PERPUSD
Perpetual Protocol / United States dollar
crypto Composite

Perpetual protocol is a decentralized protocol to trade perpetual contracts for every asset powered by a Virtual Automated Market Maker (vAMM). The project aims to create novel financial instruments by democratizing Futures and other crypto-asset derivatives. Virtual Automated Market Maker (vAMM) Automated Market Makers (AMMs) have been among the most successful protocols since the dawn of DeFi. With most AMMs, a user can deposit two assets into a pool which are represented as x and y in the well-known constant product formula pioneered by Uniswap: x y = k The product of the available quantities of the two assets establishes the price a user would pay to swap in either direction. Given the simplicity of the formula, as the supply of one asset increases, the supply of the second asset decreases resulting in a constant value of k. Perpetual Protocol's vAMM follows a similar concept except the assets are never stored inside the AMM and the protocol uses the constant product formula solely for price discovery, not for spot trading. The "virtual" part of the name comes from the fact that there are no real assets (x and y) stored inside the vAMM. Instead, the assets are sent to the "Clearing House", a smart contract that accepts deposits and records position ownership such as initial margin, level of leverage, and the direction of the position. Upon receiving the funds, the Clearing House deposits them in the "Vault" which manages all of the collateral backing the vAMM. Funding Rate In contrast to AMMs that rely on arbitrageurs to continually execute trades to ensure asset prices in the AMM track closely the rest of the market, Perpetual's vAMM utilizes an hourly funding rate where at the top of each hour, funding payments are paid to incentivize traders to take the unpopular side of a trade to bring the price of the contract back in line with the index price. The protocol follows the following formula to compute the funding payments: funding payment = position size funding rate Where the position size is computed as the notional value of the position (number of contracts multiplied by the price of the asset) and the funding rate is calculated as the difference between the time-weighted average price (TWAP) of the contract and the TWAP of the index divided by 24. funding rate = (TWAP perpetual - TWAP index) / 24 Following the above formula, if the funding rate is positive (TWAP of the perpetual contract is greater than the TWAP of the index) the long position holders pay the funding payment to the short position holders, and vice versa if the rate is negative. The payments between longs and shorts happen at the end of each hour, which is similar to a conventional future contract expiring once per day. The team decided to source the index price from Chainlink because they believe it's the "most battle-tested Oracle solution on the market". Insurance Fund Half of the transaction fees on Perpetual Protocol are deposited into an Insurance Fund, which acts as the first line of defense when the system is hit with unexpected losses coming from losses in the liquidation process or funding payments. If the Insurance Fund is depleted, the protocol will mint new PERP tokens and immediately sell them for collateral in the Vault to keep the system solvent.