Margin Accounts

AA DeFi Primitive for Leveraged Trading

In Vanna Protocol, the margin account functions as a DeFi primitive for executing undercollateralized leveraged positions across multiple DeFi markets. This smart account is a core element of Vanna’s composable leverage framework, allowing traders to deploy borrowed capital effectively and efficiently.

How the Margin Account Works

A margin account is a smart contract wallet that aggregates both the trader’s collateral and the borrowed funds into a single, managed account. When a trader opens a margin account, they gain access to leverage of up to 10x, enabling them to engage in various trading strategies without manually transferring funds across different markets.

• Leverage & Borrowing: Traders fund their margin account with initial collateral, such as LSTs, LRTs, native assets, RWAs, or NFTs. In return, the margin account allows them to borrow additional capital from Vanna’s lending pool, amplifying their trading power.

• Isolation of Positions: Each trader’s margin account operates in isolation, ensuring that the risk of liquidation or loss is confined to that specific account without affecting other accounts or the protocol’s broader liquidity pools.

• Composability Across Markets: The margin account enables seamless composability, allowing traders to deploy their borrowed margin across integrated DeFi platforms. This includes trading on perpetuals, options, spot markets, and participating in yield farming or staking.

Automated Margin Management & Liquidations

Once the margin account is opened, all trading activity and fund management flow through it. Vanna’s automated liquidation mechanisms monitor the account’s health factor in real time. If the trader’s positions move against them and the account’s health factor deteriorates, the system triggers a liquidation event to protect the funds borrowed from the pool.

• Liquidation Penalties: If a trader’s margin account is liquidated, liquidation penalties are applied, and the remaining assets are returned to the lending pool, boosting returns for liquidity providers (LPs).

Composable Leverage & Risk Management

The margin account abstraction allows traders to unlock capital efficiency by deploying borrowed margin across multiple markets, optimizing returns. Traders can use their margin for:

• Delta-neutral strategies: Balancing long and short positions to minimize risk while profiting from market volatility

• Derivatives trading: Leveraging options and futures to hedge or amplify exposure.

• Yield farming: Earning passive income by farming on platforms like Curve or staking on Lido, maximizing capital deployment.

Efficient and Modular Design

By abstracting all operations through the margin account, Vanna achieves low overhead on gas and ensures capital efficiency. Traders can program their margin account according to their needs, adjusting positions, and leveraging their funds across multiple protocols with ease.

• Smart Positioning: The margin account integrates with Vanna’s chain abstraction feature, which automatically routes trades to the most liquid and cost-efficient markets across multiple blockchains.

• Customization & Flexibility: Traders retain full control over their margin account and can customize how their borrowed funds are utilized across different strategies, whether for perpetuals, options, or delta-neutral strategies.

This margin account abstraction forms the backbone of Vanna’s prop trading protocol, offering traders an automated, flexible, and capital-efficient way to maximize their positions in the DeFi ecosystem.