Comparison Of The Top 3 Largest Perpetual Platforms On Optimism

July 24, 2023 - Around 8 mins mins to read

The cryptocurrency market has seen a surge in innovative financial instruments tailored to cater to the diverse needs of traders. Among these instruments, perpetual contracts have garnered immense popularity. In this article, Coincu will provide an overview of the top three largest perpetual platforms in the Optimism ecosystem.

Comparison Of The Top 3 Largest Perpetual Platforms On Optimism

What is perpetual futures?

Perpetual futures, also known as perpetual contracts or crypto perpetual, are a form of financial derivative that has taken the cryptocurrency market by storm. These contracts offer traders the unique advantage of taking both long and short positions on an underlying asset without any expiration date. With a design that closely mimics the price movements of the underlying asset, perpetual contracts have become especially sought-after for trading major cryptocurrencies like Bitcoin and Ethereum.

Key Features of Perpetual Futures:

Funding Rate Mechanism: One of the most crucial elements of perpetual contracts is the funding rate mechanism. This mechanism plays a vital role in maintaining a close correlation between the perpetual contract price and the spot price of the underlying asset. The funding rate is essentially a periodic interest rate exchanged between long and short position holders. When the funding rate is positive, long position holders pay short position holders, and vice versa when it turns negative. This exchange incentivizes traders to take positions that help bring the contract price closer to the spot price, ensuring market stability.
Leverage Facility: Perpetual platforms also offer traders the option to utilize leverage, a feature that enables them to open positions significantly larger than their actual account balance. While leverage can magnify potential profits, it also exposes traders to higher liquidation risks should the market move unfavorably against their position. For instance, a trader utilizing 100x leverage can open a position worth $10,000 with a mere $100 of their own capital.

The Optimism ecosystem has witnessed substantial growth in its perpetual platforms, with three of them standing out as the largest players in the market. As these platforms continue to gain traction, they are increasingly shaping the landscape of perpetual trading within the cryptocurrency space.

Top largest perpetual platforms on the Optimism ecosystem

Perpetual Protocol

Perpetual Protocol is a cutting-edge decentralized exchange lives on Optimism, providing users with a seamless platform for decentralized perpetual contracts.

Perpetual Protocol operates as a DeFi protocol, delivering a host of services centered around perpetual futures options. Through the platform, users can enjoy cross-margin trading with leverage of up to 10 times, opening up exciting opportunities to capitalize on various popular tokens. By contributing liquidity to the pool, providers stand to gain trading fees from other users, making it a mutually beneficial ecosystem.

Security is a top priority for Perpetual Protocol, given the inherent risks in the crypto world. To safeguard its open-source code base, the platform incentivizes developers to discover bugs by offering bug bounties. This proactive approach ensures that the platform can address vulnerabilities swiftly and maintain a secure environment for its users.

At its core, Perpetual Protocol operates as software that encourages a distributed network of computers to facilitate the trading of derivative contracts. What sets it apart is that it functions without the need for traditional financial intermediaries. Instead, Perpetual Protocol relies on meticulously crafted smart contracts running on the Ethereum blockchain. This decentralized setup empowers users to engage in trading without placing trust in a central authority. All they need is confidence in the code’s ability to execute transactions as intended.

The project takes inspiration from two highly successful DeFi platforms – Uniswap and Synthetix. However, Perpetual Protocol sets itself apart by focusing on leverage trading, short positions, and minimizing slippage. Unlike Uniswap, it is not intended for spot trading or exposure to real-world assets.

Key to Perpetual Protocol’s functionality is its innovative use of a virtual automated market maker (vAMM) and collateralization vault. These essential components settle trades and offer users access to a wide array of complex financial instruments, with perpetual contracts being the flagship product.

Perpetual contracts are a type of derivative akin to futures contracts but without an expiry date. In traditional futures contracts, traders speculate on the price of an underlying asset until a predetermined future date when the asset is delivered. Perpetual contracts, on the other hand, are perpetual in nature, with no delivery of the underlying asset. Traders pay fees to maintain their positions, allowing for greater flexibility and prolonged trading opportunities.

The native cryptocurrency of Perpetual Protocol, PERP, plays a crucial role in the ecosystem. It is utilized for staking and governance, with PERP holders having the power to influence the project’s direction. By staking their tokens, users actively contribute to securing the marketplace and ensuring its smooth operation.

