Perpetual Protocol PERP

What is Perpetual Protocol?

Perpetual Protocol is a decentralized perpetual futures DEX with deep liquidity and builder-ready composability that is built on Ethereum’s Layer 2 Optimism. Users can choose to open long or short positions with up to 10x leverage or provide liquidity for a variety of cryptocurrency markets.

What is the PERP token?

The PERP token is the platform’s governance token and the protocol will soon activate a new tokenomic model that enables token holders to earn a share of the platform’s fee revenues. 

PERP is currently transitioning to a vote-escrowed token model, where users can lock up their PERP for a maximum of 52 weeks to receive vePERP in return. Holding vePERP boosts your PERP rewards and increases your voting weight for governance proposals, as well as unlocking the ability to claim a share of the protocol’s trading fees in USDC. 

Token holders can also vote on the direction of the protocol’s future by modifying key features or further expanding utility for the platform’s native token. Voting power is determined by the user’s total vePERP holdings.
 

How does Perpetual Protocol work?

Perpetual Protocol’s Curie (AKA Perp v2) uses a vAMM model leveraging Uniswap v3 as the execution layer for providing perpetual swaps, offering concentrated liquidity for makers. The benefits include improved slippage and greater capital efficiency. Trades are executed against these pools of assets supplied by liquidity providers, who in turn earn a share of the fees generated.

Real assets are stored in the smart contract’s clearinghouse that manages the collateral backing the vAMM, which is denominated in USDC. Each perpetual contract has their own specific vAMM, but all of them are protected under the protocol’s insurance fund. The vAMM mints virtual tokens (or v-tokens), which are placed in Uniswap v3 pools to provide liquidity. Traders can then use this liquidity to buy or sell v-tokens to take long or short positions in a fully non-custodial manner. 

For instance, when a user deposits 1,000 USDC, their buying power is calculated as 10,000 USDC. If a user wants to go long on BTC and the price is $20,000, then they can use 10,000 vUSD tokens that they can mint to open a position of 0.50 BTC by buying 0.5 vBTC tokens from the BTC-USD pool. 

When closing the trade, the trader has to provide 0.50 vBTC back into the pool, where the profit or loss paid out in USDC is the difference between the entry price and the price at which the position is closed at. For example, if Bitcoin rises to $25,000 and the long position is closed, then the trader returns 0.50 vBTC to the pool and they’ll have realized a profit of approximately 2,500 USDC. 

As well as Uniswap v3, Chainlink oracles are another fundamental component of Perpetual Protocol that determines the index price. This also means that any asset with a Chainlink price feed can be listed on the platform as a perpetual market. In the future, Perp v2 will introduce permissionless markets. These markets will have their own isolated insurance funds, allowing anyone to create a market for perpetual future swaps for any asset that has a Chainlink price feed. 

Perpetual Protocol enjoys very low fees and fast confirmations with the use of Optimism’s optimistic rollup, as well as benefiting from Ethereum’s security. Optimistic rollups enable lower fees and greater throughput since multiple transactions are 'rolled up' into a single transaction, which is settled on the main Ethereum blockchain. The decentralized application has facilitated the greatest number of transactions out of all protocols deployed to Optimism. 

As with all forms of perpetual contract trading, funding rates and margin ratios are key aspects of Perpetual Protocol. Funding rates are settled on a block-by-block basis while margin ratios are set at 6.25% of your posted margin. This means that trades with an effective leverage of 16x will face the risk of their positions being liquidated by keeper bots. Keeper bots will earn 20% of the liquidated margin, while the rest is sent to the insurance fund. 

Currently, Perpetual Protocol supports multi-collateral with current support for three different assets: USDC, ETH/WETH, and FRAX. More assets will be added so that they can be used as margin for opening positions in the near future. There are currently 17+ different markets to trade or provide liquidity to, including BTC and ETH, as well as other popular tokens such as APE, AVAX, LINK and SOL.

How do I get PERP tokens?

PERP tokens can be obtained from cryptocurrency exchanges like Binance, FTX or Uniswap.

As part of the liquidity mining program, each market is currently allocated 5,000 PERP in weekly rewards for liquidity providers and is paid out every Monday. These rewards are paid out in proportion to the liquidity provided to a pool. For example, if the size of a pool is $1 million and a liquidity provider supplies $100,000 in assets, they’ll earn 10% of the liquidity mining rewards for that week (500 PERP).

PERP tokens can also be earned through participation in the Grants program, which involves building products on top of Perp v2 and expanding the ecosystem. All proposals go through the GrantsDAO, and if approved, builders can earn PERP tokens for their contributions to the project.