Once dismissed as a sideshow, decentralized finance (DeFi) is creating innovative ways for traders to improve performance and causing the big money to take note. The addition of DeFi features to the basic margin account is one area of envy. In DeFi, a trader can find the best interest rates, margin fees, and trading fees aggregated on one screen. From the same screen, a margin borrower can cross-collateralize a margin account.
These features give a trader more borrowing power and thus leverage for margin accounts, allowing them to use their current crypto assets to borrow more crypto to trade. Nonetheless, magnified bets are becoming riskier on DeFi owing to a lack of decentralized notification service.
Traders are missing timely alerts on both opportunities and risks such as price moves and margin calls. Fast forward to the very near future when an AI-driven Web 3.0 will be delivering more highly targeted trading data to traders, more trading opportunities will be missed.
To fill the void, alternative notification solutions have evolved, most commonly involving forwarding messages to social media (Telegram, Twitter), email, or third-party apps and services not integrated with or native to the DeFi platform. But these solutions fail to provide the price accuracy or time sensitivity required of notifications.
Let's say you bet that at a fixed date in the future the price of Bitcoin, the most traded crypto asset, will fall. You enter a short trade using margin borrowing — selling borrowed securities at a high price with the expectation you can buy them back at a lower price in the future and earn a profit from the price difference.
You place $50,000 in BTC in your margin account, the price of 1 BTC. You then borrow $50,000 BTC/USD and sell it. The price of BTC/USD falls to $40,000. You buy 2 BTC/USD for $80,000 and pay back the margin loan, making a $20,000 profit (minus margin loan interest payments and trading fees), a 40 percent profit.
On a centralized trading platform, the trader would be highly dependent on notifications to execute the above trading scenario and manage trading risk, including on:
• Margin borrowing rates and trading fees
• Exchange entry and liquidation prices
• Pricing alerts
• Market, Limit, Stop, and OCO trading alerts
• Margin calls
A margin call occurs when the value of your margin account falls below the amount required to cover trade losses. In the above example, imagine instead Bitcoin rises 20 percent, creating a $20,000 loss. A margin call will give you a set date to transfer assets into your account to cover the negative balance. This is the maintenance margin required to keep your account open.
Fortunately, automated market orders on crypto platforms can be configured to automatically act on price signals and are important risk management tools for a trader.
They fill orders based on contingent price triggers you set. In the above example, a buy-stop order just above $50,000 would execute the trade and stem your losses from a price rise. A Buy limit order at $40,000 would execute the trade automatically. An OCO order cancels one order out when the other is placed.
Trouble is, traders do not receive timely notifications of these order executions. If the price of Bitcoin has fallen by $10,000 because a big whale has sold, an immediate notification of the execution of your buy limit order would allow you to, for example quickly set another buy limit at a lower floor and capture more profit from the drop in the market. Since markets drop in a flash (milliseconds), only instant notifications suffice.
Lacking a decentralized notification service, some complex workarounds have been created. They include sending trading alerts to emails which, in turn, forward the alert to a crypto signal service to place a predefined order. Another service provides general price signals for a coin based on trade signals appearing in Telegram or other social media channels. These solutions provide unreasonable time delays and inaccurate pricing signals since prices for one coin can vary greatly across crypto exchanges.
Decentralized push notifications, on the other hand, allow traders to maintain their trading edge. The EPNS push notification service was designed to ensure you do not lose an opportunity to make a trading profit or stem unnecessary losses. Our notifications are sent to one place, your wallet so you can easily track and quickly act on trading signals and market information. You can then decide whether to hold your position, take your gains, or cut your losses.
Because traders commonly use leverage to increase their trade position, the risk lurking in inadequate DeFi notification services is high. Margin trading increases your potential profits but also your potential losses since each point gain or loss is increased by the amount of leverage in the same direction. Ignoring fees, in the above example, if you had added leverage to the trade, say 3x, you would have made a profit of $30,000. If the price of the coin, however, rose, you would have lost that much.
EPNS keeps all the information you need to successfully trade in front of you so you never miss a price signal, margin alert, or margin call. You are in complete control of creating your notification channels and which notifications you receive, and receive token incentives for using the service.
As they say in trading, timing is everything!
Starting on Ethereum, the EPNS protocol will support other blockchains to fully support your cross-platform DeFi services. You can start receiving instant DeFi notifications today by downloading the EPNS Android or IOS app, or through your favorite wallet with EPNS integration.