Introducing Perpetual Protocol V2 — “Curie”

Perpetual Protocol
Jun 30 · 6 min read

Release highlights

  • Scaling and UX enhancements
  • Cross margin & multi-collateral
  • Efficient, flexible liquidity
  • Path to permissionless markets

Perpetual Protocol v1 was launched in December 2020, pioneering the virtual market maker model. In less than 7 months, the protocol has facilitated over $19bn in trading volume, making Perpetual Protocol the top decentralized derivatives exchange in the world.

Today, we are excited to announce Curie, version 2 of Perpetual Protocol.

Overview

  • Next-gen DeFi UX
    Curie will launch on Arbitrum, giving users a greatly enhanced UX with fast, cheap and reliable trading. It will launch with cross-margin collateral management, and support for multiple collateral types will follow.
  • Concentrated liquidity
    Curie leverages Uniswap v3 as the execution layer for providing perpetual swaps with highly efficient concentrated liquidity. For makers, our upgraded vAMM will mint virtual tokens (v-tokens) that are placed in Uniswap v3 pools to provide liquidity. For traders, our vAMM will mint v-tokens used for buying and selling using these Uniswap pools.
  • Permissionless market creation
    Curie will empower everyone to create perpetual markets using Uniswap and Chainlink oracles, while greatly expanding the options and benefits available to PERP stakers.

Concentrated Liquidity

In Perpetual Protocol v1, liquidity is spread thinly across all price ranges, resulting in higher slippage for large trades.

The most exciting innovation in Curie is combining Perpetual Protocol’s vAMM model with Uniswap v3 as the execution layer — the outcome is drastically improved capital efficiency for the protocol. This innovation brings the efficiency of Uniswap v3 to Perpetual Protocol, as well as opening the way for further ecosystem integrations thanks to a high degree of composability, such as with 3rd party market making strategy providers.

Another exciting aspect of the Curie upgrade is an all-new class of liquidity provisioning: Leveraged Liquidity Provision. As a maker on Perpetual Protocol, in addition to earning protocol fees, you will be able to apply leverage to your liquidity, opening the door to an exciting range of new LP strategies.

As shown in the graphic above, makers deposit USDC on Perpetual Protocol, and can instruct the clearing house to mint vUSDC with leverage up to 10x (the protocol supports higher leverage, which can be increased via governance).

In other words, depositing 100 USDC will let you create up to 1000 vUSDC tokens. These v-tokens can then be deployed into Uniswap v3 pools created by the protocol. For example, 1000 vUSDC could be deployed as 0.25 vETH and 500 vUSDC (assuming an ETH price of $2000). Makers also choose a price range for their liquidity according to the Uniswap v3 LP model. In this case, the maker has deployed liquidity with 10x leverage.

For traders, while the trading process remains unchanged, trades are now executed on Uniswap using v-tokens. Under the hood, you deposit USDC for trading, and can trade using up to 10x that amount in vUSDC tokens. For example, if you deposit 10 USDC and place a long order with 10x leverage, the clearing house will mint 100 vUSDC and use those tokens to buy vETH from the vUSDC-vETH Uniswap v3 pool, resulting in an effective leverage of 10x.

Cross-margin Mode + Multi-assets Collateral

For traders, Curie uses cross-margin, allowing traders to open multiple positions using their account balance as a common pool of collateral.

At a later date, traders will also be able to use multiple assets as collateral. The design is similar to FTX’s non-USD collateral design and it gives traders more flexibility to express themselves in the market. For instance, trader Alice can use ETH as the collateral to open a long position on the BTC-USDC perpetual market.

Two scenarios can result based on the price movement:

  • If BTC’s price increases against USD:
    She receives profits in USDC after closing her position.
  • If BTC’s price decreases against USD:
    She receives less ETH in return after closing her position.

Permissionless Market Creation

Curie will support Uniswap v3 TWAP and Chainlink oracles to determine index prices, meaning that if an asset has a price feed on either one of these platforms, anyone can create a perpetual market for that asset. In this future update, the protocol will no longer be limited to crypto — forex, commodities, stocks — you name it, we can trade it.

The permissionless market creation design was developed in collaboration with Delphi Digital, a premier research firm that provides institutional-grade bespoke research solutions.

Tokenomics Update

This update also brings tokenomics changes.

In Curie, instead of only relying on transaction fees from public markets, i.e., markets deployed by the Perpetual DAO, fees can be generated from three different sources:

  • Transaction fees from public markets
  • Transaction fees from private markets, i.e., markets created by users
  • Rehypothecation: Funds in the insurance fund may be utilised in low risk interest protocols to increase staker earnings

Each one of these revenue sources is expected to grow as more markets are added to the protocol. Combined with higher fee income from leveraged liquidity provisioning and fees from private markets, we expect total fees will be several times higher than what Perpetual Protocol v1 could achieve.

The introduction of makers also provides a new potential revenue stream for token holders interested in single-asset LP strategies. Perpetual Protocol will partner with 3rd party strategy providers to help makers deploy liquidity easily and efficiently.

Check the diagram below to understand the flow of trading fees for public markets.

When determining how to split trading fees, there is a balance to maintain between the stakers, the Insurance Fund, and makers. After the release of Curie, we will be able to make an informed decision by looking at the real world trading numbers and determine the fee percentages in the chart above.

The treasury allowance in the chart would initially be zero. Once the project transitions fully to a DAO governance model, funds can be diverted to the treasury to fund further protocol development, marketing and so on.

Curie is designed to fix sustainability issues with protocol v1 that prevent trading fees from being shared with stakers. Fee sharing amounts will be put to a governance vote, but it is anticipated that stability improvements in Curie will allow fees to begin sharing as soon as modeling and approval from governance are completed.

Join our Community

The Curie update is a huge milestone for Perpetual Protocol, and we welcome all the feedback from the Community.

On 2021/7/2 (Fri.) at 9 AM UTC, we will host an AMA on Youtube to answer questions and discuss Curie. You can click here to add this event to your calendar or bookmark this link to the AMA.

If you can’t attend the call, questions can be submitted in advance on our #community-call-questions Discord channel.

Join or follow any one of our communities to stay updated:

Perpetual Protocol Team

Perpetual Protocol

Decentralized Perpetual Contract for Every Asset