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Top Things You Should Know About Perpetual Protocol (PERP)

By MuyAsk | Crypto Truth Lexicon | 19 Jan 2021


Hey guys :) I’m back with another comprehensive Q&A piece, this time for the innovative new DeFi protocol inspired by Uniswap’s AMM design – Perpetual Protocol (PERP).

Perpetual Protocol is a decentralized perpetual contract protocol for every asset, be it crypto, gold, oil, you name it. It’s hot off the DeFi press and poised to make waves in this space as the traditional finance market becomes digitized.

Now, before we dive in, the following piece is similar to my latest articles on 1inch (1INCH), BadgerDAO (BADGER), and Harvest Finance (FARM), so if you haven’t already seen those, be sure to check them out as well.

Hope you enjoy!

The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:

  1. What is Perpetual Protocol?
  2. Who and When Created Perpetual Protocol?
  3. What is $PREP Token Used For?
  4. What is Virtual Automated Market Maker (vAMM)?
  5. What are the Main Features of the Perpetual Protocol Exchange?
  6. Who's Behind Perpetual Protocol?
  7. Where to Store $PERP?
  8. Where to Buy & Sell $PERP?

1. What is Perpetual Protocol?

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Perpetual Protocol website homepage

Perpetual Protocol is a decentralized perpetual contract protocol for trading derivatives for every asset via a Virtual Automated Market Maker (vAMM) – a new type of AMM pioneered by Perpetual Protocol and inspired by Uniswap and other AMMs like Curve, Balancer, and Bancor V2. 

The innovation behind Perpetual’s vAMM over other AMMs is that it doesn’t rely on liquidity providers to determine the price curve of a given market. Rather, it programmatically sets and updates the parameters of the virtual AMM to use it as a price discovery mechanism.

As such, Perpetual’s vAMM is the first virtual AMM to guarantee on-chain liquidity without market makers (liquidity providers) and can thus be used to handle leverage, short positions, and provide lower slippage compared to other AMMs.

Perpetual Protocol aims to create the world's best, most accessible, and most secure decentralized derivatives trading platform. It intends on accomplishing this goal by adopting the ‘money lego’ ethos by building upon other amazing DeFi projects and facilitating ways for future projects to build upon their work.

Also, Perpetual Protocol has a native utility token (PERP) with incentive structures to foster a vibrant and engaged community of users through staking and governance modules that power and shape the protocol. 

2. Who and When Created Perpetual Protocol?

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Perpetual Protocol founders Yenwen Feng and Shao-Kang Lee

Perpetual Protocol, formerly known as Strike Protocol, was created in December 2019 by Yenwen Feng and Shao-Kang Lee, and went live on the Ethereum mainnet on December 14, 2020. 

Perpetual Protocol was inspired by the popular AMM protocol Uniswap and derivatives protocol Synthetix, and in essence, is a combination of the merits of these two protocols. 

Feng is a serial entrepreneur who has founded multiple successful startups and companies including: Decore (stripe atlas for crypto companies), Cinch Network (a decentralized derivatives protocol), Zoo Inc (fully autonomous private workspaces & conference rooms), Cubie Messenger (a multimedia messenger app, a 500 Startups company with B5, 10M downloads), Gamelet (one of the first social app developers in Taiwan), and Willmobile (a mobile financial service for J2ME phones in Taiwan).

Lee, a close friend of Feng, is also a serial entrepreneur who has founded multiple companies with Feng including Decore, Cinch Network, and Zoo Inc. Additionally, Lee is the co-founder of POAPP, an app that transforms sketches into click-through prototypes in minutes, and he previously worked as a web and mobile engineer, iOS developer, and software engineer for various companies.

All in all, both Feng and Lee have many years of experience creating successful startups and companies out of Taiwan. As for the rest of Perpetual’s team, most of them are crypto enthusiasts originating from Taiwan, with other members from all over the world.

3. What is $PREP Token Used For?

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Perpetual Protocol $PERP token logo

The native cryptocurrency of Perpetual Protocol is $PERP – an ERC-20 token serving as the protocol’s governance and utility token. $PERP is a utility token designed to facilitate and incentivize the decentralized participation and governance of the protocol. 

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$PERP token incentive structure

$PERP Token Use Cases:

  • Staking - Protocol Incentives
  • Governance - Voting Rights 
  • Incentivization Programs - Transaction Mining, Liquidity Mining, etc.

Staking
$PERP token holders can stake (lock-up) their tokens in the Perpetual Protocol Staking Pool for a fixed amount of time (epoch) to receive $PERP staking rewards and a portion of 50% of protocol transaction fees paid out in USDC.

Staking periods (aka epochs) last for 7 days (can be adjusted through governance) and during this time, stakers cannot withdraw their tokens from the Staking Pool. Stakers can stake their $PERP at any time during an epoch and if they don’t unstake their tokens at the end of an epoch, their staked $PERP gets rolled over to the next epoch. 

Transaction fees paid out in USDC can be claimed at the end of each epoch and staking rewards for each epoch are locked for 3 to 6 months (to be confirmed upon launch of the staking pool). 

Governance
$PERP token holders who stake their tokens not only receive rewards and transaction fees, but they can also use their staked $PERP tokens to vote on or propose new ideas to improve Perpetual Protocol.

Note that the governance module will go live approximately 3 months after mainnet and it will take 3-6 months after that for the system to be finalized.

Incentivization Programs
In addition to the incentivization methods through the Staking Pool, Perpetual Protocol will implement additional programs to encourage use of their derivatives trading platform and holding of $PERP tokens. 

