# Multi-Collateral Trading

This page explains how multi-collateral trading works on Polynomial and its benefits.

## Overview

Multi-collateral trading allows you to use multiple different assets as collateral for your trading positions. Instead of being limited to a single asset, you can deposit various supported tokens and use them collectively to support your trading activities.

### **Key Benefits**

* **Diversification:** Use multiple assets as collateral
* **Capital Efficiency:** Maximize use of available assets
* **Flexibility:** Choose from various supported assets
* **Risk Management:** Diversify collateral risk

## Supported Collateral Assets

### **Primary Assets**

* **USDC:** USD Coin - Most liquid and stable
* **sDAI:** Savings DAI - Yield-bearing DAI
* **sUSDe:** Savings USDe - Yield-bearing USDe
* **ETH:** Ethereum - Native gas token

### **Asset Characteristics**

| Asset     | Type          | Yield    | Stability | Liquidity |
| --------- | ------------- | -------- | --------- | --------- |
| **USDC**  | Stablecoin    | None     | High      | Very High |
| **sDAI**  | Yield-bearing | \~5% APY | High      | High      |
| **sUSDe** | Yield-bearing | \~8% APY | High      | High      |
| **ETH**   | Volatile      | None     | Medium    | High      |

## How Multi-Collateral Works

### **Unified Collateral Pool**

1. **Deposit Assets:** Deposit multiple assets into your account
2. **Unified Pool:** All assets become part of a unified collateral pool
3. **Shared Margin:** All assets contribute to margin requirements
4. **Cross-Margin:** Use any asset to support any position

### **Collateral Calculation**

```typescript
// Total collateral value calculation
function calculateTotalCollateral(assets: Asset[]) {
  let totalValue = 0;
  
  for (const asset of assets) {
    const value = asset.balance * asset.price * asset.collateralFactor;
    totalValue += value;
  }
  
  return totalValue;
}

// Example calculation
const assets = [
  { balance: 1000, price: 1.00, collateralFactor: 1.0 }, // USDC
  { balance: 500, price: 1.05, collateralFactor: 0.95 },  // sDAI
  { balance: 0.5, price: 3000, collateralFactor: 0.9 }    // ETH
];

const totalCollateral = calculateTotalCollateral(assets);
// Result: $1000 + $498.75 + $1350 = $2848.75
```

## Collateral Factors

### **Risk-Based Factors**

Each asset has a collateral factor that determines how much of its value can be used as collateral:

| Asset     | Collateral Factor | Risk Level  |
| --------- | ----------------- | ----------- |
| **USDC**  | 1.0 (100%)        | Low Risk    |
| **sDAI**  | 0.95 (95%)        | Low Risk    |
| **sUSDe** | 0.9 (90%)         | Medium Risk |
| **ETH**   | 0.9 (90%)         | High Risk   |

### **Dynamic Adjustment**

Collateral factors can be adjusted based on:

* **Market Conditions:** Volatility and liquidity
* **Asset Performance:** Historical performance
* **Risk Assessment:** Ongoing risk assessment
* **Protocol Updates:** Protocol improvements

## Position Management

### **Cross-Margin Positions**

With multi-collateral, all positions share the same collateral pool:

```typescript
// Position margin calculation
function calculatePositionMargin(position: Position, totalCollateral: number) {
  const requiredMargin = position.size * position.leverage / 100;
  const availableMargin = totalCollateral - usedMargin;
  
  return {
    required: requiredMargin,
    available: availableMargin,
    utilization: requiredMargin / totalCollateral
  };
}
```

### **Portfolio Management**

* **Unified View:** See all positions and collateral in one view
* **Risk Monitoring:** Monitor portfolio-wide risk
* **Liquidation Protection:** Portfolio-wide liquidation protection
* **Optimization:** Optimize collateral allocation

## Yield Generation

### **Yield-Bearing Assets**

Some collateral assets generate yield while being used as collateral:

* **sDAI:** Earns \~5% APY from DAI savings
* **sUSDe:** Earns \~8% APY from USDe savings
* **Automatic Compounding:** Yield automatically compounds
* **Real-time Updates:** Yield updates in real-time

### **Yield Calculation**

```typescript
// Yield calculation for yield-bearing assets
function calculateYield(asset: Asset, timeElapsed: number) {
  if (!asset.yieldRate) return 0;
  
  const annualYield = asset.balance * asset.yieldRate;
  const timeFraction = timeElapsed / (365 * 24 * 60 * 60); // Convert to years
  
  return annualYield * timeFraction;
}
```

## Risk Management

### **Collateral Risk**

Different assets carry different risks:

* **Stablecoin Risk:** Risk of depegging
* **Volatility Risk:** Price volatility risk
* **Liquidity Risk:** Liquidity availability risk
* **Smart Contract Risk:** Smart contract risk

