Introduction:
Perpetual futures, or "perps," are a type of derivative contract that allows traders to speculate on an asset's price without an expiration date. First popularized in the cryptocurrency market around 2016, these contracts let traders take long (buy) or short (sell) positions indefinitely, as long as they maintain sufficient collateral.
LeoDex Perps is a decentralized perpetual futures trading platform where users can trade leveraged crypto derivatives without needing an account or for their funds to be held by an exchange. The platform uses Rujira Network and THORChain, allowing assets to remain secured on the THORChain network and trading to be fully on-chain. This model gives users control over their funds while enabling them to speculate on price movements with leverage, a feature unique to perpetual futures.
How it works on LeoDex
- Decentralized and on-chain: All trades are executed directly on the blockchain, meaning no third party, including LeoDex, ever takes custody of your assets.
- Powered by Rujira and THORChain: The platform is built on the Rujira Network and secured by THORChain, a protocol that facilitates cross-chain asset swaps.
- No account or KYC: Like other decentralized applications (dApps), users connect a crypto wallet to trade, eliminating the need for traditional registration and identity checks.
- Leveraged trading: Users can open positions with leverage to speculate on the price going up or down, but this also increases risk and the potential for liquidation.
Key features and considerations
- Perpetual contracts: Unlike traditional futures, these contracts do not have an expiration date, allowing traders to hold positions indefinitely until they manually close them or are liquidated.
- Funding mechanism: A key feature of perpetual futures is the funding rate, a periodic payment mechanism that helps keep the contract price aligned with the underlying spot market price.
- Asset security: Because the platform is decentralized, the assets are secured on the THORChain network, and no exchange has direct access to your funds.
- Risks: As with any high-risk trading, there are risks involved, including volatility, price slippage, and smart contract risk.
How PERS trading works on LeoDex
- Decentralized platform: Unlike many perpetual futures markets on centralized exchanges, LeoDex's perps are fully on-chain. Assets are secured on the THORChain network, meaning no centralized exchange holds custody of your funds.
- Leverage: PERPS let you trade with leverage, allowing you to open larger positions than your initial collateral would normally permit. Higher leverage amplifies both potential gains and risks, including the risk of liquidation.
- Funding rate: To keep the perp's price aligned with the underlying crypto asset's spot price, a funding rate mechanism is used. This small, periodic payment is exchanged between traders who are long (betting on a price increase) and those who are short (betting on a price decrease).
If the perp's price is higher than the spot price, longs pay shorts.
If the perp's price is lower than the spot price, shorts pay longs. - No expiration: PERPS can be held indefinitely as long as your collateral is sufficient to maintain the position, providing flexibility not found in traditional futures contracts.
How to trade PERPS on LeoDex
- First, Use a compatible wallet: You will need a Web3 wallet that is compatible with the LeoDex platform, such as the Keplr Wallet.
- Second, Deposit collateral: To open a position, you must first deposit USDC as collateral onto the THORChain network through the LeoDex interface. This secures the funds for trading.
- Third, Choose network and amount: Select the network and amount of USDC to secure on THORChain for your trading.
- Fourth, Open a position: Once your collateral is ready, you can open a long or short position on an available trading pair. For example, a long position on XRP/USDC.
- FIFth, Monitor your position: You can track your open positions, including your unrealized profit and loss, through the LeoDex interface.
- Sixth, Close or withdraw: You can close your position at any time to realize a gain or loss, or withdraw your available collateral from the THORChain network.
Risks of trading PERPS on LeoDex
- High volatility: Perpetual futures trading is highly volatile, especially in cryptocurrency markets. You can lose all of your collateral if your position is liquidated.
- Liquidation risk: If the market moves against your leveraged position, your margin may fall below the required level, leading to the automatic liquidation of your position.
- Funding costs: While the funding rate can sometimes be a source of income, it can also be a significant cost if you are consistently on the side of the trade that is paying the fee.
Last words
- Thats a short introduction to PERPs on LeoDex.
- Learn as much as you can and consider paper trading until you are confident you can win.
- Only trade what you can afford to lose.
-Remember you wins are yours and your losses are yours. Take full responsibility for your actions.
The End
@Shortsegments
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This post was written by Shortsegments, who has been writing about cryptocurrency, the blockchain, digital ledgers, bitcoin, ethereum, and decentralized finance; where digital ledgers and smart contracts meet finance, for seven years. You will find his articles here on his blog Link to his blog.
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