In the ever-evolving world of crypto trading, perpetual markets have emerged as the dominant force, luring traders away from traditional spot trading. But what catalyzed this sudden shift? The game-changer is the ability to go long or short on a cryptocurrency without actually owning it, with no looming expiration date on the horizon. This unique flexibility has made perpetual trading a hot favorite among crypto enthusiasts. The icing on the cake is the availability of leverage, allowing traders to amplify their investments and potential profits!
As the crypto trading landscape evolves, a significant innovation comes into focus: perpetual pools. These pools are reshaping the way liquidity is managed and are at the forefront of transforming the market.
Perpetual Pools: Revolutionizing Liquidity
It's not just traders who've been captivated by the charm of perpetual markets. Liquidity providers have also been drawn into this dynamic landscape, especially with the emergence of top perpetual DEXs like Demex. These DEXs have spearheaded the creation of revolutionary and innovative perpetual pools.
Understanding Perpetual Pools
Perpetual pools are automated market makers, acting as liquidity pools that counterbalance the activities of perpetual traders. The liquidity deposited in these pools seamlessly integrates with the order books, ensuring deep liquidity and minimal slippage for traders. When a trader incurs losses, the liquidity providers are compensated, while profits are drawn from the perpetual pool.
For a comprehensive exploration of Demex's Perpetual Pools, check out our article here!
A Comparison of Perpetual Pools and Perp LP Tokens
Drift Protocol and DLP
Drift Protocol is a decentralized exchange (DEX) operating on the Solana blockchain, designed to facilitate peer-to-peer crypto trading. To optimize capital efficiency and ensure trader protection, Drift utilizes cross-margin trading accounts and a decentralized automated market maker (DAMM).
This DAMM enhances liquidity management and flexibility, effectively reducing slippage and improving capital efficiency. Traders can leverage their positions with up to 10x leverage, allowing them to access perpetual swaps for various cryptocurrencies, swap spot tokens, borrow, lend, and stake.
Drift Liquidity Provider or DLP is a key component of Drift Protocol, simplifying liquidity provision for users. It represents the liquidity that users deposit in the platform. DLP shares, in essence, encapsulate the liquidity contributed by providers and effectively eliminate the need for manual position management.
Users have the option to provide liquidity with leverage, with a maximum of 10x leverage, giving them the flexibility to choose their preferred markets. Liquidity providers receive a portion of the fees generated by the decentralized automated market maker, with 80% of the fees distributed based on the proportion of liquidity each provider contributes. Additionally, providers receive funding and any profit and loss from settled positions.
GMX and GLP
GMX, a decentralized perpetual exchange on the Arbitrum and Avalanche blockchains, was one of the pioneers in implementing counter-party liquidity mechanisms.
GLP, the multi-asset liquidity provider token, is linked to all perpetual markets on GMX. By supplying liquidity and acquiring GLP tokens, users effectively participate in market-making for all GMX perpetual markets. GMX has designed a value-accruing model, encouraging users to stake GLP for enhanced rewards in the form of esGMX tokens.
You have the option to purchase GLP tokens using any of the assets available in the liquidity pool, such as USDC, WETH, WBTC, DAI, and more.
The fee is determined by the composition of the liquidity pool. Acquiring GLP tokens is more cost-effective when using assets that are sought after by the market but are in lower supply within the pool.
The GLP Index Composition can be found on the dashboard here.
Traders on GMX trade against liquidity providers, who serve as their counterparties, across a curated selection of under 10 perpetual markets.
Demex and CLP
Curious about how Demex distinguishes itself in the realm of perpetual pools? Let's dive into the details. Demex has partnered with Fluo Finance, an omni-chain liquidity management protocol that specializes in creating AMMs for perpetual DEXs. This collaboration will bring forth perpetual pools designed for maximum capital efficiency.
Demex houses an array of trendy perpetual markets that you won't find anywhere else, presenting ample market-making opportunities for liquidity providers and for traders to make the trade of a lifetime. The upcoming perpetual pools are engineered to provide a superior trading experience with deep liquidity and narrow spreads.
With over 20 perpetual markets and fresh listings every week, Demex ensures traders have access to an enticing array of trading opportunities. These perpetual pools will be categorized to cater to different risk appetites, making liquidity provisioning a tailored experience.
Demex's upcoming pilot perpetual pool, the "BTC-ETH Pool," will cater to the OG and the most popular perpetual market among its traders. The "Top 100 Pool" encompasses all altcoins within the top 100 by market capitalization, providing comprehensive market coverage in one go.
Carbon Liquidity Provider or CLP tokens serve as the receipts for users who deposit liquidity in USD stablecoins. To enhance yield opportunities, Demex offers the option to stake CLP and earn additional rewards on liquidity.
CLP distinguishes itself from other LP tokens by efficiently distributing and quoting liquidity across connected perpetual markets. For instance, a $1,000 worth of CLP deposited in the BTC-ETH Perp Pool generates a 4x quote of liquidity, with $1,000 on both the bid and ask sides for both the ETH-PERP and BTC-PERP markets.
Furthermore buying CLP is made extremely simple as all you need is one asset - $USD, a basket of grouped stablecoins. Deposit selected stablecoins on Demex and it gets auto-converted to Demex at a 1:1 rate.
Demex has hosted a very exciting Incentivized Public Devnet to encourage early testing of its revolutionary features.
DeFi is evolving rapidly, with perpetual pools becoming a central focus, from GMX to Drift Protocol and now Demex. Demex is poised to introduce CLP, a game-changing liquidity catalyst, to power its perpetual markets. Get ready to ride the wave of the liquidity revolution!