Perennial is a cash-settled derivatives protocol on Ethereum. It also allows developers to launch any synthetic market.
Perennial is a DeFi-native derivatives primitive that allows for the creation of two-sided markets that trade exposure to an underlying price feed in a capital efficient manner.
Perennial acts as a peer-to-pool derivatives AMM that perpetually offers to take the other side of any Taker’s position directly at the oracle price, in exchange for a funding rate that floats based on utilization of the liquidity pool (similar to Compound & Aave).
Takers (Traders) deposit collateral to get leveraged exposure to different price feeds (long, short, and exotic payoffs). Makers (Liquidity Providers) pool capital in the protocol to earn fees for taking the other side of Taker trades.
On a continuous, on-going basis, LPs and traders settle up; the losing side of the trade pays the winning side.
Perennial is minimalist at its core, designed to be a low-level, unopinionated primitive that lays the basic infrastructure and leaves the rest up to market creators and participants to define/optimize.
Perennial in its most basic form is infrastructure for launching derivative markets. A market in perennial is a two-sided market (makers and taker) that trades exposure to a given payoff function. Each markets is indepedent & has isolated risk.
The market operator chooses a price feed that the market will track. Any price feed can be chosen as long as it has an oracle can that be used as an input to the Perennial smart contract.
To start, Perennial will have hooks to pull in Chainlink data, but in the future other oracles will be added. If Perennial doesn’t have a hook for some oracle or price data, anyone can build it.
Pricing in Perennial is particularly important because all position changes (opens & closes) occur at the oracle price with no price slippage. If the oracle returns the price of an asset, traders can trade as much of that asset at that price as liquidity will allow.
- Peer-to-Pool AMM — trade against a pool of capital, without having to find a counterparty to take the other side of a trade
- Zero price slippage — trade directly at the current price, regardless of size
- Cash-settled — trades settled in $USD, not crypto, in line the most popular crypto derivatives
- Utilization-based Funding Rate — funding varies with pool utilization (like Compound), creating an extremely simple, continuous funding rate
- Two-sided Leverage — Takers & Makers can both trade with significant leverage, amplifying capital efficiency
- Maximum LP flexibility — LPs (makers) can customize their risk exposure, pricing curve, hedging strategy (or lack thereof); Perennial makes very few assumptions about this at the protocol level, giving LPs full control
- Developer-oriented & built for composability— With just a few lines of code, developers can build exposure to any asset by customizing the payoff function, utilization curve (pricing), oracle, fee model, etc.
- Permissionless — Permissionless market creation, integration, and composability.
Perennial does not clarify this question clearly. They did not provides the channel of how cash get paid to settlements and did not define what cash means. They only state in the doc that all profit and loss is paid directly from the taker to the maker and vice versa.
P&L is settled every oracle version globally on a per-position basis. Account-level P&L is synced when a user makes any position-related updates to their account (i.e. opening or closing a position).
The market ensures that the aggregate notional value of taker positions never exceeds the aggregate value of maker positions to cap the short exposure on the maker side. In all cases, makers are exposed utilization (%) times short from 0% to 100%.
There are three types of fees that a product can charge: maker, taker, and funding.
Maker fee is the fee % on the notional maker volume opened or closed.
Taker fee is the fee % on the notional taker volume opened or closed.
Maker and Taker fees are completely optional, however Perennial has a protocol minimum funding fee parameter that can be updated.
Ealier 2022, Perennial has raised $12m in a seed round led by Polychain Capital and Variant, with participation from Archetype, Scalar Capital, Robot Ventures, Coinbase Ventures, and a.capital.
In addition to this, Perennial also has some of the top builders & leaders in the space join the round as angels, including:
- Zubin Koticha & Alexis Gauba (Cofounders of Opyn)
- Sunny Aggarwal (Founder of Osmosis)
- Will Price
- Clinton Bembry & Scott Lewis (Cofounders of Slingshot)
- Pete Kim (Coinbase Wallet & USDC)
- Rob Witoff (CEO at Unit 410)
- Lewis Freiberg (DAO Facilitator)
- Collins Belton
- Sam Rosenblum (Partner at Haun Ventures)
- Katherine Wu (Partner at Archetype)
- Reuben Bramanathan (Partner at IDEO CoLab)
