How Does Perp Protocol Bring Leverage Trading to Optimism?
Crypto Regulation | Smart Cities | Polkadot's Future | Web3 & VR | Crypto's Moment
GM Intels, this is your Daily Bolt briefing.
Today's briefing includes intelligence on Perp protocol, some updates on the future of Polkadot, and more.
Additionally; we recommend reviewing our latest intelligence report on Pendle, the Yield Trading platform on Arbitrum.
Now available for our agency’s premium members.
Also, be sure to check out our latest video, breaking down how exactly the FED is intervening and provisioning USD liquidity given the recent events in TradFi institutions nationally, and globally.
Over and out.
Key Discussions Happening Today
1/ The Scoop - LMAX CEO: It's time for crypto to embrace regulation
Preview: IIn this episode of The Scoop, Frank Chaparro is joined by David Mercer, CEO of LMAX group to discuss why bitcoin dominance has been increasing, post-SEN/Signet opportunities, and where markets go from here. Click here to listen to the full episode.
Length: 36 mins | OUR NOTE: 2 mins
Mercer observes a significant sell-off in bank stocks, contrasting with a small 10% bump in crypto prices.
He identifies the crisis as a tech-led bank run.
Regulators stepping in is considered a good move to protect consumers and ensure financial stability.
Crypto companies should engage with regulators, operate as legitimate businesses, and consider giving up some anonymity to support market growth.
2/ Coin Bureau - Smart Cities
Preview: In this episode, Guy talks about smart cities, who made them, WEF and more. Click here to listen to the full episode.
Length: 21 mins | OUR NOTE: 4 min
Here are some key takeaways:
Smart Cities are a technologically modern urban area that uses different types of electronic methods and censors to collect specific data.
The data is used to improve operations across the city which includes data collected from citizens, devices, buildings and assets that are processed and analyzed to monitor and manage transportation systems, power plants, utilities, water supply networks, waste, criminal investigations, schools, libraries, hospitals and other community services.
The UN’s SDGs (Sustainable Development Goals) require all 193 member countries to introduce smart cities by 2030.
3/ Polkadot Blockspace - Centric Future with Rob Habermeier
Preview: Birdo & Rob Habermeier discuss how Polkadot is addressing scalability with asynchronous backing and pay-as-you-go parachains. Click here to listen to the full episode.
Length: 48 mins | OUR NOTE: 2 mins
Here are some key takeaways:
There are two main things that need to be done which are to create more blockspace and allocate it efficiently to those who need it most.
Asynchronous backing is optimization and increasing production of the blockspaces.
Demand for projects in Polkadot is not going to be even at all times.
4/ Real Third Web Show - The Future of Web3 in VR
Preview: Ian Hambleton, Blake and Russ Harding discuss the future of Web3 in Virtual Reality and PS VR2 Launch. Click here to listen to the full episode.
Length: 71 mins | OUR NOTE: 5 min
Here are some key takeaways:
People are having divided opinions about what they think are the games that are really strong in VR (Virtual Reality).
Ian has no immediate plan to bring Web3 and VR together but is looking forward to the future.
Web3 should exist in everything. It has a benefit for all gamers.
5/ Bell Curve Roundup - Crypto's Moment: They Swung, They Missed
Preview: In this episode of Bell Curve, Mike, Jason, Vance, and Michael discuss the economic fallout from the recent banking collapse, if Powell has pushed things too far and why the crypto bulls are back despite the market turmoil. Click here to listen to the full episode.
Length: 68 mins | OUR NOTE: 4 min
Here are some key takeaways:
Arbitrum is launching an airdrop on March 23rd, distributing 1.15 billion tokens to users.
The distribution of tokens and governance model will be interesting to watch compared to other L2 solutions.
The closure of Signature Bank has led to speculation that the government may be competing with the private sector in the provision of instant payments.
On the Revelo Intel platform, we’ve summarized these 5 episodes and in total, would have saved you: 3 hours and 47 minutes!
To get access, you just have to sign up for a FREE plan.
Note of the Day
Subli Optimism Series - Introduction of Perpetual Protocol
In this Twitter Spaces, Subli invites jholme5.lens to discuss Perpetual Protocol, the working mechanism, and the features of the product.
Read notes below to learn more.
Introduction to Perpetual Protocol and how it works
Perpetual Protocol is a trustless crypto trading platform that allows users to trade with leverage up to 10x.
The protocol is completely open source and fully unchanged, meaning that anyone can access and verify the code behind it.
Perpetual Protocol is native to Optimism, a layer 2 scaling solution for Ethereum that offers faster and cheaper transactions.
The protocol is built on top of Uniswap V3, which serves as its pricing engine.
Perpetual Protocol has 18 different markets, including major cryptocurrencies like Bitcoin and Ethereum.
