vAMM
Our exchange model is very different from other exchanges, including AMM based exchanges. Key points to begin with:
Perpetual Protocol does not use liquidity or liquidity providers.
Perpetual Protocol is 100% AMM based; there is no order book.
The on-chain price reflects trades on Perpetual Protocol - the price only moves when positions are opened or closed.
Traders use collateral (USDC) to open long or short positions in a given asset. Every time a trade is made, the vAMM calculates the entry or exit price in the same way prices are calculated on Uniswap or other AMM style exchanges.
An important difference with the vAMM is that no swap is occurring. Unlike Uniswap, for example, where traders arrive with asset A and leave with asset B, on Perpetual Protocol traders always arrive with USDC, and leave with USDC. This allows the protocol to operate without ever having held the underlying asset.