The first incentivization program is the Balancer LP Rewards Program – which incentivizes users to buy $PERP and stake it in the Balancer Shared Pool (BSP) to receive $PERP token rewards. 

Another incentivization program is Transaction Mining – a rewards program that aims to incentivize trading by returning a portion of trading fees to traders. This program distributes $PERP to early users of the system and thus attracts more traders to the system.

More and more $PERP incentivization programs will be implemented as time goes on.

$PERP Token Distribution

The total $PERP token supply is set at 150,000,000 with different lots of $PERP tokens unlocking and getting released into circulation at different times.

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$PERP Token Distribution

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$PERP token Release Schedule

4. What is Virtual Automated Market Maker (vAMM)

Perpetual Protocol pioneered the virtual automated market maker (vAMM) design and made several notable improvements on different aspects from AMMs like Uniswap, Curve, Balancer, Bancor, and Blackholeswap. 

While the aforementioned AMMs are focused on serving token swaps, Perpetual’s vAMMs are focused on derivatives, such as perpetual contracts. 

What are perpetual contracts, you ask?

“Perpetual contracts are derivative contracts similar to futures that have no expiration date or settlement, allowing them to be held or traded for an indefinite amount of time.” – (Source)

That said, Perpetual Protocol’s vAMMs are simply redesigned AMMs for the trading of derivative products that enable leverage and short selling. They are not designed for simple token swaps, but rather for perpetual contracts.

How is vAMM different from a regular AMM?

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Perpetual Protocol vAMM diagram

Regular AMMs like Uniswap utilize a constant function of x*y=k to conduct token swaps, with ‘k’ being the protocol’s liquidity pool. 

Perpetual Protocol’s vAMMs uses the same x*y=k constant product formula as Uniswap but instead of ‘k’ being a real liquidity pool, it’s virtualized and determined algorithmically, hence “virtual” AMM. 

Rather than rely on liquidity providers to determine the curve of a given market, Perpetual Protocol can programmatically set and update the parameters of the virtual AMM (x*y=k) and offer a competitive perpetual product for any given market at all times.

In doing this, Perpetual Protocol enables markets with no market makers while still guaranteeing on-chain liquidity. This proves to be the protocol’s true innovation as it radically lowers capital requirements and paves the way for new and emerging perpetual products in DeFi.

5. What are the Main Features of the Perpetual Protocol Exchange?

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The main features of the Perpetual Protocol Exchange include:

  • Up to 20x Leverage On-Chain Perpetual Contracts - The first and only DeFi protocol to do this.
  • Go Long or Short on Any Asset - Virtually any asset (ie. Crypto, Forex, Commodities, Stocks, Bonds, etc.) 
  • Lower Slippage than Other AMMs - Perpetual Protocol’s Virtual AMMs can set liquidity algorithmically to provide lower slippage to traders.
  • Quick Setup and Withdrawals - Connect your DeFi wallet to start trading in under a minute. Withdraw funds in seconds. 
  • All Trades are Funded and Settled via USDC - A trusted and reliable stablecoin.
  • Transparent fees - Trade with zero gas fees thanks to the xDai Network.
  • 24/7 trading with guaranteed liquidity - DeFi never sleeps and Perpetual Protocol’s liquidity is algorithmically set. 

6. Who's Behind Perpetual Protocol?

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Strategic investors backing Perpetual Protocol

Perpetual Protocol is backed by a wide range of notable investors, venture capital firms, and blockchain-related businesses. 

In August 2020, Perpetual Protocol announced a $1.8M strategic investment round led by Multicoin Capital with participation from Zee Prime Capital, Three Arrows Capital, CMS Holdings, LLC., and the firm behind FTCX, Alameda Research. 

Other strategic angel investors that have backed Perpetual Protocol include Binance Labs, Andrew Kang, George Lambeth, Calvin Liu, Tony Sheng, Alex Pack, and Regan Bozman.

All of the funds raised from these investors were used to launch the mainnet in September and to fund developers and aggressively scale the project to where it needs to be. 

Additionally, Perpetual Protocol has also shown generalized, non-financial support from notable members in the blockchain/crypto space with the most recent shill from Jeremy Allaire, CEO at Circle

Allaire’s bullish statement on Perpetual Protocol should not go unnoticed as he’s an influential individual in the global blockchain and financial technology space.

7. Where to Store $PERP?

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MetaMask wallet website homepage

Perpetual Protocol (PERP) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store PERP in any ERC-20 token supported wallet.

However, the best wallets for storing PERP are non-custodial Web3 wallets that provide seamless access to the best DeFi applications, like Perpetual Protocol, 1inch Exchange, Uniswap, etc.

That said, DeFi wallets are the best for storing PERP because the token is widely used and supported in the Ethereum-DeFi ecosystem. 

Popular Perpetual Protocol (PERP) Wallets:

  • Trust Wallet (mobile)
  • Argent (mobile)
  • Coinbase Wallet (mobile)
  • MyEtherWallet (MEW) (web)
  • Metamask (web)

In addition to the above-listed wallets, Perpetual Protocol (PERP) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.

8. Where to Buy & Sell $PERP?

Perpetual Protocol (PERP) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $PERP is through centralized and decentralized cryptocurrency exchanges.

You can buy and sell PERP with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy PERP with ETH or stablecoins.

  • 1inch Exchange - 1INCH
  • Uniswap - WETH
  • Balancer - USDC
  • MXC.com - USDT
  • Bilaxy - ETH

In addition to the exchanges listed above, 1inch (1INCH) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.

Hope you enjoyed that read :) Let me know if I have missed something in the comments.

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MuyAsk
MuyAsk

All truths are easy to understand once they are discovered; the point is to discover them


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