Introducing Futureswap V4
Futureswap was born in the depths of the bear market in early 2019. The concept of having perpetuals on-chain had not been explored yet. After much research and development, Futureswap V1 was launched in early 2020 and grew by over 150% per day. Next came V2, which launched in January 2021 and did over $4.2b in trading volume. Futureswap V3 was built, audited, and ready to launch in June 2021. L2 delays allowed the team to come up with a novel and significant upgrade to the protocol. The decision to build it was made. The core developers have taken many learnings from V1-V3 and applied them to this next version which is reflected in its increased leverage, capital efficiency, and utilization of existing markets.
We are excited to introduce Futureswap V4. Public testnet was released yesterday and mainnet will launch soon. It is the most competitive, flexible, and economically secure perpetual trading protocol. V4 utilizes the power of concentrated liquidity while protecting Futureswap liquidity providers from impermanent loss. V4 will enable Futureswap to become a top-performing perpetuals protocol while also being a fundamental building block for the rest of the DeFi ecosystem. It provides an exceptional trading experience, industry’s highest leverages, markets on NFTs, and other exotic instruments all while being one of the most economically sound protocols.
Harnessing Existing Liquidity
One of the key components of V4 is its ability to harness existing liquidity in all markets. This solves the chicken or the egg problem where an exchange needs to attract enough liquidity and market makers in order to start a new trading pair. By utilizing existing infrastructure and liquidity moats, Futureswap will be able to expand into far more markets, both traditional and novel, than an exchange that needs to incentivize 100% of the liquidity for each market. The first market that Futureswap will tap into for liquidity is Uniswap v3. Aggregating concentrated liquidity from multiple venues increases the depth of markets and reduces slippage, benefiting both traders and liquidity providers (LPs).
Futureswap does need its own liquidity, but the amount required is a mere fraction of what other exchanges need since the Futureswap liquidity can be leveraged up significantly. Currently, on L1 Uniswap v3, the ETH/USDC (0.05% fee) pool has $110m of concentrated liquidity. Futureswap can launch with this as one of the liquidity pools and instantly have $110m of market depth for traders. Futureswap needs its own liquidity, but even $1m would be able to facilitate trading on a liquidity pool of $110m. This would make the maximum capital efficiency of Futureswap 110x. Good for LPs.
Moon Leverage
Perpetuals are such a popular trading instrument in large part because they offer high leverage. Futureswap wanted to give users the absolute freedom to create whatever market they want without limitations. That is why V4 will allow up to 256x leverage on exchanges (note that we don’t advise this). The first exchanges will ideally have less leverage, possibly in the 20x-30x range, but this is up to the community to decide on. Have $100k and want to go long on $25.6m of ETH? We don’t recommend this, but the underlying Futureswap protocol does support it.
How can Futureswap support such high leverages when the competition is struggling to stay solvent with 10x and 25x leverage? V4 was built from the ground up with economic safety in mind. A true DeFi building block cannot have insolvency cases. The traditional insurance fund model which leads to centralization of power and potential insolvency needs to be re-examined.
Instead of having a shared insurance fund that brings significant limitations and attack scenarios unto itself, the Futureswap protocol has taken another approach that exercises ADL (auto-deleveraging) for the highest risk trades. Lower leverage trades have much less chance of receiving ADL compared to higher risk trades that will be forced closed first, usually at a much better price. This means that no insurance fund is necessary and the exchange will remain solvent in every scenario. Futureswap will continue to innovate on the insurance fund model over time.
Trade Perps on NFTs
Yes, that’s right! You can trade CryptoPunks or any other NFTs on Futureswap V4. We are excited to see where the community takes these ideas as V4 has been built to have maximum flexibility and having leverage on NFTs is just the start!
To learn more, check out our recent NFT blog post.
Superior Pricing
If you’ve been trading for any amount of time, you’ve experienced Bitmex’s or Binance’s perp markets wildly deviating from spot prices in times of volatility. These price dislocations are due to several factors, but the key one is the severe lack of a tie to the underlying asset. The funding rate attempts to keep the market in line but a few price dislocations every 8 hours is often too little too late for our fallen brethren. Liquidations do not wait for the market to become rational or to reflect the market price it is supposed to track. Futureswap V4 solves this with spot market pricing for perpetuals.
Futureswap has the most accurate market pricing, especially in volatile situations because it is inherently tied to spot. This means that if you are trying to go 30x long BTC, you will not get liquidated on Futureswap when you would have been liquidated on another perpetuals exchange because Futureswap’s mark price is the spot price. There is no need to wait 8 hours for a funding rate to attempt to make the derivative match the spot price. This is innately true with Futureswap.
Futureswap is a Composable Building Block for DeFi
We are very excited to launch Futureswap V4. Our goal has remained the same from early 2019: to provide the best, fully decentralized, perpetuals trading experience. This is being achieved by harnessing the existing liquidity of all Uniswap pools, changing the game with up to 256x leverage, exotic asset pairs such as NFTs, and ensuring that the market pricing is more fair than traditional perps. With Futureswap V4 we believe that the DeFi space will now experience not only greater perpetual liquidity, but will also have a new primitive to build innovative products benefiting the ecosystem.
Next Steps
Check out the V4 public testnet itself, the public testnet blog post, and the documentation. We welcome any and all feedback.
We’ll have more updates and additional information as we approach the mainnet launch of Futureswap V4.
Want to stay in the loop? Join us on the Futureswap community Discord and follow us on Twitter.