Users can trade or market make on Perpetual Protocol with up to 10x leverage.
Perpetual Protocol's use of Uniswap V3 and concentrated liquidity pools
Perpetual Protocol uses Uniswap V3 as its pricing engine, which means that it plugs into Uniswap's concentrated liquidity pools.
Concentrated liquidity pools are a type of automated market maker (AMM) that allow liquidity providers to define a price range for their asset.
When the price of an asset moves outside of the defined price range, liquidity providers are incentivized to provide liquidity and capture fees.
Perpetual Protocol uses this same mechanism to ensure that there is always enough liquidity available for trading on its platform.
Providing liquidity and collateral on Perpetual Protocol
Users can provide liquidity on Perpetual Protocol by borrowing a virtual token and providing collateral in the form of USDC, USDT, Ethereum, or OP tokens.
When providing liquidity, users must borrow the base token for the market they are providing liquidity for (e.g. Ethereum for the ETH market).
Users can also use Ethereum or OP tokens as collateral to trade on any of the markets on Perpetual Protocol.
The weight of each token as collateral is as follows: USDC and USDT have a weight of 100%, while Ethereum and OP tokens have a weight that varies depending on market conditions.
Users are incentivized to provide liquidity on Perpetual Protocol through token rewards and fees.
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Perpetual Protocol's position in the Optimism perpetual future ecosystem
Perpetual Protocol is one of the earlier adopters of Optimism.
It is the most popular protocol by number of transactions on Optimism.
The clearinghouse contract is the most used contract on Optimism, responsible for around 10% of total transactions on the network.
Perpetual Protocol is one of the leading perpetual DEX's on Optimism, with Kwenta being the other protocol that comes to mind, but with a different approach.
Comparison between Perpetual Protocol and Kwenta
Kwenta is based on synthetic liquidity, whereas Perpetual Protocol takes Uniswap and adds leverage trading on top of it.
Perpetual Protocol's advantage is its composability, which allows other projects to build on top of it, creating a wider ecosystem.
Kwenta's advantage is its synthetic liquidity approach, which may appeal to a different set of users.
Perpetual Protocol's approach as a base layer
Perpetual Protocol aims to become a base layer that sits as a foundation for composability, allowing other projects to build on top of it.
Perpetual Protocol is still focusing on the exchanges as its main product, with ongoing development for the perpetual exchange to increase the leverage factor and a number of assets.
Perpetual Protocol's vaults
Vaults are a way of packaging trading strategies into something more simplified for passive traders to take advantage of.
The first vault launch is called Hot Tub and will utilize an unchained arbitrage strategy for the Ethereum markets on Optimism.
The arbitrage strategy is only done for the ETH market and is done between the spot and perpetual markets on Optimism.
There are two vaults available: one for growing Ethereum holdings and one for increasing stablecoin holdings (USDC).
The vaults are fully automatic, meaning that they are a passive farming solution where users deposit tokens and the strategy is executed in the background.
The risk associated with the vaults are very low, with the only low-likelihood risks being related to the funding rate and illiquidity in the market.
Perpetual Protocol has been live testing the strategy for the past one and a half to two months and the APR has exceeded initial expectations, with the elevated volatility recently resulting in close to 20% APR for the USDC vault.
Vaults will have a cap initially to ensure everything works smoothly and only high APR users are guaranteed entry.
The cap will be gradually raised over time and more users will be invited.
Vaults are not currently available but interested users can sign up for the whitelist.
The launch of the vaults is expected to be this week, with specific details available on Twitter and Discord.
Funding Rate Arbitrage Vaults
The team is currently exploring funding rate arbitrage strategies.
It was mentioned this idea previously that users could arbitrage between different purposes.
The vault will allow users to deposit and short OP tokens to earn funding payments when the funding rate is positive.
The team is also looking at building a similar vote for funding rate arbitrage between different DEXs.ff
Other Types of Vaults
The team plans to expand the arbitrage vaults to different types of assets or chains.
They are also considering building directional strategies for users who are bullish or bearish on Ethereum.
Development Plan for 2023
The team is focused on improving the security of the protocol.
The mark price update will improve the way the mark price is calculated, making it more responsive and reducing the likelihood of bad debt and liquidations.
The team is also working on improving the accuracy of the funding rate and introducing a fallback Oracle to keep the protocol running even if Chainlink goes down.
The improvements in security will allow the team to gradually increase the leverage parameter from 10x to 15x.
The governance forum allows token holders to vote and make proposals.
Token holders who lock their tokens into the vote-escrowed pop have a boosted voting power.
Token holders earn 15% of the trading fees each week through lazy river 2.0, while 5% goes to the treasury and the remaining 80% goes to LPs of the Procure.
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