Perpetual Protocol (Symbol: PERP) is a decentralized perpetual contract protocol for every asset, made possible by a Virtual Automated Market Maker (referred to as a “vAMM” or “vAMMs”). The PERP token governs the protocol and is also staked on the platform.
A perpetual contract is a derivative similar to a futures contract but without an expiration date. For conventional futures contracts, the contract’s price will gradually converge with the underlying asset’s spot market price as the expiration date approaches. Perpetual contracts are futures contracts that automatically roll every few hours. In order to keep the perpetual contract in line with the underlying index, one side pays the other the funding rate. The funding rate effectively implies a cost of capital and the steepness of the futures curve.
Like Uniswap, traders can trade with Perpetual's vAMMs directly without the need for counter parties. The vAMMs provide guaranteed on-chain liquidity with predictable pricing set by constant product curves. The vAMMs are also designed to be market neutral and fully collateralized.
$PERP holders can become stakers by staking the PERP tokens in their possession to Staking Pool. In return, stakers are rewarded with a portion of the transaction fees in stablecoins plus the staking rewards in PERP.
In August 2020, Perpetual Protocol announced that they had raised $1.8 million in a strategic round led by Multicoin Capital with participation from Zee Prime Capital, Three Arrows Capital, CMS Holdings, LLC., and Alameda Research who is strategically partnered with FTX. Other strategic angels include Binance Labs, Andrew Kang, George Lambeth, Calvin Liu, Tony Sheng, Alex Pack, and Regan Bozman.
Virtual AMMs (vAMMs)
Contrary to the applications that utilize automated market makers (AMMs) for both token swaps and price discovery such as Uniswap and Balancer, Perpetual Protocol uses the constant-product curve in their AMMs solely for price discovery so that they can handle leverage and short.
Due to this difference, the developers renamed their AMMs as "Virtual AMMs".
PERP token is Perpetual Protocol’s ERC-20 native token, powering the whole system in two ways: staking and governance. The total PERP token supply is set at 150,000,000. The token supply can be inflated via two mechanisms, both of which have a low chance of occurring: governance may decide to mint more tokens; the insurance fund is exhausted and PERP are minted to make up the shortfall.
PERP Token Distribution
- Balancer Liquidity Bootstrapping Pool (LBP): 7,500,000 PERP tokens (5.0%) for Balancer LBP token launch (held in September 2020).
- Seed investors: 6,250,000 PERP tokens (4.2%) for Binance Labs, invested in early protocol development in 2018.
- Strategic investors: 22,500,000 PERP tokens (15%) for strategic investors, to the extent they fully exercise their rights to purchase PERP tokens.
- Team and advisors: 36,000,000 PERP tokens (21%) for the team that helped launch the initial version of Perpetual Protocol and other initiatives beneficial to the protocol.
- Ecosystem and rewards: 77,750,000 PERP tokens (54.8%) for ecosystem and rewards, which will benefit traders, stakers, and community developers who participate in the Perpetual Protocol ecosystem.
Once PERP token holders have staked their tokens, they can then use their staked PERP tokens to vote on or propose new ideas that can be used to improve the Perpetual Protocol. Before the on-chain governance voting platform is ready for PERP token holders, core protocol contributors will guide critical decisions. We think it’s important to keep governance nimble in the early days of the Perpetual Protocol. You can learn more about the governance plan here
Staking: PERP holders can lock-up, or “stake,” their PERP for a fixed amount of time to the Staking Pool. In return, stakers are rewarded with staking rewards. You can learn more about how staking works here
How It Works
Afinotan sends 100 USDT to the Clearing House on Perpetual Protocol and specifies to use that amount as the margin to open a 2x leveraged long position. The primary function of the Clearing House is to record the position ownership and its related information, including initial margin, level of leverage, and its direction.
Step 2 and 3
Upon receiving the 100 USDT, the Clearing House deposits the incoming 100 USDT to the Vault. After that, Perpetual Protocol updates the vAMM by the margin amount, position side, and the level of leverage. In contrast to the applications that utilize automated market makers (AMMs) to facilitate token swaps like Uniswap and Balancer, Perpetual Protocol only uses the constant-product curve in their AMMs for price discovery so that they can handle leverage and shorting.
The deposited tokens from traders aren't stored inside Perpetual Protocol's AMMs, whereas on Uniswap, the deposited tokens from traders are stored inside their AMMs. Due to this difference, the team named their AMMs "Virtual AMMs" because there is no actual token swapping involved in the AMMs.
Step 4and 5
Assume Afinotan has 100 ETH/USDT and 10,000 USDT in the vAMM as its initial state. Considering Afinotan uses 100 USDT as the margin to open a 2x leveraged long position, which means that the amount of USDT in the vAMMs will become 10,200 (10,000+1002), the amount of ETH/USDT will become 98.0392156862745 (10010,000/10,200), which is calculated by the constant-product curve, and the amount of ETH/USDT that Afinotan gets is 1.9607843137255 (100-98.0392156862745), which is recorded in the Clearing House.
Following Afinotan, Bob also uses 100 USDT as the margin to open a long position with 2x leverage. In return, he receives 1.8853695324283 long positions (98.0392156862745-96.1538461538461) from the vAMM with the price calculated by the constant-product curve. After Bob gets his long position, Afinotan decides to close his position and realizes a profit of 7.84012298 USDT (10400 - 96.1538461538461*10,400/(96.1538461538461+1.9607843137255)- 200).
- Yenwen Feng - Co-founder
- Shao-Kang Lee - Co-founder
- Yuren Ju - Senior Software Engineer
- Kimi Wu - Blockchain Developer
- Weiting Chen - Growth Manager
- Alameda Research
- Binance Labs
- Divergence Ventures
- Three Arrows Capital
- Mechanism Capital
- Multicoin Capital
- Zee Prime Capital
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