Since the launch of Perp v2, our protocol has driven the highest number of transactions and the greatest amount of perpetual swap volume on Optimism. A lot of new features were released this year that have moved Perp further along in the journey to becoming the ultimate decentralized exchange for perpetual swaps.
There are plenty of upcoming developments that will help us achieve the goal of becoming the most composable and transparent exchange for DeFi perpetuals, while also matching the features offered by centralized venues.
Let’s recap the first six months of 2022 and then look ahead at what’s coming next.
Review of Completed Milestones in H1 2022
In the short time since its inception, Perp v2 has achieved a total of $12 billion in volume from over 15,000 distinct traders, who have collectively placed more than four million trades. Volume facilitated by external liquidity providers has also grown significantly, currently accounting for 90% of the volume (up from around 60% at the start of the year).
During H1 2022, 16 new markets were listed. These listings have solidified Perp as a venue that offers traders the widest variety of long-tail crypto-assets, more so than any other derivatives DEX:
- AVAX-USD
- SOL-USD
- CRV-USD
- SAND-USD
- LINK-USD
- ATOM-USD
- ONE-USD
- NEAR-USD
- FTM-USD
- FLOW-USD
- BNB-USD
- PERP-USD
- MATIC-USD
- AAVE-USD
- APE-USD
The major developments and updates for the first half of 2022:
Market Shutdown Procedure
Centralized exchanges have a delisting process for assets, but what’s the process for a decentralized exchange like Perp? The market shutdown procedure triggers the closure of a market in the case of extreme conditions. This update was introduced in January 2022 and went into action during May to shut down the LUNA market after its price implosion.
The LUNA crash was a major stress test for Perp v2, which weathered the storm well. Just a few days prior to the shutdown of the LUNA market, trading volume reached a record high of more than $335.3 million in a single day.
Delegate Approval
Inspired by Synthetix’s SIP-14, the introduction of delegate approvals allows a wallet to give permission to another wallet to make transactions on their behalf, making it easier for other protocols to build on top of Perp by improving the composability of our clearinghouse. This update has opened up the development of automated trading strategies by other projects.
Open Source (March 2022)
We’re committed to the open source ethos in the interests of growing the builder ecosystem as well as providing full transparency to our users.
In March, the Curie contract codebase, the frontend SDK and Perp subgraph were all open sourced and made available on GitHub. Anyone is free to review our source code, check that it functions as it should, and submit improvements or optimizations.
Two trading bots (one for market making on Perp v2, another for arbitraging between DEXes and CEXes) and a liquidity vault were also open sourced for our community to use.
Multi-collateral (May 2022)
The multi-collateral release launched with ETH and WETH as new collateral types, giving traders the choice of using these crypto-assets instead of USDC to fund their positions. The major benefit for ETH holders is that they can retain their exposure while being able to trade or provide liquidity to any of the markets on Perp v2.
Following the introduction of this feature, the deposit cap for ETH was reached quickly, but it was raised to 400 ETH in July. The cap will be increased over time to accommodate more traders who want to use their ETH as collateral and as liquidity on Optimism grows.
The decentralized stablecoin FRAX was also added as a collateral type later on in June.
Advanced Order Types (July 2022)
The launch of advanced order types has been the most anticipated feature on Perp v2. Along with the multi-collateral release, limit and stop orders gives traders even more flexibility in their trading strategies.
The update introduced limit orders and stop loss limit orders, which are powered by an off-chain order book with on-chain settlement enabled by delegation. Going forward, the aim is to further decentralize the order book by integrating with other keeper networks (such as Gelato) and open source the off-chain backend system.
Pool Party: Liquidity Mining in OP Summer (July 2022)
Incentives were set in motion for liquidity providers as part of OP Summer, where you can earn boosted rewards in the form of OP tokens every week for facilitating volume!
Each market has a pool of 5,000 OP tokens to be shared amongst liquidity providers each week, where rewards are proportional to the total volume facilitated. To learn more about our Pool Party initiative, check out the announcement below:
UI/UX Improvements
The user experience is a big focus for us, with some of the main developments listed below:
- Wider support for different wallets: connect to app.perp.com with Coinbase Wallet, imToken and Torus, as well as MetaMask and WalletConnect.
- Bridge integrations: Seamlessly transfer assets to Optimism using Biconomy, Router or TransferTo.xyz, improving the onboarding process so you can quickly get started with trading or market making on Perp,
- Easy LP: in a simplified maker UI that allows liquidity providers to express bearish or bullish market views, minimize impermanent loss and earn USDC from trading fees.
Outlook for H2 2022
The upcoming features and plans expected for the second half of 2022 are outlined below:
vePERP Rollout
The initial Perp v2 tokenomics proposal, which was posted on our governance forum in April, has undergone some changes and iterations. But during August our own implementation of the veToken model will be released with vePERP on L2.
To get a first look at vePERP, check out this post.
Most of our focus in the past few months has been on vePERP, drawing inspiration from Curve’s veCRV and Frax’s veFXS. Following the launch of the locking contract, the plan is to roll out the new tokenomics over several phases. The first phase will involve replacing PERP payouts from our reward programs with vePERP, starting with the referral program.
New Liquidation Mechanism
A smart contract upgrade is planned to improve the liquidation mechanism, which moves away from market selling liquidatable positions to a position-transferring model, similar to what’s implemented in Aave or MakerDAO.
By transferring positions that are nearing bankruptcy instead of market selling them, liquidators get a discount by taking on positions very close to insolvency and liquidations no longer have an impact on the market price.
Learn more in this article by our senior software engineer Shaoku Tien:
Perpetually Optimistic
Perp v2 has facilitated almost half a million transactions since deploying on Optimism and there are 26 projects that have joined the OP ecosystem by building on top of our protocol, e.g., Brahma, Diamond Protocol, Galleon and Set Protocol. Our grants program will bring even more builders to this thriving ecosystem and we’re committed to bringing more liquidity to Optimism.
Source: optimismpbc Dune dashboard.
Partners that have launched vaults powered by Perp v2 are listed here.
We’re excited to continue our journey alongside the Optimism Collective and advance the growth of the OP ecosystem.
More Collateral Types
Following our multi-collateral release, our team has been researching and working on adding new collateral types. Ultimately, the inclusion of new assets as collateral on Perp v2 depends on how much liquidity there is on Optimism, since we’re exclusively focused on this L2.
The next asset that will be introduced as collateral is likely to be OP, adding another use case for the token and allowing OP holders to trade or provide liquidity without having to give up any price exposure!
Currently under consideration as new collateral types are PERP and WBTC, where the plan going forward will be to add any tokens that have deep liquidity on Optimism. The addition of interest-bearing tokens (for example, LP tokens like 3CRV) is also something that’s being actively explored.
USDC Fee Distribution
The ultimate goal of the vePERP rollout is to make our token a productive asset with cash flows by introducing fee sharing for token holders, as detailed in the fee distribution governance forum post. The snapshot vote passed in May, where vePERP holders are to receive 10% of the trading fees generated on Perp v2 once the insurance fund passes a certain threshold.
Fee sharing will further incentivize the locking of PERP into vePERP, along with the changes to the rewards programs mentioned earlier. The longer the lock time and the amount of tokens locked will jointly determine the share of fees earned.
With the completion of the final phase of our tokenomics, this will improve the alignment of the incentives of the different participants (traders, LPs, and vePERP holders) in our ecosystem, and help to unlock the true value of Perpetual Protocol. Before the end of the year, the final phase of vePERP will align the interests of PERP token holders with the success of the protocol, by introducing the ability to earn a sustainable source of yield from trading fees.