What is Perpetuals?

Perpetual contracts (perps) are leveraged derivatives that let traders go long or short on an asset with no expiration date. Price stays aligned with the underlying asset through a funding rate mechanism paid between longs and shorts.

How does Perpetuals work?

Traders deposit collateral and open leveraged positions. A funding rate paid every 8 hours incentivizes the contract price to track the spot price.

If the contract trades above spot, longs pay shorts; if below, shorts pay longs. Positions are liquidated if collateral falls below the maintenance margin.

Why does Perpetuals matter?

Perps are the most liquid instrument in crypto, enabling price discovery and hedging without the complexity of expiry dates. Decentralized perps bring this to on-chain, trustless trading.

Key features of Perpetuals

No expiration date
Funding rate keeps price aligned with spot
Leveraged long and short exposure
Automatic liquidation to ensure protocol solvency

Examples of Perpetuals

dYdX and GMX process billions in daily perpetual volume. A trader uses 2x leverage on a BTC perp without buying actual BTC.

High volatility can spike funding rates, making one side pay significant fees every 8 hours