October 10, 2023
Mars v2 has arrived on Osmosis. With it the world’s first Rover credit accounts are ready to be deployed. These powerful new DeFi vehicles give their operators the ability to leverage up (or hedge) virtually anything they do in DeFi.
In a word: Rover credit accounts are DeFi’s answer to CeFi subaccounts. Think of a Rover as a self-contained sandbox for leverage. Simply deposit assets into one (longs, shorts, margin trades – even LP tokens), then use those assets as collateral to borrow from the Red Bank for whitelisted activities.
After passing a successful audit by Oak Security, that means anyone can now use a Mars v2 Rover to engage in:
Every position in a Rover is cross-collateralized, meaning each asset acts as collateral that can be leveraged for borrowing. It’s perhaps the largest boost in capital efficiency the Cosmos have ever seen. Today’s alpha launch was also built to be extensible. With the approval of governance, support for other forms of leverage and leverage-based services can be added (suggest ideas in Mars’ community forums or stay tuned for incoming proposals!).
In the sections that follow, we’ll look at:
DeFi’s biggest strengths – things like decentralization and self custody – also lead to its biggest weaknesses. Namely, DeFi is:
CEXes, on the other hand, are as easy to use as any mainstream financial app. There are no browser plugins or private keys to deal with on Binance. You don’t have to bridge assets across chains, and you can easily swap crypto for fiat on exchanges. You also get access to multiple services in one spot including spot trading, margin trading, perps, launchpads and more.
CEXes that offer borrowing and lending also radically increase a user’s capital efficiency. FTX exemplified this capital efficiency with their subaccounts – that is a single account where all your positions could be cross-collateralized.
On FTX, you could hold bitcoin, for example, then use that as collateral to take on a perps position. Then, your perps could be cross-margined, so your PnL could be used as collateral. Then, maybe you use that to short Ethereum, and on and on and on.
Doing the same in DeFi was impossible in the Cosmos before today. For example, consider a user who wanted to short a specific asset. To do that, they would have needed to first over-collateralize their holdings on a credit protocol, then borrow an asset and sell it. Then, that user couldn’t use that short as collateral elsewhere.
Mars v2 fixes this. Instead of subaccounts, though, Mars has unleashed a new DeFi primitive: Rover credit accounts.
With Rovers, you suddenly get the ability to do all of the following in a single DeFi account:
While most “composability” in DeFi today happens with spot or staked assets, Mars v2 even allows you to collateralize leveraged assets. Literally, everything in your Rover can be “cross-collateralized” with a single liquidation point.
And additional Rover features are expected to be proposed in the coming weeks or months including high-leverage strategies and [REDACTED].
In short, Mars v2 brings the same sort of capital efficiency you can find on CEXes to DeFi. That means you get better UX and improved capital efficiency all in a self-custodied, on-chain Rover.
Mars Protocol is uniquely engineered to deploy Rovers anywhere there’s a need for leverage. That journey starts today on Osmosis.
Thanks to Mars unique “Hub and Outpost” model, though, Rovers could one day find their way onto other blockchains. To understand the Rover architecture, let’s first recap how Mars works overall.
The Hub and Outpost model has two elements:
The Hub and its outposts communicate via IBC, and Mars v2 purely impacts outposts -- specifically, the first v2 instance is on Osmosis (currently Mars’ Neutron Outpost does NOT support Mars v2 Rovers).
Under the hood, today’s upgrade on Osmosis includes a credit manager smart contract, which holds all the borrowing and liquidation logic for Mars v2. It also allows borrowing from Mars’ Red Bank for any whitelisted activity including leveraged yield farming, margin trading, lending and borrowing.
Whenever a Rover credit account is minted on an outpost, it’s minted as a transferable NFT that sits inside that chain’s credit manager contract. Each NFT can then borrow from the Red Bank to engage in any leveraged activity that is approved by governance.
Now, let’s look at how a user can mint and use their first Rover on Mars v2.
The user flow is straightforward:
Note that the assets that you borrow on Mars have interest rates that change in near real-time. These changes can impact the profitability of your leveraged positions. If you do borrow or margin trade on Mars, be sure to keep an eye on your account health.
Any whitelisted asset, position or strategy can serve as collateral in your Rover credit account. For example, users could deposit LP tokens and borrow against them to initiate a margin long on $OSMO.
