Perps are the most popular product in DeFi derivatives. As a result, we’ve covered them extensively, including projects on Blast, Solana, and more. The perps space never stops moving, with new appchains, expansions, points programs, and interesting new approaches to the perps problems being brought to light each week.
In today’s edition, we’ll be focusing on three key projects in Pear Protocol, Vest Exhange, & GMX…
Stay informed, stay alert ⬇
Background on Pear Protocol
Pear Protocol is a perps platform, utilizing an array of solutions aimed to address the inherent inefficiencies and complexities when pair-trading cryptocurrencies. Pair trading allows users to long and short two assets simultaneously with leverage. This concept was brought to life by the protocol’s founder Huf, filling a market need he identified from his own trading experiences in traditional and crypto markets alike.
Like any other DEX, Pear needs to source its liquidity from somewhere. Pear adopts an agnostic approach to liquidity, allowing users to choose between different models like GMX’s GLP, an order book-based model, or an intent-based model based on their trading preferences and the specific advantages each model offers. On the security side of things, Pear emphasizes the importance of vetting and documenting the risks and benefits of different trading venues. Another exciting prospect of Pear is that long/short positions can be tokenized as NFTs, meaning users could trade, or borrow against multi-directional positions, something not possible at the moment.
Pear Protocol is launching a public beta this week, with no whitelist or cap, featuring liquidity venues GMX V2 and Vertex. Early users of the platform could even earn significant rewards from a pool of 350,000 $ARB tokens provided by Arbitrum DAO’s LTIP.
Background on Vest Exchange
Vest Exchange is a decentralized perpetual futures exchange built on zkSync, a zero-knowledge (ZK) roll-up built on Ethereum. Notably, it is also the first protocol the to integrate risk into pricing. The platform considers a trader’s position and the associated risk to liquidity providers (LPs) and the protocol. This is shown through the game theory problem where fees paid by traders to LPs depend on their profits and losses. During a bull market, LPs might not be compensated enough, despite high trader success. Vest calculates the risk at a granular level, leading to adjusted pricing impacts like slippage or fees. In adverse market conditions, trades are configured to offer higher yields to LPs to adequately compensate for risks. The team believes that this creates a fairer system for both traders and LPs compared to other DEXs.
The protocol was built based on sound principles for a fair and sustainable trading environment. Perpetuals exchanges range from highly capital-efficient to overcollateralized models. while capital-efficient models allow for high leverage and competitive fees, they risk frequent blow-ups. Conversely, overcollateralized models, like Uniswap, maintain solvency but provide less ideal pricing for traders and liquidity providers. Vest strikes a balance between capital efficiency and risk.
Vest Exchange also focuses on avoiding risks associated with mechanism designs that could be exploited, beyond just oracle manipulation. The protocol’s founder, Justin, emphasizes the importance of designing secure trading mechanisms to prevent potential protocol-wide exploits. Vest is developed by Vest Labs a quant crypto research firm, and its backers include the likes of Big Brain Holdings and QCP Capital, crypto-native institutions.
Vest Exchange runs on zkRisk, a quantitative risk engine built specifically with Vest in mind. zkRisk opens up doors in the future for other areas Vest can expand into, including yield-bearing collateral, options trading, and much more. Cross-margin will also be enabled by default for all of these opportunities. Upcoming plans include a closed testnet or mainnet launch next week. Users can reach out to Vest’s Founder Justin for access on twitter here.
Background on GMX
GMX needs little to introduction; the onchain perps platform remains one of the most popular to date, seeing a metoric rise during the bear market in 2022. GMX is a decentralized spot and perps exchange that supports low swap fees and low-price impact trades, providing low spreads for traders. GMX is widely regarded as a leading on-chain perpetual futures and spot exchange with deep liquidity and low fees, highlighting its role as a foundational liquidity base layer in DeFi.
The platform continues to be available on both Arbitrum and Avalanche, though most volume and liquidity is present on Arbitrum. Deploying to new chains is a notion that some in the community support, with importance placed on considering whether a new chain provides access to a distinct audience or community that complements their existing user base. The Base chain has potential due to its association with Coinbase, which might attract new users, but the team remains cautious about the long-term viability and user retention on new chains, according to Communications Contributor Jonezee.
GMX uses an oracle model over traditional order books, highlighting the importance of having robust, well-audited code and reliable partners to ensure security and robustness in on-chain trading environments. Constant monitoring to prevent price manipulation and protect traders is necessary. GMX has found immense success in creating a vast DeFi ecosystem due to its fully on-chain, non-custodial nature. However, there are limitations when compared to the likes of Hyperliquid, dYdX, and more. Relatively recent developments include introduction of one-click trading on GMX, enhancing the user experience by simplifying trade confirmations, and hints at upcoming updates to the trading model and governance system, along with potential chain expansion and perhaps even a GMX chain in the future.
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