Sovryn Perpetual Futures are trading contracts that provide flexible options for taking a position within a given market. For example, with a BTCUSD trading pair, you can take a leveraged long or short position on BTC relative to USD. You can take on the risks and rewards of the spot price movement without actually buying or selling spot. You cover the risk by supplying margin assets that cover any losses you experience if the price moves against your position. Perpetual futures use an incentive mechanism that causes the contract price to track the spot price closely. Sovryn perpetual futures are similar to traditional futures contracts but without any expiration date.
Sovryn is launching perpetual futures, beginning with a BTCUSD contract. Sovryn plans to add more contracts as this product matures. The system allows users to gain exposure to other assets without selling BTC or buying a different asset. This opens the possibility for trading on basically any asset that has a publicly trackable price using a perpetual futures contract.
Perpetual futures offer a straightforward way to take a leveraged long or short position relative to an asset but without having to buy or sell the asset itself. This is similar to traditional futures contracts. However, traditional futures have an expiration date, which forces the price to track the spot price due to arbitrage between the contract and spot with the settlement date in view.
Perpetual futures use a different mechanism—called a funding rate—to keep the price aligned to the asset reference price. The funding rate specifies the rate at which a long or short position pays for the privilege of holding that position. If the contract price is higher than the reference price, then long positions pay a premium to short positions. This premium incentivizes longs to sell to avoid the premium and for traders to short to collect the premium being paid by longs. The selling pressure on the contract created by the premium moves the price back toward the reference price. Likewise, if the contract price falls below the spot price, then the funding rate goes negative and shorts pay the premium to longs. This creates upward pressure on the contract price that moves it back in line with the reference price. The funding rate changes as the contract price and reference price change relative to one another as a way to adjust the incentive.
Perpetual futures can be used in a number of different ways:
Perpetual Futures have a number of specific advantages over perpetual futures on centralized exchanges and other DeFi platforms:
Index Price: The current spot price is based on a bucket of distributed price sources provided by the Chainlink oracle.
Mid Price: The current nominal contract price of the perpetual contract, midway between the prices a buyer and a seller would receive for a given size order when slippage is taken into account. If the AMM is in balance, the mid-price is equal to the index price.
Mark Price: Moving average of the mid-price. The Mark Price smooths out rapid variations in the mid-price to provide a steadier estimate of the current contract price. The Mark Price is used to calculate unrealized PnL and to determine ongoing margin requirements. The use of the Mark Price rather than the instantaneous mid-price prevents price manipulation.
Slippage: The difference between the current quoted price (the mid-price) and the price a buyer or seller would get for a given transaction. Slippage occurs because buying or selling actually moves the price as the complete quantity of the trade is transacted.
24hr Volume: Total volume of transactions of the contract within the last 24 hours.
Open Interest: The total amount of contracts held by longs or shorts, whichever is larger.
Funding Rate: Rate at which longs pay shorts for the privilege of holding a long position (negative means shorts pay longs). The funding rate is quoted in an 8h rate and is refreshed with every contract interaction or block, whichever comes first. The AMM calculates and charges the funding rate continuously but uses a time average to produce the 8h rate. The funding rate provides an economic incentive that drives the contract price toward the index price.
Lot Size: Minimum incremental amount of the asset that can be traded (currently 0.0005 BTC for BTCUSD).
Minimum Trade Amount: Minimum position that can be traded (currently 0.0005 BTC for BTCUSD).
AMM Depth: Indicates how the price will change for a given size order. If the AMM pool contains a large amount of collateral, the price will be smaller for a given order size.
Position Leverage: The multiplier on the margin (the order cost) a buyer or seller supplies that will determine the order value, which is the size of the position established by a buy or sell order.
Note that the perpetual futures interface was temporarily made available on testnet for the competition. It will be released on mainnet once all the feedback and improvements have been implemented.
The following step-by-step guide will walk you through the process of buying and selling perpetual futures on the Sovryn platform.
Currently only MetaMask and Liquality wallets are supported when connecting to the Perpetual Futures interface.
Note that multiple approvals might be required when trading with GSN enabled.
Please note: You may be asked to sign the transaction twice. This occurs if the first ‘relay-worker’ does not respond to the request.
Rest assured, both confirmations will result in only one transaction.
Congratulations! You have successfully completed a perpetual future trade on the Sovryn platform.