That means DeFi positions that are dormant in your wallet today, suddenly become accessible as collateral if and when you deposit them into a credit account on Mars v2. It’s an unrivaled level of capital efficiency that will let you take your assets further than they can go today.
Here are just four examples of strategies users might deploy on Mars’ v2 outpost on Osmosis:
Once you’ve purchased assets on margin, you can turn around and lend them out on Mars v2 to earn yield. For example, imagine you’re bullish Osmosis (OSMO). You can deposit OSMO, and open a leveraged long to double your OSMO position.
Then you can lend out all of that OSMO via the Red Bank and collect yield in the process. Depending on the borrow/lending rates, you could quite possibly be getting paid to increase your exposure to OSMO.
On Mars v1, you can only do leveraged LP'ing by borrowing a single asset on a single position. With Mars v2, you can now borrow either asset in a pair (or a mixture of the two). And you can cross-collateralize multiple LP positions.
This improved flexibility gives you more strategic options and lets you to borrow whichever assets have the lowest borrow rates.
If you borrow both assets for an LP position, your positions and debts cancel one another out as the market moves. That means you can stay market neutral while capturing even more LP rewards.
When you post similar debt and collateral assets, your risk of liquidation is limited. For example: you might post stATOM-ATOM LP as collateral and borrow ATOM with leverage. Since stATOM and ATOM generally move higher and lower in price together, your risk of liquidation is low.
That means you could leverage your LP position while collecting a staking yield on stATOM. In some cases, this could theoretically enable triple-digit yields on your positions.
On Osmosis, Mars v1 and Mars v2 will continue to coexist on-chain. All existing Farm Vault positions on Mars v1 have been automatically upgraded to Mars v2 credit accounts. That means you can now borrow against those positions to leverage up or hedge as desired. All Red Bank deposits and borrowings need to be manually migrated from Mars v1 to Mars v2. Learn how to migrate your Red Bank positions in the Mars docs now.
Explorers can always access their desired versions of the app here:
Note that Mars v2 has been deployed on Mars’ Osmosis Outpost. The Neutron Outpost remains on Mars v1 where it enables borrowing and lending. The Neutron Outpost does not currently support Rover credit accounts.
After a track record of successful operation on Osmosis, governance could consider adding more assets and/or leverage features to the Osmosis outpost, and potentially consider expansion to other appchains.
To celebrate the launch of Mars v2, all farmers, traders and borrowers or lenders can qualify for a limited edition badge by interacting with Mars within the next two earth weeks.
Martians can earn up to three badges (the Pioneer Trader, Pioneer Farmer of Pioneer Lender badge) for engaging in any of these activities in that timeframe:
Initiate your first transactions on Mars now. Then, you'll be able to show the galaxy you were there for the Rise of the Rovers and potentially unlock special functionality in the future on Mars with your Pioneer badge.
Mars v2’s Rovers await their first pilots. Explore the Mars docs for step-by-step instructions on getting started. Or voyage straight to the Red Planet, and experience the power of Rover credit accounts first-hand.
Initiate your expedition here: app.marsprotocol.io.
*Global deposit caps for credit accounts can be adjusted by governance and are currently capped at the pre-existing levels set by governance with the passage of MRC-46. Specifically, the following caps apply for each asset: OSMO (10m tokens), ATOM (700k tokens), AXL (400k tokens), USDC (3.5m tokens), WBTC (20 tokens), WETH (300 tokens), and stATOM (350k tokens).
**At launch, Mars v2 supports the same leveraged yield farming strategies and deposit caps set on Mars v1. Specifically: OSMO-ATOM ($2m), OSMO-USDC ($1.5m), stATOM-ATOM ($1m), OSMO-WBTC ($250k) and OSMO-WETH ($500k).
Some or all features of mars v2 may not be legal to use in certain jurisdictions, including in the United States with respect to leveraged transactions. No person is solicited to use Mars v2 or receiving an offer to enter into any transaction, through this post or otherwise. Users are responsible for ensuring their own legal compliance and may be at risk of serious liabilities for violating their local laws or the laws applicable to other users interacting with them on a peer-to-peer basis through Mars v2. Remember, Cosmos, Neutron, Osmosis and Mars are experimental technologies. This post is subject to and limited by the Mars disclaimers, which you should review: https://docs.marsprotocol.io/docs/overview/legal/disclaimers-and-disclosures