Dear PancakeSwap Community,
We’re excited to bring you a weekly academy series on Perpetuals Trading V2! Launched on 20 April 2023 in partnership with ApolloX, the Perpetuals V2 upgrade provides an even more sophisticated and user-friendly decentralized derivatives trading product that prioritizes decentralization, self-custody, and transparency.
In this series, we’ll dive deep into the inner workings of Perpetuals Trading and how users can utilize the product to generate a sweet return on investment. In this first post, we’ll provide a comprehensive introduction to Perpetuals Trading V2 and all of its benefits.
The rapidly evolving world of DeFi has witnessed significant advancements in the development of innovative trading platforms. In partnership with ApolloX Finance, PancakeSwap’s Perpetuals V1 originally launched in March 2022 and introduced users on PancakeSwap to deep liquidity, tight spreads, and a wide selection of perpetual contracts.
While V1 offered valuable features, it had some shortcomings that hindered the overall trading experience. In response to user feedback and industry demands, we have reimagined and redesigned PancakeSwap Perpetuals, addressing the shortcomings of V1 and introducing a host of advantages in V2.
While Perpetuals V1 served as a foundation for our derivatives platform, it had some limitations that resulted in the development of V2:
1. Complex Registration and Collateral Requirements: In V1, users had to go through a registration process and deposit collateral before they could start trading. This added complexity and additional steps to the trading experience, which was not ideal for users looking for a seamless and decentralized trading experience.
2. Centralization of Order Matching: V1's reliance on off-chain order-book matching introduced a level of centralization, contradicting the core principles of decentralization and trustlessness sought by users in decentralized exchanges.
3. Centralized Custody of Funds: In V1, users had to deposit their funds onto the platform to begin trading. This meant they had to trust the platform to securely hold their funds. However, the decentralized nature of the blockchain ecosystem values self-custody, where users have full control over their assets. V1's centralized custody model did not align with the principles of decentralization and self-custody that many users sought.
4. Limited Transparency: Transparency is crucial in the decentralized finance space. V1 did not provide the level of transparency desired by users. The lack of transparency in the off-chain order book created opportunities for manipulation by malicious actors, exposing users to risks such as front-running and wash trading. There was a need for a more transparent and open trading environment that would inspire confidence in users and provide them with real-time access to accurate market information.
5. Limited Number of Future Contracts: V1's order book model restrained scalability, resulting in a limited number of markets for users.
PancakeSwap Perpetuals V2 takes a significant leap forward by adopting a fully on-chain unified liquidity pool and Oracle model, catering to users who prioritize decentralization, self-custody, and transparency. Let's delve into the advantages that Perpetuals V2 brings to the table.
Perpetuals V2 is a product of careful design choices to enhance your trading experience. Here are some of the main advantages:
1. Greater Decentralization and Transparency: Perpetuals V2 is designed specifically for users who value decentralization, self-custody, and transparency. It operates on BNB Chain, allowing users to trade directly from their non-custodial wallets, eliminating the need for registration or depositing collateral before trading, as was required in V1. This enhancement aims to meet the needs of different user profiles and improve decentralization.
2. Enhanced Security and Trustworthiness: Perpetuals V2 offers a sophisticated, intuitive, and user-friendly decentralized derivatives trading product. Unlike centralized exchanges, users in V2 retain full control of their funds and do not need to deposit or withdraw on the platform to trade manually. V2 also uses price feeds from both Binance Oracle and Chainlink to prevent abnormal price behavior in case of manipulation resulting in surprise liquidations and to deter front-running. Furthermore, three renowned blockchain security firms have audited its smart contracts, Salus Security, Certik, and PeckShield, ensuring the platform's security and reliability.
3. New Features and Flexibility: Perpetuals V2 introduces several new features to enhance trading flexibility. These include support for USDT and USDC for trading, detailed trading history, easily adding margin and adjusting TP/SL to existing positions, and increased leverage for BTCUSD and ETHUSD to up to 150x. Since its launch in April, V2 has listed 15 perpetual contracts, with more to come.
4. Improved Protocol Design and Fee Structure: Perpetuals V2 trading pairs share liquidity via the ApolloX Liquidity Pool (ALP), maximizing capital efficiency and enabling users to open larger position sizes. The platform also offers lower trading fees than similar products in the market and utilizes a funding fee model instead of the borrow fee model used by GMX and Gains Network. Users trade against the ALP pool and fees + trading PnL is accrued to the ALP pool, offering users lucrative APY. Furthermore, with the consolidation of liquidity into one pool, Perpetuals V2 opens up the possibility of introducing more trading pairs from different asset classes. This model ensures a more balanced market and reduces risks for liquidity providers.
5. Zero Slippage: Perpetual V2 operates on an innovative model that offers zero slippage and infinite liquidity. Unlike traditional order-book models, where large trades can result in price slippage, V2 executes trades at a single price (the latest Oracle Price), regardless of trade size. This unique feature ensures that users can enter and exit positions without the worry of slippage, providing a seamless and efficient trading experience.
6. Future Expansion Plans: PancakeSwap, in partnership with ApolloX, plans to aggressively list new contracts, especially forex contracts and other asset classes, and raise leverage for pairs. The team also plans to deploy V2 on other chains and continue improving the user interface and experience. Future developments include introducing an affiliate program, more pairs, and other tokenized assets. We're also taking steps to engage with our community for more future ideas, feedback and improvement pointers.
At PancakeSwap, we’ve heeded our community’s feedback and improved our platform to offer an even more decentralized, transparent, and secured trading environment. We invite you to explore the next evolution of decentralized perpetual trading with our Perpetuals V2.
Want to learn more in the meantime? Check out our V2 initial announcement here, our step-by-step guide here, and click here to start Perpetuals trading!
As we progress, we will continue to enhance V2 for our users and delve deeper into its features, mechanisms, fee structure, strategies, and technical design choices as part of this series. Stay tuned as we deep dive into all things Perpetuals V2 next week!
Stack’em,
The Chefs 🥞