FAQ

Perpetual Protocol

What's the goal of this project?

Our goal is to democratize Futures and other derivatives.

We have witnessed how democratizing crypto-assets can create new opportunities like fundraising (ERC-20), tokenized investment (cToken), ... etc.

We believe democratizing Futures and other derivatives can also create new opportunities. Issuing Futures used to be the job of centralized organizations with a very high entry barrier. But with Perpetual Protocol, we lower the barrier of issuing Futures by order of magnitude. Compared to centralized exchanges or other protocols like Synthetix, FutureSwap, there are several properties unique to Perpetual Protocol:

  • Stakers have no exposure to impermanent loss caused by price fluctuation, which makes the stakers much safer if the underlying price fluctuates a lot.

  • Trading volume is not bound by the fund in the Staking Pool.

  • AMM is suitable for low liquidity futures because of built-in liquidity.

  • The Oracle is not used to determine the price of trading, which minimizes the risk of price manipulation.

In the theory of disruptive innovation, a much cheaper way to reconstruct an expensive product wins and creates more use cases. This is our goal of working on Perpetual Protocol.

Where are the team based?

Our team is decentralized. Team members and advisors are across Asia, US, and EU.

Trading

What are the fees charged in Perpetual Protocolwhen trading?

0.1% Transaction Fees

50% of the transaction fees are deposited into the Insurance Fund to cover unexpected losses in Perpetual Protocol. The remaining transaction fees are shared with stakers based on the contributions to the Staking Pool.

The split between those two could be adjusted through governance to keep the protocol competitive in the market.

How could I propose a new underlying asset to be traded on Perpetual Protocol?

Please leave a message in Discord. The Perp.fi team will collect this feedback and have PERP holders vote on the assets.

Staking

Is the Staking Pool shared by all Virtual AMMs?

Yes, the Staking Pool is shared by all Virtual AMMs.

How long is the lock-up time for stakers?

Each lock-up time, or "epoch", as we call it here, lasts for 7 days. The length of the epoch can be adjusted through governance.

Token Model

What is the utility of the PERP token?

  • Staking PERP holders can stake the PERPs to the Staking Pool. In return, stakers are rewarded with a portion of the transaction fees plus the staking reward once per staking epoch (7 days).

  • Governance Perpetual Protocol is a project built on community support. Once the ecosystem has matured and we have broader token distribution, Perpetual Protocol would gradually transition into a DAO and let the community decide the future development of the protocol.

Please see PERP Tokens for more details.

How much is the staking reward if I stake PERPs?

Please see PERP Tokens for more details.

What is the initial circulation supply of PERP token?

  • Investors: (6,250,000+22,500,000) * 25% = 7,187,500

  • Balancer LBP: 7,500,000

  • Ecosystem & rewards: 7,775,000

  • Total: 7,187,500 + 7,500,000 + 7,775,000 = 22,462,500

  • Unlocked / Total = 22,462,500 / 150,000,000 = 15%

Virtual Automated Market Makers (Virtual AMMs)

Is there only one Virtual AMM shared among all the perpetual contracts on Perpetual Protocol?

No, each perpetual contract requires its own unique Virtual AMM with different settings.

Comparison

What's the main difference between Synthetix and Perp.fi?

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Perp.fi

Synthetix

Financial Instrument

Perpetual Contract

Synthetic Assets

Slippage

Slippage from constant-product curve.

No slippage because the price comes from the Oracle directly.

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πŸ˜‡: Traders can place any size of orders without slippage.

Stakers' PnL

Stakers are not exposed to impermanent loss caused by price fluctuation.

Stakers must take directional positions. (Even minting sUSD is taking directional positions)

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πŸ€”: Stakers have exposure to price fluctuation in order to earn staking rewards.

Oracle

TWAP needed at the funding time (every hour) to calculate the funding rate.

πŸ˜‡: 1) The price is used to calculate the funding rate only, which greatly minimizes the risk of price manipulation.

2) TWAP adds another layer of protection from being manipulated.

A continuous spot price feed is needed from the Oracle.

πŸ€”: The Oracle is needed for every block and used to calculate the value of positions. It has a huge risk of being hacked and Synthetix has suffered from different levels of losses.

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πŸ€”: Pricing coming from the Oracle directly making the system easier to be front-run. The prices of orders are settled 3 minutes later because of front-run protection.

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Basically, we fixed most of the Synthetix problems detailed here (front-running, skew of the debt pool, Oracle, snapshotting attack): Synthetix β€” the battlefield​

What's the main difference between Futureswap and Perpetual Protocol?

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Perp.fi

Futureswap

Financial Instrument

Perpetual Contract

Margin Trading like

Slippage

Slippage from constant-product curve.

No slippage because the price comes from the Oracle directly.

