Perpetual Protocol - Briefing Document
Event Brief Researcher
- Mitch
Copy of -- PRE-CALL CHECKLIST ---
About the event
- Project: Perpetual Protocol
- Guests: Yenwen Feng and Nick Tong
- Topic: Optimizing DeFi protocols with Layer 2
- NOT FINANCIAL ADVISE
About our guest speakers
- Guest:
- Yenwen Feng
- Brief overview on guest background:
- Co-founder
- Topic: Brief one line intro about concept to be explored.
- Perpetual Protocol
- short guest bio.
- Background in engineering
- Experience in fintech, gaming, social apps
- Fell down crypto rabbit-hole in 2017
- Was enlightened by Cryptokitties and found an opportunity to do derivatives on top of any token
- noteworthy achievements
- Decore - Crypto accounting SAAS
- Nick Tong
- Brief overview on guest background:
- Head of Strategy
- Topic: Brief one line intro about concept to be explored.
- Perpetual Protocol
- short guest bio.
- University of Sydney (2008-2012)
- CEO & Co-founder at Edisse
- Head of Product at Lumi Finance
- noteworthy achievements
About the project
- What is Perpetual Protocol?
- What are perpetuals?
- What is the general positioning of the project?
- On-chain DEX with highly efficient liquidity provisioning and up to 10x leverage for makers and takers.
- What are some of the benefits and risks of leverage trading?
- What makes Perpetual Protocol different from others in the web3 space? Unique differentiators?
- What is a Virtual Automated Market Maker (vAMM)?
- Walk us through Perpetual Protocol
- as a trading platform (perpetuals, derivatives)
- As a liquidity mining platform
- PERP token
- Results of the product so far.
- Fees Collected: $30,239,785
- Trade Volume: $30,273.780,163
- Number of Trades: $6,038,984
- How is Perpetual Protocol benefiting the web3 community? Accessibility, ease of use, incentives and rewards.
- "lowering barriers, making advanced trading available to everyone". What does this mean for the average DeFi user?
- Saving gas fees
- L2 scaling solutions.
- Fast transactions, with minimal fees.
- What blockchains does Perpetual Protocol run on?
- Ethereum, xDai, Optimism?
- How does using Layer2 improve the web3 experience?
- Intro Curie v2
About the ecosystem
- How is Perpetual Protocol contributing to the evolution and adoption of web3?
- Layer2, scalability
- What are some web3 projects/tools that the project integrates to create a more robust ecosystem?
- Partners
- Multiple frontends/UI support
- What can we expect from Perpetual Protocol in the future?
Anything else?
Detail the problems this product is trying to solve
- what do people need to stop doing?
- Trading spot if they are educated on derivatives/perpetuals
- Trading minimal assets and taking on low levels of leverage
- why should they stop doing it?
- returns on perpetuals are much higher
- Traders can open long or short positions and trade with up to 10x leverage
- list an example of the problem
- Investor wants to lever up and trade derivatives for cryptos but can't due to the protocol's capabilities.
- Perpetual Contracts have no expiration date nor leverage limits till 10x leverage is reached - enabling traders to gain more earning potential in certain market conditions.
- how does the product improve or fix this
- Increases the number of trading assets
- integrates L2 scaling solutions to provide fast transactions with minimal fees.
- Secure: open-source and third-party audits by Consensys and Peckshield.
How the product works
- basic information about the product
- decentralized derivative protocol built to trade perpetual contracts for every asset powered by a Virtual Automated Market Maker (vAMM).
- perpetual contracts don't have an expiry date and can be traded for an infinite amount of time.
- Key Features:
- Zero Impermanent loss
- Guaranteed Liquidity provided by vAMM
- details of product stemming off high level overview
- PERP's core innovation is the vAMM:
- It's a constant product (x*y=k) AMM that does not store liquidity in liquidity pools.
