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What is Perpetual Protocol (PERP)?
Perpetual Protocol basic info
What Is Perpetual Protocol?
Perpetual Protocol is a decentralized exchange (DEX) launched in 2018 by Yenwen Feng and Shao-Kang Lee. It initially had the name "Strike" before rebranding to Perpetual Protocol. This platform distinguishes itself by enabling users to engage in leverage trading, short positions, and low slippage. Its foundation on the Ethereum blockchain and utilization of smart contracts for automated market makers (AMMs) positions it as a significant player in the DeFi space.
The protocol operates uniquely by employing a virtual Automated Market Maker (vAMM) system. Unlike traditional AMMs where assets are pooled, the vAMM facilitates price discovery without requiring actual asset storage, thus creating a virtual environment for trading. This innovation not only enhances the efficiency of the trading process but also aligns with the decentralized ethos of blockchain technology. Perpetual Protocol's commitment to decentralization is further evidenced by its transition towards a decentralized autonomous organization (DAO), empowering PERP token holders in governance decisions.
Resources
Official Website: https://perp.com/
How Does Perpetual Protocol Work?
Perpetual Protocol's operation hinges on two primary components: the virtual Automated Market Maker (vAMM) and an insurance fund. The vAMM, a novel variant in the AMM landscape, is designed for price discovery rather than spot exchange. It leverages mathematical functions to determine token prices, thereby eliminating the need for a traditional liquidity pool. This system is pivotal in maintaining the protocol's decentralized and efficient trading mechanism.
The protocol's structure includes a clearinghouse and a collateralization vault. The clearinghouse plays a crucial role in managing deposits from traders, recording margin amounts, and determining leverage. These deposits are then transferred to the collateralization vault, which safeguards trading positions and communicates with the vAMM for price updates. This dual-structured approach ensures a robust and secure trading environment.
Insurance funds are another critical aspect of Perpetual Protocol. They act as a safety net, protecting traders against unforeseen events or liquidations. Funded by a portion of transaction fees, these insurance funds grow with the network's usage. In scenarios where the insurance funds deplete, a smart contract mechanism kicks in to mint new PERP tokens, which are then sold for collateral, safeguarding the system's solvency.
What Is PERP Token?
PERP is the native token of Perpetual Protocol and plays a central role in its ecosystem. It has a total supply of 150,000,000 tokens. PERP is integral to the platform's governance, with plans for PERP holders to eventually assume full governance responsibilities. The token also offers staking opportunities, where stakers are rewarded with a share of the trading fees and newly minted tokens. This mechanism not only incentivizes participation but also aligns stakeholder interests with the network's growth and stability.
What Determines Perpetual Protocol’s Price?
The price of Perpetual Protocol (PERP), like many assets in the dynamic cryptocurrency market, is influenced by a confluence of factors, pivotal among them being market demand and supply dynamics. As a decentralized finance (DeFi) platform offering trading solutions, Perpetual Protocol attracts investors and traders looking for advanced leverage and trading options in the blockchain space. The level of adoption and usage of the platform directly impacts the demand for PERP tokens. When more traders utilize the platform for its leverage trading capabilities, the demand for PERP increases, potentially driving up its price. Additionally, the unique feature of no impermanent loss and up to 20x leverage on capital in a decentralized setting makes it an attractive option for DeFi enthusiasts, further influencing its market demand.
Another critical factor in determining PERP's price is the broader cryptocurrency market sentiment and trends. As with many digital assets, PERP's price is often correlated with the overall health of the crypto market, particularly the performance of major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). Bullish trends in these leading cryptocurrencies can create a positive ripple effect, boosting investor confidence in altcoins like PERP. Moreover, the platform's technical developments, governance decisions by PERP token holders, and updates to its decentralized exchange (DEX) infrastructure can significantly impact investor perception and, consequently, the token's price. In the rapidly evolving blockchain ecosystem, regulatory news and global economic factors also play a role, as they can affect investor sentiment and the attractiveness of crypto assets as investment vehicles.
For those interested in investing or trading Perpetual Protocol, one might wonder: Where to buy PERP? You can purchase PERP on leading exchanges, such as Bitget, which offers a secure and user-friendly platform for cryptocurrency enthusiasts.
PERP supply and tokenomics
Uniqueness
The goal of Perpetual Protocol is to create a perpetual contracts trading platform that anyone can use. To do that, users need to be able to trade with good liquidity and low slippage. Perpetual Protocol solves this by employing its vAMM solution. Perpetual Protocol doesn’t follow the usual order book model of centralized exchanges. Instead, traders trade against a virtual automated market maker, whose initial liquidity is set by the operator.
For instance, assume the operator sets the vAMM’s liquidity at 100 vETH to 40,000 vDAI. Someone depositing DAI to go long on ETH would tilt the price of ETH upwards and create an incentive to go short on vETH if the price is out of line with market prices. Traders going short on vETH would also deposit DAI as collateral and bring the price of vETH back to its equilibrium. Having liquidity swaps is unnecessary, as the vAMM functions as a tally of all trades and automatically finds an equilibrium in the long run. In practice, trades on Perpetual Protocol are all settled in USDC.
By using this vAMM model and building the exchange on xDai, traders are able to enjoy on-chain trading without fees and instant settlement. Furthermore, Perpetual Protocol supports gas-free deposits over 500 USDC, meaning traders are able to deposit with 0 ETH in their wallets.
Token utility
Governance $PERP tokens can be used to vote or propose new ideas to improve the protocol. Currently, critical decisions are made by the core developers to keep governance nimble in the early days of the protocol. The team has created a detailed plan to transition governance to the community as the protocol matures. Staking Token holders can lock up their $PERP for a fixed amount of time in the Staking Pool. Stakers get rewarded through staking rewards and are eligible to claim a portion of the transaction fees generated during the epoch proportional to the number of tokens staked. PERP stakers should be aware of 5 things when staking their tokens:
- Stakers must stake their tokens for a fixed amount of time. During this time, known as “epoch”, stakers are not allowed to withdraw their tokens. Each epoch lasts 7 days.
- A transaction needs to be submitted if a staker wishes to withdraw their staked tokens.
- Staking rewards are time-weighted, meaning stakers are free to stake their tokens anytime during the epoch but will only receive a portion of the stake incentives.
- Transaction fees can be claimed right after the epoch, but the staking rewards are locked until the first day of the same month in the following year.
- If a staker doesn’t unstake their tokens at the end of the epoch, the tokens will automatically roll over to the following epoch.
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What is the development prospect and future value of PERP?
The market value of PERP currently stands at $47.77M, and its market ranking is #599. The value of PERP is not widely recognized by the market. When the bull market comes, the market value of PERP may have great growth potential.
As a new type of currency with innovative technology and unique use cases, PERP has broad market potential and significant room for development. The distinctiveness and appeal of PERP may attract the interest of specific groups, thereby driving up its market value.
Is PERP worth investing or holding? How to buy PERP from a crypto exchange?
How to get Perpetual Protocol through other methods？
What is Perpetual Protocol used for and how to use Perpetual Protocol?
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