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πŸ˜‡: Traders can place any size of orders without slippage.

Open Interest

There is no cap on the open interest.

Open interest is capped by the size of the liquidity pool.

πŸ€”: This means the growth is also capped by the size of the liquidity pool.

Impermanent Losses

Stakers are not exposed to impermanent loss caused by price fluctuation.

Liquidity providers are exposed to impermanent loss.

Underlying Assets

Not limited to ERC-20 tokens.

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πŸ˜‡: The underlying assets could be BTC, XRP, ... , and even off-chain assets.

ERC-20 tokens only.

Oracle

TWAP needed at the funding time (every hour) to calculate the funding rate.

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πŸ˜‡: 1) The Oracle price is used to calculate funding rate only, which greatly minimizes the risk of price manipulation.

2) TWAP adds another layer of protection from being manipulated.

A continuous price feed is needed from the oracle.

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πŸ€”: Pricing coming from the Oracle directly makes the system easier to be front-run. The prices of orders are settled 3~10 minutes later because of front-run protection.

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What's the main difference between dYdX perpetual contract and Perpetual Protocol?

dYdX perpetual contract provides an off-chain order book with a perpetual contract.

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Perp.fi

dYdX Perpetual Contract

Liquidity

Guaranteed liquidity from the Virtual AMM (constant-product curve).

Order book model.

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πŸ˜‡: Higher throughput

πŸ€”: Need to build up liquidity from scratch.

Auto-Deleveraging

No auto-deleveraging.

Auto-deleveraging position if the counter-party gets liquidated and the system is not able to find a new counter-party.

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πŸ€”: When there is low liquidity, the positions are auto-deleveraged much more easily than those on centralized exchanges.

Token model

Native PERP tokens to incentivize stakers and traders.

None

Transaction Fees

Transaction fees are shared by stakers.

Transaction Fees are revenue for dYdX.

System Design

How do you make sure the Oracle is secured?

Perpetual Protocol uses ChainLink as the Oracle for the funding rate calculation.

Perpetual Protocol only requires TWAP of underlying assets at funding time (every 1 hour). This minimizes the usage of the Oracle and the risks of the price being manipulated.

Could I use the flash loan to game the system like the bZx attack?

No, Perpetual Protocol doesn't use any on-chain Oracle or on-chain DEX as the price engine. It's very difficult to use the flash loan to manipulate the price of underlying assets and profit from Perpetual within the same transaction.

The only case Perpetual Protocol makes use of on-chain Mark Price is to liquidate under-collateralized assets. In this case, because Perpetual Protocol uses both 15 mins TWAP of Mark Price and instantaneous Mark Price to calculate UnrealizedPnL, it's also very difficult to manipulate UnrealizedPnL within the same transaction. Please see Liquidation for more details.

Does Perpetual Protocol have an auto-deleveraging system which is common in most of the centralized exchanges?

No, all the positions are not going to be deleveraged in Perpetual Protocol because Virtual AMMs are the counter-party of all the trades.

Which parameters can be updated by governance voting in Perpetual Protocol?

  1. CollateralizationRatio

    The Virtual AMMs are backed by the PERPs staked as collateral at the CollateralizationRatio in the Staking Pool. It's set to 500% at the launch of Perpetual Protocol.

  2. EmergencyShutdownCollateralizationRatio

    Once the CollateralizationRatio falls below the EmergencyShutdownCollateralizationRatio, PERP holders can vote for the execution of Emergency Shutdown. It's set to 150% at the launch of Perpetual Protocol.

  3. FeeRatio

    The transaction fee percentage. This rate is charged every transaction, and the proceeds are shared by the stakers. It's set to 0.1% at the launch of Perpetual Protocol.

  4. MaintenanceMarginRequirement

    Once a position's margin ratio falls below the MaintenanceMarginRequirement, liquidators can liquidate this position. It's set to 2.5% at the launch of Perpetual Protocol. Please see Liquidation for more details.

  5. InitMarginRequirement

    The initial margin ratio required to open a new position. It's set to 5% at the launch of Perpetual Protocol. Please see Liquidation for more details.

  6. LiquidationFeeRatio

    The liquidation fee percentage. It's set to 1.25% at the launch of Perpetual Protocol. Please see Liquidation for more details.

  7. StakingEpochLength

    It's the length of the staking epoch. It's set to 7 days at the launch of Perpetual Protocol.

Is it permissionless? Can everyone assess the protocol?

Smart Contracts

The smart contracts are deployed on top of Ethereum. There is no restriction to access the smart contracts from anyone, anywhere.

Perp.fi Website

The DEX UI is hosted by the team. Because of regulation, the website banned the IPs from the US and TW. This is only limited to the website that the team hosted. Anyone can grab the open-source code and host the website on their own.