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

// 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:

// 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

// 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 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 - Learn to use cross-margin

2. Debt Mechanism - Learn risk management

3. Portfolio Management - Manage your portfolio

4. Advanced Strategies - 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

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