## A Masterclass in Sovryn’s Core Features: Margin Trading and Lending
Community Call #56 was an educational session that took a deep dive into two of the foundational pillars of the Sovryn protocol: **margin trading** and **lending**. The team provided a step-by-step guide for users, explaining the mechanics, risks, and rewards associated with these powerful DeFi primitives.
### Margin Trading on Sovryn
Margin trading allows users to borrow funds to open larger trading positions than their own capital would otherwise allow, amplifying potential profits (and losses). On Sovryn, users can trade with up to 5x leverage on various pairs, such as SOV/BTC.
The process was broken down:
1. **Provide Collateral:** A user locks their initial capital (e.g., BTC) as collateral.
2. **Borrow and Trade:** The protocol allows them to borrow additional assets from the lending pool (e.g., more BTC or another asset) to open a leveraged long or short position.
3. **Maintenance Margin:** Traders must maintain a minimum collateral level (the maintenance margin) to keep their position open. If the position moves against them and their collateral falls below this level, they risk liquidation.
### The Engine: Sovryn’s Lending Pools
Margin trading is only possible because of the liquidity provided by users to Sovryn’s **lending pools**. Any user can deposit their assets (like BTC or XUSD) into these pools to earn a passive yield.
Key features of lending:
* **Passive Yield:** Lenders earn interest, paid by the borrowers (i.e., the margin traders).
* **No Impermanent Loss:** Unlike providing liquidity to an AMM, single-asset lending is not subject to impermanent loss, making it a lower-risk way to earn yield.
* **Protocol Revenue:** A small portion of the interest paid by borrowers is directed to the protocol’s fee-sharing contract, which in turn rewards SOV stakers. This creates a sustainable loop where protocol activity directly benefits token holders.
This call served as a valuable refresher on the powerful synergy between lending and trading on Sovryn. It demonstrated how lenders provide the essential fuel for traders, and how the activity of both generates value for the entire ecosystem.