🏛️Markets

Introduction to Markets

Underlying Perennial is a three-sided market, consisting of longs, shorts & makers, that trades synthetic exposure derived from a price oracle, over a given payoff function. Each market is independent & has isolated risk.

A Market in Perennial is defined by things like:

• Oracle

• Payoff function

• Fee structure

• Funding & Interest Rate

• Leverage & Liquidation

Makers can provide liquidity to the market various ways:

• Through Vaults: These are configurable pools that consolidate DSU (a USDC-wrapped stablecoin used as collateral) and deploy it as Maker positions across one or multiple markets, absorbing imbalances from Taker positions.

• Through Direct Liquidity Provision: Liquidity Providers (LPs) can also supply collateral directly to specific markets, often utilizing leverage to enhance capital efficiency and potential returns (while also managing associated risks).

Key implications of this design include:

1. Fully Synthetic Payoffs: Perennial markets can be created for any asset with a reliable price feed (e.g., crypto tokens, fiat currencies, commodities) or any programmable variation of that feed. The primary practical constraint is the availability of a non-manipulable oracle.

2. Multiple Markets per Price Feed: A single oracle (e.g., for ETH price) can support various markets, each with a different payoff function. For instance, there could be a Long-ETH market (payoff: 1*ETH), a Short-ETH market (payoff: -1*ETH), and even a 3x Short-ETH market, all referencing the same ETH oracle.

3. Multiple Markets per Payoff Function: Due to the isolated nature of each AMM, even for an identical payoff function (e.g., Short-ETH with payoff -1*ETH), multiple distinct markets can exist. Each of these can have its own unique fee structure, funding/interest rate parameters, utilization curves, and other market-specific configurations.