If you’ve used other popular decentralized lending protocols or exchanges you should feel right at home using 1Delta.

The main page of 1Delta.

When you click on start trading you can start building a position. Other than trading on margin, our interface allows you to execute a few common and useful trade types to make 1Delta your complete destination for trading crypto.

Your selection in the market tables leads to different trade settings. When a single currency is selected, the interaction is similar to a conventional lending protocol, except that the user also has the option to add DEX interactions e.g. to add a swap before the deposit in the same transaction.

Building a margin position with 1Delta

To begin trading, you will need to create a 1Delta account. The account provides you with flexibility, control and is very cheap to create — only minor gas fees are incurred.

The account creation is just a single contract call and deploys your own 1Delta account to the EVM.

Once the account is created, you can deposit funds to the lending protocol. If you do not currently own the token you want to deposit, you can also swap and then supply in the same transaction using a Uniswap-style interface:

A swap and supply transaction — A complete DEX UI combined with LTV and health factor indicators as is common for lending protocols like Compound or AAVE.

It is now time to trade on margin. With your deposited collateral you can now use the full capacity of your borrowing power. Even though the direct borrowing capacity of the ~$560 we deposited would limit us to borrowing less than this amount, we can borrow and supply an equivalent of $1,500 in a single transaction:

Opening a margin position was never easier — The margin requirement states how much collateral you have to supply to make the transaction work. With our deposit of ~$560 in USDC we have enough, however, the health factor drops below 1.1 on execution.

If our health factor gets very low, the manual withdraw-swap-repay cycle would lead to a significant hassle when trying to unwind the position, all while 1Delta executes the interactions in a single transaction:

Our health factor is immediately restored if we trim the full position by selecting the maximum output amount on the right hand side. The dApp will also make sure that there is no dust left.

1Delta introduces a new era of DeFi aggregation

The 1Delta protocol allows you to:

  • be able to compose swaps and lending interactions in a unified interface
  • still be eligible to receive all of the lending protocols’ benefits, like:
    – (pre-)mined rewards
    – additional rewards paid by stakers (like Lido)
  • always use the most up-to-date implementation of 1Delta with our automatic contract updates
  • get the best possible trading experience while not giving up your decentralized control (as with centralized brokers) or giving up your access to highly liquid protocols (as with other decentralized marketplaces that limit you to their own liquidity like dYdX)

Check out our app — Proudly building on top of 0VIX and Uniswap on Polygon, with many more collaborations in the pipeline!

The whitepaper is available on our landing page

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