What Is Perpetual Protocol – Is This Cryptocurrency Project Worth the Investment?
The crypto market has been expanding massively over the last decade or so. Investors are now getting more ways to buy and sell crypto. But the use of crypto derivatives has gained a lot of momentum. Because of this, several platforms, including both centralized and decentralized, have emerged to offer derivatives trading in crypto.
One platform that is trying to do this is the Perpetual Protocol (PERP). The platform will be the main center of attention in this review. We will begin by highlighting what it is, why it is important, and wrap up the post with details about its investment viability.
What is The Perpetual Protocol (PERP)?
In simple terms, The Perpetual Protocol is an on-chain decentralized exchange that is solely dedicated to trading perpetual contracts in crypto. The platform is designed to offer “deep liquidity”, over 20X leverage for margin trading, low fees, and fast transactions.
Also, since the perpetual protocol is a fully decentralized platform, it means that all trading is permissionless and non-custodial. This means that you are in full control of your crypto assets and no third parties are involved. But what are perpetual contracts anyway?
Well, they are actually a form of crypto derivative that works the same way as a futures contract. The main difference however is that, unlike futures that have expiry dates and settlement, perpetual contracts don’t. As such, investors can hold open perpetual contracts indefinitely for as long as they want.
Perpetual Protocol – Founders and Backers
As one of the leading DEXs for derivatives, the Perpetual protocol is backed by a respectable list of investors and founders. There are two co-founders on record. The first one is Yenwen Feng. Feng also serves as the CEO. He has extensive experience in crypto startups having been involved in the launch of companies like Cinch Network, Decore, Gamelet, and others.
The second founder is Shao-Kang Lee who alongside Feng has worked on various SaaS projects to serve the crypto market. As for backers, there is a long list of notable names. This includes CMS Holdings, Binance Labs, Lattice Capital, Divergence Ventures, Zee Prime Capital, and a few others.
Why is the Perpetual Protocol (PERP) Important?
There are so many DEXs in the crypto-verse that offer derivatives trading. But very few match up to the Perpetual Protocol. Here are some of the reasons why this project is very unique:
One of the biggest challenges for decentralized exchanges has always been liquidity. It’s the reason why transaction volumes in DEXs remain considerably low compared to highly liquid centralized platforms like Binance or Coinbase. But the Perpetual Protocol is addressing this by using automated market protocols. This deep liquidity allows orders to be filled with minimal risk of slippage.
Variety Of Tradable Assets
So, a derivative is a financial instrument whose value is determined by an underlying asset. For example, you could buy a perpetual contract on Bitcoin. The value of that contract will move based on the price of Bitcoin.
The Perpetual Protocol however provides derivatives underpinned by a huge variety of assets, including off-chain and on-chain assets. In addition to crypto, Perpetual Protocol also offers synthetics on commodities like gold, oil, and fiat currency pairs. This makes it appealing to a broader base of traders.
Besides, the Perpetual protocol also offers what it calls multi-asset collateral. In essence, the feature allows traders to open several derivative positions using the account balance as part of the common pool collateral. This allows more versatility in trading.
Leverage is very crucial in derivatives trading. It allows users to enter large positions using a relatively small amount of money. While this increases the chances of rapid losses, it also means that profits can be highly maximized. The perpetual protocol offers up to 20X in leverage for margin trading on perpetual contracts. This is one of the highs of any DEX.
Create Your Own Perpetual Markets
The Perpetual protocol is also empowering users to create their perpetual markets. This is mostly done using oracles from Chainlink and Uniswap. But still, it is one of the perks that allow PERP holders to benefit even further from the platform. Also, please note the creation of perpetual markets is fully permissionless and is open to all holders of the PERP token.
How to Invest in The Perpetual Protocol (PERP)?
Well, the Perpetual Protocol gives you several ways to make money, including earning yields by providing liquidity to the DEX. But the best way to invest long-term would be to buy into PERP, its native governance and utility token. Let’s talk more about it below.
PEPR Token – Tokenomics
The total PERP supply stands at 150, 000, 000 right now. Ecosystem and rewards account for the biggest share of vesting. This includes rewards for things like staking or yield farming. As of now, 54.8% of all PERP supplies are earmarked for this.
The Perpetual protocol team on the other hand will get up to 21% of total coins while strategic investors get around 15%. Other seed investors will get 4.2% and Balancer LBP will get the remaining 5%.
PERP Vesting Schedule
As for the vesting schedule, Balancer LBP will get the allocated PERP tokens right away. There is no lock period. Team and advisors however will have to wait for a cliff period of 6 months. After that, the allocated tokens will be released at a rate of 2.1% every 3 months.
Seed and strategic investors on the other hand will get between a quarter and a fifth of the allocated token every 3 months. A small cliff period was to be implemented but it has since passed. The biggest share of PERP tokens earmarked for earnings and rewards will be released as per the votes by governance.
Why The Perpetual Protocol (PERP) Is A Decent Investment?
Ever since The Perpetual Protocol began its operations, it has facilitated over $19 billion in trade volume through its platform. This makes it one of the biggest DEXs in the world. We have also seen a sharp increase in total value locked this year. In fact, at the start of 2022, TVL stood at around $20 million. That figure has now shot up by more than 90%. According to Defilama, that TVL right now is at $36 million.
Also, The Perpetual Protocol is doing a very good job of addressing the key liquidity challenges that have hampered the growth of decentralized exchanges. This makes it a very attractive option for derivatives traders all over the world.
There is also the stellar team, all of whom have backgrounds in crypto start-ups. The fact that a notable list of venture capital firms is invested in PERP also shows the confidence around this project.
Decentralized exchanges have often been referred to as the future of crypto trading. They are far more secure and private. But liquidity challenges have made it harder for DEXs to rival centralized exchanges.
The Perpetual Protocol is hoping to address this while offering users fast and cheaper ways to trade perpetual contracts. The project has constantly updated its ecosystem to adapt to changing consumer demand. So far, it looks like it’s one of the most promising DEXs in the world. Check it out if you can.
* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.