# 🤓Functioning of WOW protocol

WOWswap is a fully community-owned protocol based on a simple idea: liquidity providers can create a liquidity pool , and traders can borrow these funds to buy up to 5 times more tokens. Protocol fees, interest rates for lenders and borrowers, liquidation ratios and other settings are decided by holders of WOW tokens — our governance token.

Making a WOW swap is as easy as making a regular swap on Uniswap or Pancakeswap — extra capital will be automatically borrowed from the liquidity pool.

In the example below with 1 BNB you would be able to buy your favorite token for 5 BNBs, so you will receive 5 times more tokens

![](https://3431135529-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MYhYcw9WN6xTQqOD_-A%2F-MYhYojbuuYVwA5kmL6C%2F-MYh_H-Xrb4aWa7gFhJT%2Fimage.png?alt=media\&token=5d235490-10b7-4676-bd15-e3a3b8c754a2)

Instead of the original token you will receive a proxy-Token (for example, if you bought CAKE you will get prxCAKE tokens), which is pegged 1:1 to the original in WOWswap’s smart-contract. Proxy-Token will be converted back to the original token when you decide to close your trading position.

If the price of your token goes up, you can swap proxy-Tokens back to BNB and receive a multiplied profit. In this case a 5% fee (set by community) of your profit will go to back to the community via the insurance fund (2,5%) and token buy-back and burn 🔥 (2,5%).

![](https://3431135529-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MYhYcw9WN6xTQqOD_-A%2F-MYhYojbuuYVwA5kmL6C%2F-MYh_98CUktiKAug8xbe%2Fimage.png?alt=media\&token=c7b8184e-72ae-48ee-b5a1-38b2b7e8618c)

If the price of your token goes down below the liquidation threshold, then anyone can become a margin caller by triggering the liquidation of your trading position — in this case you will loose all collateral invested in the trade.

![](https://3431135529-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MYhYcw9WN6xTQqOD_-A%2F-MYhYojbuuYVwA5kmL6C%2F-MYh_XhugtjrkQZHRvbF%2Fimage.png?alt=media\&token=08256877-f68a-428c-9921-5a8aa052a978)

The BNB pool will still receive back borrowed funds plus the accrued interest, and the margin caller gets the rest of the funds as a reward.

## Chainlink Integration

WOWswap uses Chainlink Price Feeds as our go-to oracle mechanism to prevent on-chain actions based on manipulated price data. It ensures protection against any potential data manipulation attacks that are funded by flash loans.

WOWswap V2 allows buying a token with leverage if its AMM-based price is less than 102% of the Oracle’s price.

![](https://3431135529-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MYhYcw9WN6xTQqOD_-A%2F-MafW0UJQipPiiI0yfeE%2F-MafXoY9ZWeRlok8JEt1%2Fimage.png?alt=media\&token=5174eb2d-988e-4454-87d0-17262bbd3f85)