Perpetual Protocol is a decentralised perpetual futures exchange that recently deployed Curie, their V2 on Optimism. V1 of Perpetual Protocol saw over 40bn in volume traded on a non incentivised basis.
Note: This proposal has been reviewed and discussed on by the TFL BD Team
To provide further context, we have recently published our proposal of what the next version of tokenomics of Perp looks like.
At high level, there are 2 programs that make things interesting:
- Liquidity Acquisition is a method for the new market making entity to borrow stables and scale up its borrowings. It is similar to the Curve model where lenders deposit UST and then receive PERP rewards.
- Liquidity Mining is a method to incentivise market makers to utilise a specific type of collateral
For Liquidity Mining how it would work is illustrated below:
- The UST vault would receive a certain amount of PERP depending on the vePERP gauge
- There is then a swap for UST <> PERP
- Market makers who deposit and use UST as collateral receive UST rewards
Basically what this means is that UST is able to get utilisation of UST whilst this is effectively paid for by Perp
For further details of the tokenomics proposal please see here: Proposal: Perp V2 Tokenomics - Proposals - Perpetual Protocol
To create demand for UST on Optimism in the most cost effective way possible - subsidised by PERP tokens
We’d propose for TFL to lend 10M UST to the market making entity with the following terms:
- 12 month loan term
- 5% interest rate paid up front
The market making entity will then utilise this UST to market make on PERP. By lending to Perp, Perp will then list UST to be able to be used as a collateral which provides another avenue of demand for individuals to hold UST
Additionally, Perp would create a liquidity acquisition vault for UST. Like Curve, individuals can then buy UST and deposit into Perp to receive PERP rewards. This creates a second channel for demand for UST. The following diagram illustrates how this would work:
We’d like to forge a partnership between Perp and UST and propose at a high level a 10M USD value token swap between PERP and UST. This swap is to be done using a 30d TWAP price found using CoinGecko
The reasoning behind this is as follows:
- An early token swap will allow for TFL to hold PERP which can then be locked up for vePERP and guide emissions to the UST vault on launch. This means there’s no need to slowly build up PERP through rewards
- PERP plans to utilise the UST by running it through the liquidity mining program mentioned above which will create demand for usage of UST as collateral
- Additionally, PERP plans to match emissions on a weekly basis that will then be distributed via the gauge (e.g. if there is 300K USD worth of PERP being swapped and distributed across all collateral types, then the DAO will match it with a further 300K USD worth). By owning a large percentage of vePERP, TFL is able to then redirect these additional rewards to market makers who use UST as collateral
- Finally, PERP rewards for the liquidity acquisition program is dictated by a gauge - by granting TFL the ability to lock up vePERP, there is the ability to make holding and lending UST to the market making entity extremely attractive and profitable, creating a second channel of demand for UST