Creating a New Market
Currently Perennial has permissioned market creation. However, in the future this will be opened up to anyone. Please join our discord to get the latest updates.
Perennial allows for permissionless market creation — anyone can come in and launch any market they desire. We anticipate there will be markets with long / short <asset> payoffs for many types of assets, duplicate markets for assets that tweak LP/risk parameters, and many exotic defi-native markets.
Each market created in Perennial has a market operator controlled by an on-chain address (typically a multisig). The market operator serves a few functions:
Design & deploy the market — pick market, choose price feed & utilization curve, launch market
Set and tune parameters — set initial parameters and adjust them in response to market Manage
Market evolution — upgrade the market, help with distribution to users, and more
In return, the market operator receives a portion of the fees collected by the market, creating an incentive for market creation.
Because market operators have the ability to change important system parameters, we recommend that operator keys are managed by a multisig with a timelock (such that there is a delay before changes are implemented).
Most markets will be operated by ecosystem participants — For the Long-SQTH pool, the market operator is Opyn team, and the key is controlled by Opyn protocol core multisig w/ timelock.
Some markets will be protocol-owned — For the Long-ETH & Short-ETH markets, the Perennial protocol will be the market operator, and the key is initially controlled by Perennial's core multisig w/ timelock.
Initializing a Market
In order to create a market there are a number of parameters you need to consider. These will impact the operation & safety of the market. See the values explained below:
Market Definition
Tokens
token is the underlying asset that the market settles in. It must match the quote currency of the oracle.
reward is the token that rewards are paid out in. It must not match the token. It may initially be set to the zero address, but once non-zero it may not be changed.
Oracle
oracle is the underlying oracle provider that feeds in the market’s underlying price.
payoff is the payoff provider that transforms the oracle’s underlying price to create the market’s price. The payoff may be set to the zero address to signify an identity function.
Roles
coordinator is allowed to update the risk parameters and claim any accrued risk fee.
beneficiary is allowed to claim and accrued donation.
Risk Parameters
Parameters per market, set by the risk coordinator.
Position Fees
Skew is a measure of when a markets Takers, long & short, aren't equal:
To derive the TakerFee we use the Skew we determine what the appropriate fee is when opening position fees:
Similarly, for the MakersFee in the market we calculate their fee based on the utilization of the present collateral:
Collateralization
An account is eligible for liquidation when:
During a liquidation, the liquidator is eligible to take at most
Since oracle prices are only pushed upon request, account updates (position / collateral) are blocked when the market is stale:
If the market is stale a new price must be posted with the update in order to “freshen” it.
Limits
We define efficiency (the ratio of maximum taker notional over back maker notional) as:
The global position of the market must satisfy*:
* only applies when the position is increased
Funding
Funding is determined via a P-controller over long vs short skew.
Interest
Incentivizes the delta-neutral capital costs of makers by deducting an interest rate from both long and short over a jump rate utilization curve.
U = JumpRate utilization curve
Miscellaneous
When makerReceiveOnly is active, the sign of the funding will instantaneously flip when the sign of the skew flips instead of gradually rebalancing through the P-controller. This is useful if we want to ensure that the makers always receive non-negative funding.
An amount of virtualTaker is added to both the long and short sides of the market for the purpose of funding and taker fee skew and impact calculations. This helps dampen fee volatility in new markets without a critical mass of activity.
Market Parameters
Parameters per market, set by the market factory owner.
Fees
fundingFee, interestFee, and positionFee are the percentages of the funding, interest, and maker / taker fees respectively that are collected as fees by the market.
The settlementFee is a fixed dollar-term amount that is collected to incentivize the oracle keeper any time a new oracle price is requested.
The pooled fees are split between the market and the protocol and market as follows:
The market fee is then further split as follows:
With the oracle fee going to the oracle factory of the market, and the risk fee being claimable by the risk coordinator.
Any leftover market fees are recorded as a donation and given to the beneficiary to support any miscellaneous additional fees.
Pending Limits
Because of Perennial’s delayed-settlement system, there may be multiple pending positions that need to be settled during a market flywheel touch.
Since this is a loop, we want to limit the worst case gas consumption of this process by capping the number of pending positions in the market.
maxPendingGlobal limits the quantity of global pending positions, while maxPendingLocal limits the quantity of local pending positions per account.
Once hit, this limit will soft-pause the market until the keepers are able to catch up.
Incentives
Incentive rewards may be dripped to all three sides of the market at their individually specified rates per second:
makerRewardRatelongRewardRateshortRewardRate
The reward tokens are optimistically accrued meaning the market owner is responsible for ensuring the market contract has a suitable amount of reward tokens to satisfy outstanding accruals. There are no direct invariants to account for this.
Miscellaneous
When takerCloseAlways is active, long and short positions may always close even when their closure will bring the market into socialization. Likewise when makerCloseAlways is active, maker positions may always close even when their closure will bring the market into socialization. If inactive, for both cases, the closure will instead revert.
When closed is active, the market is in a closed-only state. No funding, interest, or profit & loss, or rewards are accrued, and positions may only be reduced. Liquidations and position fees are still active during this time.
Protocol Parameters
Protocol-wise parameters, set by the market factory owner.
Fee
protocolFee is the cut of the market fee that is taken by the protocol.
Parameter Limits
Limits apply to parameters in all instance markets as specified above.
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