Perptual Futures DEX Track: Models, Ecosystem and Outlook

In the crypto market, Perptual Futures DEX is rapidly developing, with significant advancements in efficiency, speed, and scalability. This article aims to explore how Perptual Futures DEX expands the scope of blockchain applications and paves the way for the large-scale adoption of Web3.

Exchanges are the core of the crypto market, supporting market operations through transactions between users. The primary goal of an exchange is to achieve efficient, fast, and secure trade matching. DEX innovates on the basis of CEX by eliminating trust assumptions, avoiding intermediary control, retaining user fund control, and allowing community participation in governance.

However, while DEX has advantages, it often comes at the cost of high latency and low liquidity, mainly due to the limitations of blockchain performance. Currently, DEX spot trading volume accounts for 15%-20% of the total, while Perptual Futures account for only 5%.

Developing Perptual Futures business on DEX faces challenges because CEX has the following advantages:

1. Better product experience
2. Market makers can provide more precise spreads
3. Better liquidity ( especially for mainstream assets )
4. One-stop combination with multiple functions

The centralization and monopoly of CEX has become an issue that users cannot ignore, especially with the collapse of FTX exacerbating this trend. Increasing the usage of DEX can effectively reduce systemic risks and promote the sustainable development of the ecosystem.

Layer2 and multi-chain ecosystems create favorable conditions for the development of DEX. This article will delve into the current state of Perptual Futures DEX and introduce some design concepts of DEX.

Perptual Futures in the Product Market Fit of the Crypto Ecosystem

Perptual Futures allow for positions to be held indefinitely, similar to over-the-counter futures trading in traditional finance. The difference is that Perptual Futures introduce the concept of funding rates, enabling retail investors to participate while preventing an imbalance in the long-short structure.

Currently, the monthly trading volume of Perptual Futures exceeds 120 billion USD, thanks to a good user experience, an order book that promotes trading efficiency, and a vertically integrated clearing system.

Perptual Futures have four major advantages over traditional futures:

1. Save on extension fees and related costs
2. Avoid the issue of more expensive forward contracts
3. The funding rate system provides continuous real-time profit and loss, simplifying the processing flow.
4. Provide a smoother price discovery process

Since BitMEX introduced Perptual Futures in 2016, more than 100 DEXs have supported Perptual Futures. Research shows that the Perptual Futures market has begun to have price discovery functions. The trading volume of Perptual Futures on DEX has increased from $10 billion in July 2021 to $120 billion in July 2024, with a compound annual growth rate of 393%.

However, the Perptual Futures DEX is limited by blockchain performance. To further develop, it is necessary to address the issues of low liquidity and high latency.

Perptual Futures DEX Pricing Model

The pricing mechanism is key to ensuring that market prices accurately reflect supply and demand dynamics. The main models include:

Oracle Mode

Get price data from top exchanges. There is a risk of price manipulation, but it can reduce DEX pricing costs. For example, GMX uses Chainlink oracles to obtain data, creating a friendly environment for price takers and providing substantial rewards for price makers. However, excessive reliance on data from top exchanges limits proactive price discovery.

Virtual Automated Market Maker ( vAMM )

Inspired by Uniswap, but the vAMM liquidity pool is virtual. It supports Perptual Futures trading without the need for large capital investments. It has been adopted by Perpetual Protocol, Drift Protocol, and others. There are issues of high slippage and impermanent loss, but due to its transparency and decentralization characteristics, it remains an excellent on-chain pricing mechanism.

Off-chain order book combined with on-chain settlement

Overcoming on-chain order matching performance limitations. Trade matching is completed off-chain, while settlement and asset custody are on-chain. Retaining self-custody reduces MEV risks. This model is adopted by dYdX v3, Aevo, and Paradex.

Full Chain Order Book

All order data and operations are processed entirely on-chain, ensuring the highest security. However, they face the risks of front-running and market manipulation due to blockchain delays and throughput limitations. Public chains like Solana and Monad are improving infrastructure to support full-chain order books. Projects such as Hyperliquid, dYdX v4, Zeta Markets, and LogX are also exploring innovations.

Acquisition of Liquidity and Improvement of User Experience in DEX

Liquidity is fundamental to the survival of exchanges. Emerging DEXs acquire initial liquidity through incentives and market forces. However, as the number of DEXs increases, it becomes difficult for a single DEX to achieve effective scale.

New ideas include:

1. Community-supported active liquidity vault: such as Hyperliquid's HLP vault
2. Cross-chain liquidity acquisition: such as Orderly Network and LogX Network

The competition among DEXs is intensifying, introducing features such as gas-free trading, session keys, and social logins. Cross-chain DEXs like Vooi.io are developing smart routing systems to integrate multiple DEXs and cross-chain bridge functionalities.

The Telegram trading bot optimizes UX, providing features such as real-time trading alerts, executing trades, and portfolio management. However, there are security risks.

Innovative Financial Products in Perptual Futures DEX

Variance Perptual Futures

The trading content is based on asset volatility rather than price. It can be used to hedge risks. Opyn has developed four types of products: Stable Perps, Uniswap LP Perps, Normal Perps, and Squared Perps, which can be combined into complex strategies.

Pre-Launch Perptual Futures

Allows price speculation before the official launch of the Token. Models such as Aevo, Helix, and Hyperliquid have pioneered this approach.

RWA Asset Perptual Futures

It may become the main way to put real assets on the blockchain. Companies like Ostium Labs and Sphinx Protocol are developing in this area.

ETP Perptual Futures

Can be used to create ETPs that hold perpetual futures contracts, reducing trading costs and NAV depreciation risks.

Prediction Market

Perptual Futures DEX can fundamentally change prediction markets, especially suitable for irregular events. Advantages include:

• Continuously update data and generate multiple sub-markets
• Provide short-term trading opportunities
• Continuous real-time settlement ensures market stability
• Community control enhances decentralization

Future Prospects of Perptual Futures DEX

The focus of future design may be to leverage the advantages of decentralization, seeking a balance between efficiency and security. Emphasizing community participation to enhance users' sense of belonging. Improving the user interface to ensure a smooth usage process.

Perptual Futures DEX covers multiple fields such as finance, elections, and sports, providing new ways for the public to participate in crypto trading. In the next decade, DeFi may intersect and integrate with various sectors, driving the large-scale adoption of cryptocurrencies.