01 Exchange Introduces Power Perpetuals (#SQUOL)
Over the past few weeks, 01 exchange has attracted over 5,000 unique traders, added 5 different Perpetual futures markets, and 6 different collaterals. During this time, 01 has been working hard with traders, market makers, and quants to design and push forward a novel derivative type, uniquely enabled by 01’s scalable order book design, and Solana’s high throughput: Power Perpetuals (also known as #SQUOL, squared sol).
What are Power Perpetuals
Power Perpetuals is a novel financial derivative type first outlined by Dave White, Dan Robinson, and the Opyn team, that offers a uniquely different payout structure to traders.
Imagine a regular perpetual future but raised to a power. Squared Solana (²) would be worth 10,000$ (if Sol is at 100$), square root Solana (¹/2) would be 10$, and so forth. This property is enforced by changing the typical perpetual futures funding rate to `mark — index^power`.
The question then is why do something like this. The one evident reason is leverage. If you buy squared sol and it goes up by 2x, you 4x your investment. Well, one might say that you can achieve the same if not larger effect with leverage, but the difference is that with leverage you can get liquidated whereas with powers you can’t. This happens because power perpetuals with powers greater than one offer positive convexity, while power perpetuals with powers lesser than one offer negative convexity.
Obviously, such a trading instrument does not come for free. Just like with regular perpetuals, powers have funding involved. In the previous example, squared perps traders who are long will be paying funding to those who are short.
Beyond speculation, Powers have multiple other applications that 01 Exchange is excited to be releasing in the coming days.
The nature of Powers opens multiple applications for delta neutral vaults allowing for multiple strategies to be released on top of the product. By pairing the Power perpetual with an underlying asset or a corresponding perp, vaults can earn passive yield for DeFi users.
Hedging impermanent loss
One of the most exciting applications of Power perps is to hedge impermanent loss from LP pools. The Powers payout can allow users to avoid losing on impermanent loss while staking into constant product market maker pools such as Atrix, Raydium, Orca, etc., by composing a well-defined portfolio on 01. This process can also be simplified through automated vaults.
[To learn more about power perps, read original power perps article: https://www.paradigm.xyz/2021/08/power-perpetuals/]
The 01 team finished testing and developing Powers in early January. Over the past few weeks, we’ve been internally auditing, and onboarding top-liquidity providers to make sure that traders have the best experience when trading on 01.
01 is excited to announce the official Power perps release date for early adopters within the next week. 01 will be giving out exclusive early alpha NFT tickets to traders and users on Solana.
Oh, also, the first 5 people to tweet #SQUOL & tag @01_exchange will get early access to NFT.
About 01 Exchange
01 Exchange is a fully decentralized orderbook-based derivatives exchange on Solana, supporting perpetual futures and power perpetuals. It features an on-chain limit orderbook through a deep integration with Project Serum, cross-collateralization, powerful cross-margining, and yield-earning deposits, all without sacrificing on decentralization. To learn more about 01 Exchange, visit https://01.xyz/ or https://twitter.com/01_exchange.