- trade collateral is stored in a smart contract (vault)
- Every time a trade is made, the vAMM calculates the entry or exit price
- Leverage
- Traders use leverage by backing a position with a margin - up to 20x leverage
- Liquidation
- The exchange enforces a minimum ratio between the position's value and the margin, called a maintenance margin - 6.25% on Perpetual Protocol
- Margin Ratio
- Liquidation is determined based on your position's margin ratio.
- If the margin ratio falls to 6.25%, your position may be liquidated.
- Funding Payments
- Funding payments act to converge the mark price (the price on perpetual protocol) and the index price (the average price from major exchanges)
- Uses Chainlink for the index price. Other oracles will be added as needed.
- results of the product so far
- Fees Collected: $30,239,785
- Trade Volume: $30,273.780,163
- Number of Trades: $6,038,984
Value proposition
- Uses PERP token - can stake the token to earn rewards
- PERP governance voting
- Overview on other products in the space that also solve this problem and how their solutions differ:
- Synthetix: Trades synthetic assets
- Differences: Synthetix uses Oracles instead of a constant-product curve. Traders can place any size orders without slippage.
- Futureswap: Margin Trading
- Differences: Futureswap, open interest is capped by the size of the liquidity pool. Perp.fi has no cap on open interest.
- dYdX: Trades Perpetuals
- Differences: dydx has higher throughput and no slippage, but in cases of low liquidity - positions are auto deleveraged
- why should I use this product over the other products
- Perp.fi's exchange model does not use liquidity or liquidity providers
- Uses concentrated liquidity similar to Uniswap
- Perp.fi is 100% AMM based; there is no order book
Practical applications of product:
- detail current functionality of project, where it is deployed, TVL, audited?
- 🎉 perp v2 Curie is live on optimism 🥳 🎉
- TVL: $14,315,676
- Audited: Consensys and PeckShielf
- highlight current upgrades soon to be released
- speculate future use cases
- ????
- outline steps for a beginner to get started
- Set up a Metamask wallet (support for more wallets coming soon...)
- $USDC on Ethereum
- Deposit USDC and start trading!
- best case scenario of project
- Becomes the #1 perpetual/derivative platform for traders
Risks
- detail risks associated with project.
- Lots of competition
- Price appreciation for PERP is largely tied to network usage, tied to overall DeFi usage.
- A smart contract bug or exploit may compromise the protocol.
- worst case scenario example
- Daily Trading Volume has decreased drastically since May and June. Without high levels of volume, PERP may see decreased growth.
- general risks in the industry
- Lots of competition
- Regulatory pressure from governments
Roadmap/future applications
- technical updates
- Problem with v1:
- Insurance fund takes on the risk
- Used x*y=k pricing model
- Solution with v2:
- Introduce liquidity providers. Concentrated Liquidity reduces slippage and protects both sides from price volatility risk.
- Uses UniswapV3 pricing model
- Curie: Perpetual Protocol v2 is rolled out over four phases:
- v2.0 testnet
- v2.1: Mainnet Launch with Uniswap v3 Concentrated Liquidity and market makers on Optimism
- v2.2: Limit orders and liquidity mining for PERP stakers
- v2.3: Multi-collateral assets beyond USDC
- v2.4: Permissionless, private market creation via Uniswap v3 pools. (Important step for Perp.fi)
- community updates or changes
- Solid community around this project
- Need more information on the specifics of updates or changes.
References
- Website: https://perp.fi/
- Docs: https://docs.perp.fi/
- Twitter: https://twitter.com/perpprotocol
- Discord: https://discord.gg/mYKKRTn
- Telegram: https://t.me/perpetualprotocol
- Newsletter: https://perpetualprotocol.substack.com/
- Dune Analytics: https://dune.xyz/yenwen/perpetual-protocol_2
Sources
- https://medium.com/perpetual-protocol/perpetual-protocol-v2-is-live-on-optimism-mainnet-5b9520bc02a2 - 🎉medium