Perpetual Protocol
Perpetual Protocol is an on-chain perpetual futures DEX (Decentralized Exchange) with very deep liquidity and builder-ready composability.
What is Perpetual Protocol?
Launched in December 2020, Perpetual Protocol is an open source software project founded by Taiwanese entrepreneurs Yenwen Feng and Shao Kang-Lee that is building the future of on-chain derivatives.
Perpetual Protocol permissionlessly builds on top of Uniswap v3 to offer decentralized trading of perpetual swaps, which is facilitated by concentrated liquidity and offers up to 10x leverage for makers and traders. With a total of 17 different markets to trade, including BTC, ETH, DOGE, APE and more, Perpetual Protocol has generated more than $15 billion in volume since inception.
Perpetual swaps are similar to futures contracts, except that they never expire and trade 24/7. A funding rate mechanism is used to keep the price of a perpetual swap as close as possible to the price of the underlying asset. The price feeds provided by oracles such as Chainlink are used to calculate the index price, where a 15-minute time-weighted average price is applied.
Traders can also benefit from the multi-collateral feature, where USDC, USDT, ETH/WETH, and OP tokens can be used as margin to open positions or provide liquidity. As a result, traders do not have to give up exposure to supported assets such as ETH to long or short any of the 17 markets available on Perpetual Protocol. However, trading fees and PnL are always denominated in USDC. A trading fee of 0.10% applies for each position that is opened or closed, and these fees accrue to LPs, vePERP holders and the DAO treasury.
Built on Optimism’s layer 2, traders benefit from cheap and fast transactions. Another key benefit of building on Optimism is composability. As a result, numerous projects have been built on top of Perpetual Protocol, using the perpetual swaps as a money lego to introduce exciting innovations.
Some examples include structured products (Brahma, DeCommas, Diamond Protocol and GalleonDAO), maker tools (DeFi Labs, PerpSim and Seedle), trading tools (Crypto N' Carry and the TradingView strategy integration) as well as metaverse integrations (Atlantis World). A comprehensive ecosystem map is shown here. A grants program is in place to fund builders who are interested in creating alternative frontends, launching structured products as well as other projects built on top of Perpetual Protocol.
To ensure the security of the protocol, several audits of Perpetual Protocol’s smart contracts have been carried out, all of which you can read for yourself here. As well as audits, there’s also a bug bounty in partnership with ImmuneFi. Deposit caps are in place as a protective measure against economic attacks and an insurance fund ensures the protocol’s resilience during extreme market conditions.
How Can I Use Perpetual Protocol?
There are several ways that you can use Perpetual Protocol: as a trader, as a maker or as a vePERP staker.
As a trader:
Traders (or takers) use the liquidity provided by makers to enter derivatives positions to profit from market movements. Traders can be categorized into three broad classes:
- Arbitrageurs, who can use Perpetual Protocol to profit from price deviations between different exchanges. Check out Perpetual Protocol’s open source arbitrage bot!
- Perpetual swaps can be used to hedge against market volatility. For example, if you own 10 ETH, you can use the ETH-USD perpetual swap to short 10 ETH and protect your portfolio from any losses.
- Speculators can also use perpetual swaps to generate profit from movements in the prices of different cryptocurrencies.
As a maker:
- Makers can place liquidity in ranges similar to Uniswap v3 to earn a share of the trading fees generated by takers.
- 80% of all trading fees generated accrue to makers.
- The Pool Party program incentivises liquidity with OP and PERP token rewards, paid out weekly proportional to the volume facilitated.
- Check out the open source maker bot to start providing liquidity!
As a vePERP staker:
- Earn real yield with rewards in USDC and vePERP from staking PERP on Optimism with Lazy River 2.0. Token holders can lock PERP for up to 52 weeks to receive vePERP at https://token.perp.com and earn a stream of passive income. Stakers can also receive vePERP rewards from the referral program. Learn how to create a referral code here.
Other than Lazy River 2.0, the referral program and Pool Party, the Perpvangelist program is another reward program open to contributors who are interested in helping to expand awareness about the project through user-generated content and translations.
More Information
To learn more about Perpetual Protocol and receive the latest updates, follow their Twitter account, join the Discord server and subscribe to their blog. More details about how the protocol works can be found in the project’s developer docs and help center.