Introduction to Perpetual Protocol (PERP)

Perpetual Protocol (PERP) is a decentralized finance (DeFi) project designed to simplify and decentralize the buying and selling of derivative contracts through an automated system. It operates on the Ethereum blockchain, allowing traders to engage in transactions without the need for a traditional financial middleman. Inspiration for the protocol came from established decentralized exchanges like Uniswap and the synthetic asset platform, Synthetix.

The operation of Perpetual Protocol doesn't require explicit trust in a particular organization or group of people; instead, users only need to trust that the embedded code will function as written. The protocol overall aims to encourage innovative strategies including leverage trading and short positions with low slippage by implementing a virtual automated market maker (vAMM) and collateralization vault.

Foundation of the Perpetual Protocol (PERP)

The protocol was brought to life by Yenwen Feng and Shao-Kang Lee in Taiwan. The development began back in 2018 under the name "Strike" and eventually had its official launch in December 2020 as Perpetual Protocol. The project succeeded in raising around $10.65 million, equivalent to nearly 25% of the maximum 150 million PERP supply.

The native cryptocurrency of Perpetual Protocol, PERP, has multiple roles in the ecosystem. It's instrumental for tasks such as staking and protocol governance. Users who stake PERP can look forward to rewards in the form of unallocated or newly generated tokens. Furthermore, stakers earn a portion of the transaction fees collected by the protocol, paid out in USDC. The currency also doubles as a governance token.

Currently, the protocol is managed by the original development team, but plans are underway to transition governance oversight to the PERP token holders, effectively making Perpetual Protocol powered by its community.

How does Perpetual Protocol Function?

Perpetual Protocol utilizes a unique variation of an automatic market maker known as the virtual automated market maker (vAMM). This approach is designed exclusively for price discovery rather than for spot exchanges. Even though it employs a similar mathematical function to protocols like Uniswap for pricing assets, it doesn't hold actual cryptocurrency within the vAMM.

Instead, the protocol uses smart contracts functioning as a 'Clearing House' and 'Collateralization Vault' to manage both long and short trades. The Clearing House accepts initial traders' deposits and logs the characteristics of their trading position (including margin, direction, and leverage). The deposited funds are then transferred to the 'Collateralization Vault', which backstops and secures trading positions, and subsequently communicates this information to the vAMM to update prices.

Should the situation of unexpected losses occur due to liquidation or traders being unable to maintain their funded positions, an insurance fund is used. This fund is filled by 50% of the transaction fees obtained by the protocol. If the fund becomes depleted, smart contracts mint new PERP tokens, which are then sold to maintain the system's financial stability.

Why Consider Using PERP?

The Perpetual Protocol provides decentralized access to perpetual contract trading, which might be attractive to some traders. There might also be potential arbitrage opportunities between pools in the Perpetual Protocol and those available in other markets. Besides trading, users might also invest in PERP if they anticipate decentralized trading of cryptocurrencies becoming more popular in the future.

Some Unique Features of Perpetual Protocol:

1. Leverage Trading: The protocol allows for leverage trading with up to 20x on capital.
2. 24/7 Liquidity: Perpetual Protocol guarantees constant availability of liquidity.
3. Freedom from Impermanent Loss: As pricing fluctuations don't directly affect stakers on the Perpetual Protocol platform, the issue of impermanent loss becomes irrelevant.

Roadmap and Strategy

Since its introduction, Perpetual Protocol has continuously shown promising improvements. The founders aim to transfer the governance power to the community. The goal is to turn Perpetual Protocol into a fully decentralized platform that implements control via its native tokens, PERP, introducing a democratic decision-making process.

Towards decentralizing completely, Perpetual Protocol aims to let the community decide and govern the markets that get listed on the protocol's platform. Presently the choice of markets has been manually selected by the Perpetual Protocol team. Eventually, the community will decide every aspect of the protocol’s future, embracing the structure of a Decentralized Autonomous Organization (DAO).

Current and Upcoming Projects

Being a still relatively young project, Perpetual Protocol has its sight on expanding its services and reach. At the moment, users are earning rewards through staking, which currently provides notable incentives through the protocol's trading fees distribution. In addition to this, educating users and increasing awareness about Perpetual Protocol's unique approach to derivative contracts is part of their ongoing projects. They are also working on broadening their offerings by including more trading pairs and markets. Future developments will likely further enhance Perpetual Protocols' value offerings within the DeFi space.

Conclusion

Perpetual Protocol is a unique player in the DeFi space. With its innovative approach to decentralized trading using derivative contracts, it offers potentials like no other. As always, cautious examination and evaluation are needed when considering investments in protocols like PERP.

Perpetual Protocol Price Analysis

As of November 24 2024 Perpetual Protocol has a marketcap of $62M. This is {{percentagefromath}} from its all time high of $24.40. In terms of its tokenomics, there's a total supply of 150M with 48% currently outstanding. Keep in mind Perpetual Protocol has a fully diluted value of $128M which many investors might interpret as overvalued.

Of course, don’t trust price predictions alone, always check the Coinrotator token screener to follow the trending market.