Pika Protocol

In a bid to spearhead the derivatives segment on the Optimism ecosystem, Pika is making significant strides in building and developing Pika Exchange. The platform has introduced a plethora of innovative features to provide users with a cutting-edge trading experience.

One of the key highlights of Pika is its unwavering focus on deep liquidity. By employing the virtual automated market maker (vAMM) model, the exchange optimizes capital efficiency and minimizes slippage, ensuring a seamless trading process even during times of high volatility.

To determine asset prices accurately, Pika Protocol has integrated Chainlink Oracles with Dynamic Pricing. This formula calculates the Trade Price as the Base Price multiplied by the Slippage, adding the Price Adjustment. This approach enhances price transparency and empowers traders with real-time, reliable market data.

Pika stands out for its versatility, enabling users to trade a wide range of crypto assets available in the market. With the vAMM model, the platform ensures that traders have access to an extensive selection of cryptocurrencies. Moreover, Pika’s long-term vision involves expanding its offerings to encompass traditional finance (TradFi) assets and indices, catering to a diverse set of investors.

Emphasizing the importance of composability in the DeFi space, Pika Protocol allows seamless integration with other DeFi protocols. This fosters the creation of profitable tools and solutions for users, enhancing the overall DeFi ecosystem.

One of the major advantages of utilizing Pika Protocol is its cost-effectiveness. As the platform is built on Optimism, transaction fees are relatively low while still inheriting the robust security and decentralization features of the Ethereum blockchain.

Pika has devised a unique liquidation mechanism, wherein the price difference between the entry and liquidation price is utilized to pay liquidators, liquidation fees, and liquidity providers. This innovative approach ensures the smooth functioning of the platform while safeguarding users’ interests.

Arbitrage mitigation is a key concern in the DeFi space, and Pika Protocol has taken inspiration from GMX to address this issue. By offering solutions to limit arbitrage opportunities by bots, Pika enhances fairness and transparency in the trading environment.

For users seeking to provide liquidity, Pika Protocol offers the Liquidity Vault feature. Liquidity providers can participate in different vaults and earn profits from transaction fees, liquidation fees, and interest on trades, creating a mutually beneficial ecosystem.

Beyond these remarkable features, Pika Protocol also supports leveraged trading, providing traders with up to 50x leverage. This feature enhances potential returns for users, making Pika a comprehensive and dynamic perpetual platform on the Optimism network.

With its relentless pursuit of innovation and user-centric approach, Pika Protocol is poised to lead the derivatives market on Optimism, driving the DeFi revolution forward and offering traders unparalleled opportunities in the crypto space.

Kwenta

Developed on the Optimism Layer 2 network by the renowned Synthetix team, Kwenta offers a wide range of derivative assets, from tokens to traditional financial instruments like Forex, gold, and silver.

At the heart of Kwenta’s functionality lies its ability to provide a diverse selection of synthetic assets, thanks to its foundation on the Synthetix protocol. The platform’s users can engage in spot swaps and perpetual futures trading, offering them a plethora of investment opportunities.

A standout feature of Kwenta is its emphasis on perpetual futures, which supports margin trading with leverage of up to 25x. Traders can choose from various order types, including market orders, limit orders, and stop market orders, granting them greater control over their trading strategies.

One of the cornerstones of Kwenta’s seamless trading experience is its integration with the Chainlink oracle, which ensures accurate and real-time price feeds for Synthetix’s synthetic assets. As a result, trades on Kwenta enjoy zero slippage, a significant advantage for traders seeking to execute precise transactions.

KWENTA, the governance token of Kwenta, plays a crucial role in incentivizing coordination and growth within the Kwenta DAO. Holders of KWENTA can actively participate in the platform’s governance decisions, shaping its future developments.

Unlike traditional exchanges that rely on order books and automated market makers (AMMs), Kwenta leverages the power of the synthetic asset protocol, Synthetix. The liquidity for Kwenta’s trades is provided by Synthetix’s Synthetic Asset Debt Pool, ensuring a robust and efficient trading environment.

Since its inception in October 2020, Kwenta has garnered a reputation for its steadfast security. With no security attacks or crisis events experienced, the platform remains a trusted destination for traders looking for a secure and reliable trading venue.

Kwenta’s commitment to security is further demonstrated through its diligent smart contract audit process. The platform’s disclosed smart contract audit report revealed a few security issues, including one high, one medium, and three low-severity concerns. However, the team promptly addressed and resolved these issues, demonstrating its dedication to maintaining a safe and robust ecosystem.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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