Introducing PERPS: Perpetual Futures Contract Trading on BSC!
In recent weeks we have teased information to our community about a coming first for BNB Chain, and now the big moment has arrived. At Growth DeFi it is with great pleasure we can announce our Perpetual Futures Contracts trading platform will launch 14 September 2022 on perps.growthdefi.com!
This presents a whole new dynamic, offering a secure, immediate, and decentralized platform for trading in perpetuals markets. In this article we will:
- Outline the benefits that Perps offers to users
- Define “Perpetual Futures Contracts”
- Introduce PERPS
- Outline which assets can currently be traded on PERPS
- Answer user FAQs
1. What Features Make PERPS Superior to Other Perpetual Futures Platforms?
PERPS offers features that no other platform on BNB Chain offers. While ApolloX (for which PancakeSwap is just a frontend) also offers perpetual futures, let’s take a closer look on why PERPS is the superior perpetuals platform on BNB Chain.
A. No Slippage
PERPS’ major benefit lies in its slippage, because there is none! On PancakeSwap, users end can end up paying substantial amounts for slippage; the larger the transaction, the more slippage they pay. But on PERPS, a user avoids slippage because PERPS is protocol-based. See point B below for further explanation.
B. Instant Trades
Orders are not only slippage-free, but they happen instantly because it is LP/Protocol-based. ApolloX, on the other hand, is orderbook-based. That means that on PancakeSwap, if a user places an order to buy 1 BTC-PERP, then there has to be someone else to match that order on the sell side. One can see how wide the spreads currently are on PancakeSwap because of this. In our case, though, there is no slippage because PERPS acts as the broker, and users can get in and out instantly; there is no waiting for an order to execute. PERPS is a much more liquid platform and users don’t have to wait for their order to execute; it will happen instantly.
To further incentivize individuals to use PERPS, we will offer users additional perks, such as VIP levels for holding partner tokens wherein users will be offered rebates if holders of certain tokens use PERPS. PERPS will also hold trading competitions to reward users for using the platform. More details about these incentives will be announced after launch.
Growth DeFi is about innovation and filling the needs of users and protocols. It fits naturally within our core values to build a perpetual futures platform on BNB Chain that offered users features that don’t currently exist. We are excited to offer this better user experience not only to existing users, but as a vehicle to onboard new users as they discover a better way to transact and trade.
Ghost, Growth DeFi Co-Founder
2. What are Perpetual Futures Contracts?
A Futures Contract is an agreement to buy or sell an asset (such as commodities or currencies) at a predetermined price at a specified point in time know as the ‘settlement date’. Traders can thereby have exposure to the price of an asset without actually holding the underlying asset. Alternatively, users can also use leverage with BUSD to open a position. However a Perpetual Futures Contract does not have a settlement date — there is no contract expiry like in conventional futures markets — so individuals can hold positions for as long as they choose. For example, if the Chainlink price of Bitcoin is $20,000, then a user might be able to buy it at $19,940 and sell it at $20,060
The trading of contracts is based on an underlying Index Price. The contract price adjusts, on an perpetual basis, based on the price and volume of the asset in spot markets.
To make sure the price of perpetual contracts does not diverge too much from the price of the underlying asset, they operate with a ‘Funding Rate’ which applies to open positions. A positive Funding Rate means users who are ‘long’ (Contract buyers) pay users who are ‘short’ the asset (Contract sellers) and a negative rate means the opposite — shorts will pay longs. The Funding Rate is comprised of both an ‘Interest Rate’ and a ‘Premium’, which is calculated in real-time when a position is opened, modified, or closed.
The price of the perpetual futures contract will therefore continually converge with the price of the real underlying asset.
3. Trading with PERPS
Opening and Managing Positions
BUSD will be used as the primary collateral and all trades on PERPS are settled in BUSD. This process is managed via a smart contract which acts as a ‘clearing house’ for trades. When the user deposits BUSD, the smart contract mints a synthetic token representing the underlying asset being traded. The user can then enter a position on their chosen asset — with the option of applying a specified amount of leverage if they choose.
For example, if a user deposits BUSD and speculates on the price of Bitcoin (BTC-PERP) increasing, and this occurs and the user closes their position, they will end up with a higher amount of BUSD than their original deposit. Leverage is max 10x for opening a position.
Market Making and Platform Stability
Users on PERPS also have the option of being ‘Market Makers’ by providing liquidity to a Counterparty Pool on PERPS.
As market participants providing liquidity to this pool, these users then accrue trading fees whenever a trade is placed in the pool to which they have provided liquidity.
What is the purpose of the Counterparty Pool?
The purpose of the counterparty pool is to not let PERPS take as much downside risk. This way as PERPS’ surplus grows it can own an increasingly larger share of the counterparty pool, and it can do so safely (without risking PERPS’ collateralization).
The counterparty pool effectively acts as the counterparty to all the trades happening in PERPS. That means that if traders are in total net long $1m BTC-PERP then the counterparty pool will have the financial exposure of being short $1m of BTC-PERP.
As compensation for taking the other side of the trade, regardless of what it may be, the counterparty pool receives different type of fees to compensate for the risk taken and make it profitable in the long run.
All BUSD deposits in the counterparty pool are tokenized.
4. Markets available on Perps
BTC, ETH, and BNB markets will be available at launch. Later we will launch commodities, beginning with gold and silver.
5. User FAQs
How are contract prices set?
PERPS will use the prices for contract assets using decentralized Chainlink oracles. Chainlink is the leader in oracle price feeds due to their record of consistency.
What is the settlement asset?
All positions on PERPS, once exited, are settled in BUSD.
What kind of user would benefit from using PERPS?
There are two types of users we’re targeting: one are traders who would use PERPS to trade and hedge and the other are passive LPers who would deposit stables (BUSD) into the counterparty pool in order to act as market makers. They would then receive swap fees from all the trade volume happening on the platform.
Founded in 2020, Growth DeFi provides an advanced suite of products to blockchain protocols and investors, helping to increase their capital efficiency. For more info on Growth DeFi, please see our main website, or Perps. Or simply visit our Linktree, read our docs, or stop by our Telegram channel to chat with our team.