Positions
Positions are smart contracts that hypothecate borrowers' collateral and debt, giving the borrower flexibility with composing unique positions or strategies. A borrowers positions isolates their assets from other borrowers, meaning collateral on Sentiment is not pooled.
Borrowing on Sentiment differs from existing money markets like Aave v3 or Compound III in 2 ways:
- Borrower collateral is not rehypothecated
- Borrower collateral is not pooled.
Collateral Isolation
Leverage in Sentiment is not achieved through "looping" as it is money markets. Instead borrowers can borrow up to 20x the value of their collateral in a specified loan token, and have the flexibility to allocate the proceeds in ways defined by the lending pool configuration. This is a cheaper and more efficient way for borrowers to access leverage and it is made possible only by Positions.
A borrower's collateral and debt are completely isolated from other positions, and such borrowers can have the flexibility of maintaining multiple positions without inflicting risks across positions.
Borrowers collateral on Sentiment are not pooled or rehypothecated, which provides superior security guarantees for users within the protocol.
Position Types
To create maximum capital efficiency while preserving security the Sentiment protocol comes equipped with 2 position types.
To make the user experience seamless, the Sentiment UI will automatically choose a position type most suitable for the strategy the borrower wishes to make. Users also have the ability to create more complex positions programmatically by interacting directly with sentiment contracts
Type 1 Positions
Type 1 Positions allow borrowers to have 1 collateral asset type, while being able to borrow across debt markets. An example of this is if a borrower has ETH as collateral, and borrows both WBTC and USDC.
We expect these type of positions to be most performant for users seeking to create delta neutral strategies.
Type 2 Positions
Type 2 Positions allow for users to have multiple collateral assets but only 1 debt asset. This position type is most suitable for users wishing to cross-margin or cross-collateralize a position to have increased capital efficiency.
Both positions were designed to ensure flexibility within the system while mitigating solvency risk for lenders.
Position Manager
Position Manager is a contract that acts as a control center for all borrower Positions on Sentiment. The Position Manager contains all the logic necessary for any mutation of a position, including, but not limited to: lending; borrowing; external actions.
The Position Manager contains a process function which enables positions to interact with exogenous protocols and contracts. This allows for unique functionalities such as: swapping tokens via dex aggregator; providing liquidity to external markets and much more.