2 Giant Exchanges Listed and Flyed: What is Perpetual Protocol?

Coinbase and Binance listed the altcoin project named Perpetual Protocol (PERP). The altcoin price rose strongly on the back of the listing news. What then is the Perpetual Protocol (PERP)? brought up the issue. we have cryptocoin.com What is Perpetual Protocol (PERP)? We sought an answer for you, let’s examine the project together…

What is Perpetual Protocol (PERP)?

Perpetual Protocol is software that attempts to incentivize a distributed network of computers to operate an exchange where users can buy and sell derivative contracts. Perpetual Protocol is a decentralized finance (DeFi) project that provides this service through scripted code without the need for financial intermediaries. Also, Perpetual Protocol is a collection of programs (smart contracts) running on the Ethereum Blockchain created to transmit and replicate services offered in derivatives markets.

This means that Perpetual Protocol users do not need to rely on a particular institution or community of people to trade, they simply need to trust that the code will be executed as it is written. Perpetual Protocol was inspired by popular decentralized exchange Uniswap and synthetic asset platform Synthetix. However, Perpetual Protocol is not intended for spot trading or exposure to real-world assets, but rather designed for leverage trading, shorts and low slip levels.

To achieve this, Perpetual Protocol uses a process that includes a virtual automatic market maker (vAMM) and collateral vault. These structures are designed to settle transactions and give anyone access to complex financial instruments such as perpetual contracts. Specifically, a perpetual contract is a derivative similar to a futures contract but without an expiration date. In traditional markets, a futures contract allows people to speculate on the price of the underlying asset up to a specific date when that asset is delivered (in kind or cash equivalent).

Relatively perpetual contracts are perpetual where the underlying assets are never delivered and investors pay certain fees to maintain their positions. Additionally, Perpetual Protocol’s native cryptocurrency, PERP, is used for staking and management. More specifically, PERP tokens are used to secure the market and influence the future direction of the project.

Perpetual Protocol Who created it?

Taiwan-based Perpetual Protocol is managed by its founders, Yenwen Feng and Shao-Kang. The project was launched with its old name “Strike” in 2018 and then launched its mainnet in December 2020 with its new nickname. In total, the project raised roughly $10.65 million in exchange for approximately 25% of the maximum supply of 150 million PERP. Additionally, the founding team and their advisors held 21% (36 million) of the supply at the token creation event.

The project was initially funded by a seed round investment fund that released 6.25 million PERP. Later in August 2020, the project distributed 22.5 million PERP in a private round led by Multicoin Capital, along with others, including Alameda Research and Three Arrows Capital. The following month, the project went public with a liquidity mining campaign on Balancer, releasing seven and a half million PERP into a boot pool. Perpetual Protocol is currently controlled by the core development team as it remains in the early stages of the project as they plan to transfer management of the protocol to the community.

Key features of Perpetual Protocol

• Perpetual contract with 20x leverage: Traders can trade with up to 20x short or long leverage, transparent fees and 24/7 guaranteed has liquidity.
• Guaranteed liquidity provided by vAMM: Every asset can be backed by a perpetual contract on the Perpetual Protocol. Gold, fiat, BTC, BCH, ETH, ERC-20s, XRP, EOS, LTC, ZEC, XMR and more: Perpetual Protocol can support them all. All Perpetual Protocol requires is a price feed for the underlying asset from an oracle.
• Zero temporary loss due to fundamental price fluctuation: Unlike popular DeFi protocols that use AMMs such as Uniswap and Balancer, stakers on Perpetual Protocol are not affected by permanent losses caused by price fluctuation.

How does the Perpetual Protocol work?

The Perpetual Protocol was designed to facilitate the buying and selling of perpetual contracts, reflecting traditional exchange. It does this by creating a new version of the Automated Market Maker (AMM), a technique that uses a mathematical function to determine the price of an asset and facilitate the exchange of two or more assets.

What is a Virtual Automatic Market Maker (vAMM)?

In the most common AMM setups, users deposit their crypto assets into liquidity pools representing specific trading pairs. Users who trade against assets in the pool then pay a prorated fee to all liquidity providers based on their contribution to the pool. In this setup, DeFi protocol providers and investors both set the price for each pair and facilitate the actual exchange of assets.

In contrast, Perpetual Protocol’s vAMM is designed for price discovery only, not spot exchange. While it uses the same mathematical function as other DeFi projects like Uniswap to set prices, there are no actual crypto assets stored within the vAMM. This is why it is called the “virtual” Automated Market Maker.

In practice, Perpetual Protocol maintains smart contracts that act as a ‘Clearing House’ and ‘Margin Vault’ to leverage both long and short trades. The Clearing House accepts initial deposits from investors and records the nature of their positions (margin amount, direction and leverage). The Clearing House then sends the deposits to the ‘Margin Vault’ which helps to stop the reversal and secure the trading positions and notifies vAMM to update the prices.

Conclusion

What is Perpetual Protocol (PERP)? We searched for an answer for you. However, it should be noted that investing in altcoin projects is risky. For this reason, we recommend that you do your own detailed research before making any cryptocurrency investment.

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