Overview
Last updated
Last updated
D8X provides fully decentralized perpetuals with financial contracts very close to the classical centralized perpetuals introduced by BitMEX. That is, traders can go leveraged short and long and the side with higher demand pays a funding rate to the side with lower demand. There are no holding fees. The perpetual price deviates from the underlying index price depending on supply and demand, allowing for basis trades with other markets. D8X can offer linear, inverse, and quanto perpetuals.
D8X perpetuals are built so that they can be collateralized with virtually any ERC-20 token. Therefore it is possible for D8X to launch perpetuals that are collateralized in yield-bearing tokens.
D8X employs a limit order book combined with an Automated Market Maker. There are many different order types that the traders can choose from.
D8X does not operate their own front-end. Instead D8X provides a front-end kit for white-labelling partners. White-labelling partners can brand their front-ends and set their own trading fees. They can even incorporate their own token in setting fees.
A Perpetual Future is a derivative product similar to a futures but without expiry date. Market participants trade futures contracts to profit from price movements or to hedge against losses. Traders can have a leveraged long or short position and sell their contract at any point in time. The profit & loss of a future is determined by the price differential at the time when the future is sold compared to when the future is bought. See [CME Group, 2022] for a detailed explanation of a futures profit & loss calculation.
To pull the price of the perpetual future towards the spot price, perpetuals feature funding payments. Funding payments add to the profit & loss. Funding payments have to be made from the long traders to the short traders if the perpetual contract trades at a higher price than the spot. This payment will make the long position more expensive and the short position more attractive. This causes the perpetual price to move towards the spot. Equivalently, if instead, the perpetual price trades below the spot, the funding payment is made from the short to the long.
The spot price is represented by an index price that normally consists of an aggregation of different spot price sources. Funding payments are based on a funding rate that corresponds to the percentage deviation of the perpetual mark-price from the spot-price, often represented as a time and volume averaged perpetual price. The funding rate is applied to the notional position size to arrive at the payment amount. The convention is that the funding rate is an 8-hour rate (as opposed to e.g., a 30/360 rate) that is updated on a frequent basis (e.g., milliseconds for some centralized exchanges). Often the accrued funding rate is paid every eight hours. Funding payments are subtracted or added to the margin collateral.
We distinguish between linear, inverse, and quanto perpetuals. The distinction lies between the type of collateral currency compared to the instrument base currency and quote currency. For a BTCUSD instrument the base currency is BTC, the quote currency is USD.
With linear perpetuals, the collateral is held in the quote currency (or a stablecoin with that currency such as USDC).
With inverse perpetuals, the collateral is held in the base currency (e.g., ETHUSD collateralized in ETH).
With quanto perpetuals, the collateral is held in a third currency (e.g., ETHUSD collateralized in BTC).
Funding Payments
Funding rates are quoted as 8-hour rates. Funding payments per contract unit are refreshed with every trade, margin, and deposit interaction or at most every block. A unit funding payment equals the funding rate times the current base to collateral currency conversion rate, times the time evolved since the last funding payment adjustment (accounting for the 8h convention of the rate).
Funding payments are accumulated continuously for every open position.
Mark Price
The mark price is the price at which the perpetual contract profit and loss is calculated. The mark price is the relevant price that determines whether a trader can be liquidated or not.
Expiration
No expiration.
Position Limit
The maximal position size is dynamically calculated. The maximal position size depends on the exposure of the AMM and the liquidity in the system. There are different maximal position sizes for long and short trades.
The minimal position size is static. There are different minimal position sizes for each perpetual contract. See for details.
