What Is Perpetual Protocol (PERP)?

Perpetual Protocol (PERP) is a software project that aims to create derivatives and financial tools to enable users to trade a variety of assets. The protocol is a decentralized exchange (DEX) that uses a derivative, which derives its value from another asset, called a perpetual contract. In simple terms, traders use the concept of leverage to trade with funds that they don’t own and use assets as collateral in exchanges to obtain leverage. The perpetual contract is one such leverage offering of DeFi. This perpetual contract aims to make price speculation easy for users without holding the asset. Also, the protocol seeks to offer leverage of up to ten times for traders.

As per the litepaper, the Perpetual Protocol aims to offer a perpetual contract for every asset using a virtual automated market maker (vAMM). In the DeFi ecosystem, an automated market maker (AMM) is a tool utilized to supply liquidity (token pool) without the intervention of a third party to set the price of an asset. However, Perpetual Protocol aims to virtualize AMMs, significantly expanding the application space of AMMs and enabling perpetual contracts, a derivative, to eliminate the existing drawbacks of AMMs. As a result, unlike typical AMMs, Perpetual Protocol uses a vAMM for price discovery. As the protocol uses vAMM, traders pay a lower slippage than AMMs as AMMs cap the liquidity while vAMMs set it algorithmically.  

Further, Perpetual Protocol aims to support varieties of assets such as traditional currencies, cryptocurrencies, gold, and more via perpetual contracts. The protocol uses the price feed of these underlying assets to offer support for the contracts. Importantly, as there is no swap on a vAMM, traders who arrive with an asset X leave with an asset X instead of an asset Y as in AMM. This mechanism makes the protocol operate without holding an underlying asset and use the price feed instead. 

The decentralized autonomous organization (DAO) of the Perpetual Protocol issues PERP, the native token of the protocol. This ERC20-standard token is primarily a utility token for the protocol, designed to facilitate and incentivize the governance process. That is, holders of PERP tokens gain a proportional voting right according to their token holding. Besides, the protocol offers staking for the users by locking up the PERP tokens in the staking pool for a certain period of time. The protocol rewards the stakers in PERP tokens.

History of Perpetual Protocol (PERP)

Perpetual Protocol was founded in 2019 by Shao-Kang Lee. The protocol was initially known as Strike and was developed by a small group of startup entrepreneurs and software developers.  In 2020, the project shifted its focus to permanent futures and changed its name to Perpetual Protocol. The team deployed the first mainnet version of Perpetual Protocol on the xDai network in December 2020. Curie, the second version of the protocol, was released on Optimism in November 2021. 

How to Stake PERP

The purpose of staking Perpetual Protocol is to keep PERP off the market while simultaneously ensuring the demand. This purpose aims to allow the exchange to respond quickly in emergency scenarios, such as severe market movements. In order to cover any deficit, PERP tokens are sold at market. As a result, the protocol incentivizes the stakers who shoulder this risk.

Consequently, the reward scheme of PERP has two stages; stage 1 (beta) and stage 2 (yet to be launched). In the stage 1 scheme, the protocol aims to grant 150k PERP as staking rewards each week in two ways, namely, the liquid PERP rewards and the vested PERP rewards. 

Firstly, the liquid rewards are based on trading fees that the perp.exchange collects in a week. Afterward, stakers receive 50% of the trading fees in PERP equivalent to US dollars. These PERP tokens are derived from the DAO reward pool and are available for withdrawal right away. For instance, the exchange collects trading fees of 50k USDC (all trades on Perpetual Protocol settle in USDC, a stablecoin, as the exchange’s collateral is in USDC). Out of this, 50%, or 25k USDC, is taken and converted into PERP using the current exchange rate at 2,500 PERP (assuming the US dollar equivalent for PERP is $10). This sum of PERP is then distributed proportionally to stakers as liquid rewards, which can be claimed and used right away.

Secondly, the vesting PERP rewards are distributed to stakers proportionally from the weekly reward pool of 150k after reducing the liquid reward amount. Simply, of the total 150k weekly rewards, 2,500 PERP is reduced from the liquid pool according to the previous example, and 147,500 PERP is distributed to the stakers. These PERP tokens are then distributed proportionately to stakers and locked for six months to ensure that stakers are genuine traders who care about Perpetual Protocol rather than just aiming for a quick return.

How Many PERP Tokens Are Available?

The Perpetual Protocol reports a total supply of 150,000,000 PERP tokens.

How to Buy Perpetual Protocol (PERP) Tokens 

When it comes to buying PERP, you have a lot of options, including Coinbase's centralized exchange, available anywhere Coinbase's platform is available.