How are we different?
What makes us different
Last updated
What makes us different
Last updated
Perped leverages API3’s infrastructure to to provide revolutionary new ways to participate in the trading of perpetuals (futures with no expiry) of synthetic versions of traditional assets on-chain.
: Perped utilizes a new methodology for bringing off-chain data to the protocol by way of first-party oracles using API3.
Airsigner: With Elemental Blockchain’s Airsigner, MEV revenue that traditionally went to block producers is now shared with the dApp participants.
Dispute Resolution: Perped will aim to ensure that trades performed on its platform are subject to review by Kleros' arbitration mechanisms, to serve as a fallback oracle in the case of any discrepancy in price reporting from the above mechanisms.
These improvements will allow the user to trade traditional assets on-chain in a decentralized manner, which is not achievable with scale due to the inability of legacy oracle methods to do so. This radical shift allows for the burgeoning ecosystem of Decentralized Finance to be utilized for traditional assets and crypto-native assets on-chain.
Bringing off-chain data to the protocol so that Decentralized Finance can be enjoyed with a larger pool of assets requires an in-depth view of how current price data is used for this purpose, and why this traditional method is not viable for larger pools of assets outside of crypto markets.
Most protocols today utilize deviation threshold-based Chainlink price feeds and there are certain issues that come with these feeds, namely relating to scalability, costs, centralization risks and latency, which make it difficult for dApps to incorporate traditional assets in a scalable manner.
Chainlink has smart contracts deployed on chains like Ethereum, Polygon etc. for each asset pair (ex. ETH/USD). This smart contract for the price of ETH/USD is continuously updated by a network of node operators who reach a consensus on what they believe the price of ETH/USD is, and then write each of the node operator’s proposed prices to that smart contract. The Chainlink nodes aggregate the data and generate "proof" that the data is authentic and accurate.
From all of those values, the median is selected to be the new official price of ETH/USD. This event occurs on what is known as a deviation threshold, which for ETH/USD is currently set at 0.5%; meaning anytime the price of that asset changes by more than 0.5%, a new price is communicated and updated on-chain.
Prices are updated on-chain regardless of whether that particular update will be used by a protocol/user or not. Additionally, writing the proposed price from all 32 node operators when only one will be used is wasteful in terms of gas costs and block space.
Processing this on the Ethereum Mainnet would result in very high costs, especially when considering that the average block usually has approximately 200-300 transactions.
If the price of each S&P 500 asset were to change roughly every minute, that could potentially take up all the transactions within each block. Although price action for many assets on the S&P 500 may not see variances that reach the 0.5% deviation threshold regularly, the risk of network problems arising due to days with high trade volume and volatile markets is high enough that a more scalable and efficient solution is necessary.
From a scalability standpoint, using the 503 assets that comprise the S&P 500 index as an example, would mean that there would need to be 503 smart contracts deployed and constantly updated on every single chain where those asset prices are demanded. When the configuration and overhead that would be required by all node operators to manage this much larger number of assets are taken into account, the lack of scalability becomes more palpable.
This deviation threshold of 0.5% is not derived from traditional market price data but from crypto market price data, which is much more volatile. For more stable assets and markets, a more granular deviation threshold may be necessary, which only compounds the aforementioned problems of scalability and efficiency.
Consider a scenario where TSLA shares are $300 at market open and an oracle update is written for that value, and a trader opens a 30x DeFi trade for that asset, but the price only moves to $301 by end of the day, never breach the 0.5% threshold, then the on-chain price is still reflected as $300 and the trader would have missed a 10% gain on his trade for that day.
There can be periodic updates made to the chain by oracles on certain time intervals but these are often bogged down with a lengthy time cost (1+ hours) making the standardized approach in this way less efficient or meaningful. The problem then reverts back to the issue of price updates being written that use resources without having demand for an extensive number of assets (1k+ potentially) that Perped is proposing.
A final consideration for market leaders like Chainlink and their LINK token is the market cap of the project. At the peak of 2021, the market cap of the LINK token in circulation was almost 25 Billion. That valuation is largely based on revenue and projected revenue, meaning the amount of money being made from this middleman-type solution is substantial.
But the costs get immediately passed on to the protocols and end users, in addition to gas fees, unnecessary updates, etc.
The traditional oracle solution that the industry has adopted is not suitable for supporting a large variety of less volatile assets and this is why there hasn’t been much progress in seeing assets outside of the crypto market being traded on-chain. Until this point, no feasible alternative has been available.
Perped utilizes a completely new way of bringing off-chain data to the protocol by using first-party oracles. This is a radical shift from legacy methodologies that are predominantly used by most smart contracts today and allows for the burgeoning ecosystem of Decentralized Finance to be utilized for traditional assets as well as crypto-native assets on-chain.