Perpetual Protocol - Research Copy

Event Brief Researcher

Mitch

Copy of -- PRE-CALL CHECKLIST ---

Topic, Project, and Guest

Guest: Yenwen
- very 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 e-commerce
- Fell down crypto rabbit-hole in 2018
- Was enlightened by Cryptokitties and found an opportunity to do derivatives on top of any token
- noteworthy achievements
  - ????
Guest: Nick
- very Brief overview on guest background:
  - Head of Strategy & Co-founder
- 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
  - ????

Detail the problems this product is trying to solve

what do people need to stop doing?
1. Trading spot if they are educated on derivatives/perpetuals
2. Trading minimal assets and taking on low levels of leverage
why should they stop doing it?
1. returns on perpetuals are much higher
2. Traders can open long or short positions and trade with up to 20x leverage
list an example of the problem
1. Investor wants to trade derivatives for cryptocurrency, gold, and other commodities but can't due to the protocol's capabilities. Additionally, an investor/user does not get his/her desired returns trading spot. Perpetual Contracts have no expiration date nor leverage limits till 20x 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
- Low fee structure by integrating 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.
- In addition to perpetuals, the project aims to create novel financial instruments by democratizing Futures and other crypto-asset derivatives.
- Key Features:
  - Zero Impermanent loss
  - Guaranted Liquidity provided by vAMM
details of product stemming off high level overview
1. PERP's core innovation is the vAMM:
  - It's a constant product (x*y=k) AMM that does not store liquidity in liquidity pools.
  - Instead, trade collateral is stored in a smart contract that emulates a vault and manages all collateral.
  - 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.
2. Leverage
  - Traders use leverage by backing a position with a margin - up to 20x leverage
3. Liquidation
  - The exchange enforces a minimum ratio between the position's value and the margin, called a maintenance margin - 6.25% on Perpetual Protocol
4. 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.
5. 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 - stake the token to earn fees, staking locks for 2 weeks, rewards are locked for 6 months, rewards paid in PERP and USDC.
PERP governance voting - grants initiatives voted on by PERP, 50k USD voting, token listing is voted on by community, token swaps voted on by PERP holders.
Overview on other products in the space that also solve this problem and how their solutions differ:
- Synthetix: Trades synthetic assets
  - Bad Differences: Uses Oracles instead of constant-product curve. Traders can place any size orders without slippage.
  - Good Differences:
    - Stakers on PERP are not exposed to impermanent loss
    - PERP uses TWAP, which minimizes the risk of price manipulation and adds another layer defense against manipulation.
- Futureswap: Margin Trading
  - Bad Differences:
  - Good Differences:
    - On Futureswap, open interest is capped by the size of the liquidity pool. Perp.fi has no cap on open interest.
    - Perp.fi's underlying assets are not limited to ERC-20. Futureswap's are limited to ERC-20.
- dYdX: Trades Perpetuals
  - Bad Differences:
    - dydx has higher throughput and no slippage
  - Good Differences:
    - When there is low liquidity on dydx, the psoitions are auto-deleveraged much more easily than those on centralized exchanges. Perp.fi has no auto-deleveraging.
  - Neutral Differences:
    - dydx has an off-chain matching engine. Perp.fi is 100% on-chain AMM