For market makers and traders who adopt DEX (based on AMM model), impermanence loss and high slip point are inevitable pain points. DEX, which appeared after Uniswap, therefore took solving these two problems as the main breakthrough.
At present, most DEX attempts to reduce impermanence loss and slide point by introducing prediction machines. From the results, it can't be proved that the problem can be completely solved only by the prediction machine-once the hacker attacks or the prediction machine fails, the problem still exists.
Is there any other way to try?
Perpetual Protocol has designed a completely different path: eliminating the long-term order (no market maker), leaving only the long-term order (trader), so as to reduce the impermanence loss and slippage from the root. At the same time, it also tries to solve the problem that has puzzled retail investors for a long time: the high Gas fee.
How to realize the free circulation of assets without market makers? How to reduce Gas fee. Mars finance APP takes you to know the Perpetual Protocol, which is sought after by Multicoin Capital, sanjian capital, Alameda Research and bi' an, from the perspectives of operation mechanism and development potential.
- What is the Perpetual Protocol?
Perpetual Protocol, a decentralized trading platform for perpetual contracts, started its main network in mid-December last year (up to now, the transaction volume exceeded USD 1.2 billion), and supported the trading of perpetual contracts of BTC and ETH, with the highest leverage ratio of 12 times. It is called the combination of Uniswap and BitMEX.
As we all know, Uniswap is the leading spot trading platform in DEX market, while BitMEX is the pioneer of the sustainable contract track in CEX market. Is Perpetual defined as the combination of Uniswap and BitMEX because the former is in a decentralized world and mainly provides sustainable contract trading services?
Obviously not. Then how should we correctly understand the saying "Uniswap+BitMEX=Perpetual"?
Obviously, the definition of Perpetual by BitMEX is mainly because it is one of the few trading platforms for perpetual contracts in the DeFi market. The reason for being labeled as Uniswap is that Perpetual designed vAMM (Virtual Automatic Market Maker) model, which tries to solve the long-criticized problems of impermanence loss and high slip point of AMM on the basis of learning from AMM which is ignited by Uniswap, and this has become its biggest highlight.
To understand Perpetual, we have to mention vAMM.
Second, vAMM (virtual automatic market maker)
As we know, last summer, the success of Uniswap pushed AMM (Automatic Market Maker) to a new height, and most of the DEX that appeared afterwards also used the constant function of x * y = k (constant product market maker, one of AMM modes) to exchange tokens.
Compared with AMM, vAMM designed by Perpetual is called virtual automatic market maker. Although this model adopts the same constant product formula as Uniswap, they are essentially different:
vAMM itself does not store the real fund pool (K), but the real assets are actually stored in the smart contract vault, which manages all the collateral supporting vAMM.
vAMM is essentially equivalent to the price discovery mechanism and is not used for spot trading.
In the constant product formula (x*y=k) designed by Perpetual, the value of k is manually set and adjusted by the development team, and then set by the algorithm.
Unlike traditional AMM, which requires liquidity providers to provide liquidity for the fund pool, the liquidity of vAMM comes directly from the intelligent contract vault outside vAMM. Therefore, the Perpetual team pointed out that vAMM can provide liquidity to each other without liquidity providers.
"Since there is no need for liquidity providers in vAMM, there is no problem of impermanence loss from the beginning".
In the traditional AMM mode, when the size of the fund pool increases (the higher the K value), the smaller the sliding point faced by traders. In this respect, vAMM is similar to AMM: the higher the K value, the lower the slip point. However, the value of k in vAMM is virtual, which is manually set by the development team at the start, and can be adjusted by algorithm according to the transaction volume, open interest rate, financing interest rate and other market data at the later stage.