Once a price feed has been chosen, the market operator defines the logic of the market by choosing the payoff function. A payoff function describes the logic the smart contracts should use to split money between the two parties involved, the makers and takers, when the market settles. Perennial allows for developers to define any payoff function they desire — everything from simple long <asset> markets to 3x short <asset> markets to options & exotic payoffs. Below are some examples of possible payoff functions.

Example Payoff Functions

3x Leveraged Ether
3 * ETH
Chainlink ETH Feed
Short Ether
-1 * ETH
Chainlink ETH Feed
Chainlink ETH Feed
Inverse ETH-USDC UniV2 LP
-1 * sqrt( ETH )
Chainlink ETH Feed
The payoff function for a market can be any function over an available oracle feed. This function is the definition of the exposure one (1e18) taker position represents within the market.
Note that in the case of the "3x Leveraged ETH" payoff function, the payoff function itself is leveraged. This is independent of Maker/Taker (user) positions that can also be leveraged (Ex. a Taker could be 2x leveraged on a 3*ETH market). For more information on Maker/Taker leverage, see the Maintenance (& Leverage) section.