SakePerp Perpetual Contact and A Synthetix System with vAMM and Leverage on BSC
🤯An Overview of the SakePerp Protocol
SakePerp Protocol is a decentralized perpetual contact protocol on Binance Smart Chain for all-asset leverage trading powered by the vAMM+Oracle pricing algorithm. vAMM + Oracle is designed for price discovery. Users can trade cryptocurrency, foreign exchange, gold, crude oil, stocks, indexes, and other assets. SakePerp brings real-world assets into DeFi in an innovative way.
How the on-chain SakePerp system works under the hood
- Market Makers provide liquidity for the SakePerp system and earn the rewards of protocol development. In the meantime, MMs will take the risk of the net position.
- Traders can easily take a long or short position or a buy and sell position with leverage.
- The liquidator will earn a certain percentage of the user’s remaining position margin as the liquidation service charge. Liquidation occurs when the trader’s position margin falls below the maintenance margin.
- Oracle provides the price of the underlying asset on-the-spot market. Oracle + vAMM will calculate the transaction price.
- The Insurance Fund is designed to provide financial protection under extreme circumstances.
- Transaction Fee
Traders pay a fixed percentage of fee when opening or closing a position. Currently, the Transaction Fee is 0.1%.
2. Overnight Fee
An overnight fee is a payment that applies if the trader holds a position overnight. This is essentially an interest payment to cover the cost of the leverage that the trader uses overnight. The SakePerp overnight fee is collected every 24 hours and the fee rate is 0.05%.
3. Funding Rate
Funding rates are periodic payments either to traders that are long or short based on the difference between SakePerp contract markets and Oracle prices.
When the SakePerp contract price is higher than the Oracle TWAP price, the funding rate is positive, which means long traders pay short traders.
When the SakePerp contract price is lower than the Oracle TWAP price, the funding rate is negative, which means short traders pay long traders.
SakePerp is using vAMM + Oracle price discovery mechanism, the funding only occurs when there’s no oracle price update in the last hour, which rarely happens and the rate is much smaller than other perpetual exchanges.
4. MM Withdrawal Fee
When MMs remove liquidity from the SakePerp pool, a 0.5% withdrawal fee will be charged. We will reserve all accumulated withdrawal fees for existing MMs.
5. Clearing Fee
Liquidation occurs when the trader’s position margin ratio falls below the maintenance margin (3%). The liquidator will get 1% of the position size or 100 BUSD (when 1% of the position size is greater than 100 BUSD). The remaining part goes to the Insurance Fund.
🤔️ Oracle+vAMM price discovery
SakePerp Protocol uses the Oracle+vAMM curve for price discovery.
- SakePerp starts with a vAMM curve price equal to Oracle price.
- Before Oracle price updates again, the transaction price will be decided by the virtual AMM curve x * y = K, which is the same as Uniswap.
- After the Oracle price is updated, the curve will update to the latest oracle price. Then new transactions will start from the latest Oracle price and follow the vAMM curve again. Oracle + vAMM is the most important mechanism of SakePerp Protocol, which can track the price of the spot market in time.
- The virtual liquidity of AMM is determined by the number of funds provided by MM, the volatility of the underlying asset, and the transaction volume.
😞 Risk Exposure of Market Makers
MMs provide liquidity on the SakePerp system and assume net position risk. MM is the core participant of the SakePerp system. SakePerp protocol use vAMM mechanism to reduce the risk exposure of MM.
The perpetual contract trading platform Perpetual.fi uses virtual AMM to completely balance the net position risk among traders. SakePerp combines the two mechanisms of Oracle+vAMM to open up the MM risk exposure while making the risk exposure controllable and configurable. At the same time, as far as traders are concerned, it is similar to SakePerp trading.
- When the oracle price is not updated, the trader opens and closes the trade according to the virtual AMM curve. The profit and loss caused by long and short are entirely complemented between traders.
- After the Oracle price update, the price curve will move from the last transaction price point to the latest oracle price.
- The transactions at the same Oracle price point can be completely complemented. After the oracle price update, the slopes of the two points on the curve will be different. The original positions which were opened/ closed on the vAMM curve cannot be completely complemented at the new Oracle price point. The non-complementary part is the risk exposure assumed by MM.
- The closer the vAMM curve price promoted by trading users is to the Oracle price, the smaller the risk exposure MM assumes. And better SakePerp trading experience for traders.
- The risk exposure assumed by MM can ensure that traders trade on the basis of real-time Oracle price. With the design of Funding Rate, the risk exposure is very small and the capital efficiency is quite high.
💪 Advantages of SakePerp
Compared with AMM spot swap
- Greater capital efficiency for both traders and MMs.
- MMs provide single-sided liquidity which can avoid impermanent loss.
Compared with other perpetual exchange
- Less price manipulation than other perp markets.
- Lower funding rates and fees.
👏 Relationship between SakePerp and SakeSwap
SakePerp is the derivatives exchange while Sakeswap is the spot swap exchange. Both SakePerp and SakeSwap are the DeFi products of sakeswap.finance.
SAKE is the governance token of the SAKE DeFi ecosystem. The SAKE is also designed to incentivize liquidity providers and MMs on SakeSwap and SakePerp.
More about SAKE
SAKE is the first governance token in DeFi that supports both spot market and futures market with SakeSwap AMM DEX and SakePerp Perpetual Contract.
SakePerp BSC: http://sakeperp.fi/
SakeSwap BSC Farming: https://bsc.sakeswap.finance/#/farm-v2
SakeSwap Ethereum: https://sakeswap.finance/
SakeSwap Info: https://info.sakeswap.finance/
Useful Tutorials: https://www.youtube.com/playlist?list=PLMAvf3CWmVcaQnE-JgomMNsCkzhVvWwpc