### **Risk Mitigation**

* **Diversification:** Diversify across multiple assets
* **Monitoring:** Monitor asset performance
* **Rebalancing:** Rebalance collateral allocation
* **Emergency Procedures:** Emergency liquidation procedures

## Liquidation Mechanics

### **Portfolio Liquidation**

Liquidation considers the entire portfolio:

1. **Total Value:** Calculate total portfolio value
2. **Required Margin:** Calculate total required margin
3. **Liquidation Threshold:** Check against liquidation threshold
4. **Liquidation Process:** Liquidate positions if needed

### **Liquidation Priority**

1. **High-Risk Positions:** Liquidate high-risk positions first
2. **Asset Priority:** Liquidate based on asset priority
3. **Size Priority:** Liquidate larger positions first
4. **Time Priority:** Liquidate older positions first

## Best Practices

### **Collateral Allocation**

* **Diversification:** Diversify across multiple assets
* **Stability:** Use stable assets for core collateral
* **Yield Optimization:** Use yield-bearing assets when appropriate
* **Risk Management:** Monitor and manage risk

### **Position Management**

* **Size Control:** Control position sizes relative to collateral
* **Leverage Management:** Use appropriate leverage levels
* **Monitoring:** Continuously monitor positions
* **Rebalancing:** Rebalance when needed

### **Risk Management**

* **Stop Losses:** Use stop losses for risk management
* **Position Limits:** Set position size limits
* **Collateral Monitoring:** Monitor collateral values
* **Emergency Plans:** Have emergency plans ready

## Advanced Strategies

### **Yield Farming**

* **Deposit Yield Assets:** Deposit yield-bearing assets
* **Earn Yield:** Earn yield while trading
* **Compound Returns:** Compound trading and yield returns
* **Risk Management:** Manage both trading and yield risk

### **Arbitrage Opportunities**

* **Cross-Asset Arbitrage:** Arbitrage between different assets
* **Yield Arbitrage:** Arbitrage yield rates
* **Liquidity Arbitrage:** Arbitrage liquidity differences
* **Risk Arbitrage:** Arbitrage risk premiums

### **Portfolio Optimization**

* **Asset Allocation:** Optimize asset allocation
* **Risk-Return:** Balance risk and return
* **Correlation:** Consider asset correlations
* **Rebalancing:** Regular rebalancing

## Monitoring and Analytics

### **Portfolio Metrics**

* **Total Value:** Total portfolio value
* **Collateral Utilization:** Collateral utilization rate
* **Yield Earned:** Total yield earned
* **Risk Metrics:** Various risk metrics

### **Asset Performance**

* **Individual Performance:** Performance of individual assets
* **Correlation Analysis:** Asset correlation analysis
* **Yield Tracking:** Yield tracking and analysis
* **Risk Analysis:** Risk analysis and monitoring

## Troubleshooting

### **Common Issues**

#### **Insufficient Collateral**

* **Add More Assets:** Deposit additional assets
* **Reduce Positions:** Reduce position sizes
* **Optimize Allocation:** Optimize collateral allocation
* **Monitor Values:** Monitor asset values

#### **High Risk**

* **Diversify:** Diversify across more assets
* **Reduce Leverage:** Reduce leverage levels
* **Add Stable Assets:** Add more stable assets
* **Monitor Closely:** Monitor positions closely

### **Getting Help**

* **FAQ:** Check [FAQ](https://github.com/Polynomial-Protocol/gitbook/blob/master/explanation/support/faq.md) for common questions
* **Support:** Contact support for assistance
* **Community:** Ask community for advice
* **Documentation:** Review documentation

## Next Steps

After understanding multi-collateral trading:

1. [**How to Use Cross Margin**](https://github.com/Polynomial-Protocol/gitbook/blob/master/explanation/how-to/trading/cross-margin.md) - Learn to use cross-margin
2. [**Debt Mechanism**](https://github.com/Polynomial-Protocol/gitbook/blob/master/explanation/explanation/debt-mechanism.md) - Learn risk management
3. [**Portfolio Management**](https://github.com/Polynomial-Protocol/gitbook/blob/master/explanation/how-to/trading/portfolio-management.md) - Manage your portfolio
4. [**Advanced Strategies**](https://github.com/Polynomial-Protocol/gitbook/blob/master/explanation/how-to/advanced.md) - Advanced trading strategies

## Important Reminders

* **Diversify:** Always diversify your collateral
* **Monitor Risk:** Continuously monitor risk
* **Manage Leverage:** Use appropriate leverage levels
* **Stay Informed:** Keep up with asset updates

***

*Multi-collateral trading provides flexibility and efficiency, but requires careful risk management. Always understand the risks and monitor your positions closely.*


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