They claim the Perpetual Protocol (PERP) can make money from automated arbitrage. Moreover, they claim Perpetual users can earn a share of protocol revenue in USD Coin (USDC) stablecoins.
Hence, they claim the Perpetual Protocol pays stakers with fiat currency, US Dollars. To explain, USD Coin is a stablecoin that pays with US Dollars they hold in BlackRock (BLK) and BNYMellon (BK) trust accounts. Importantly, the world’s largest payment card brand, Visa (V) payment network, now settles USDC payments through merchant acquirers. Statista estimates there were over 2.9 billion Visa debit cards worldwide in the fourth quarter of 2023.
Arbitrage is a foreign exchange trading strategy in which speculators buy an identical security, commodity, or currency in two markets at once. The hope is to capitalize on differing prices for assets in disparate regions.
The US Dollar is DeFi’s future
Thus, Perpetual is part of a growing trend in decentralized finance (DeFi). The trend is using blockchain technology to pay users with fiat currency. I consider this a smart strategy because most people use fiat currency for almost all transactions.
For example, US citizens pay their electric and internet bills in US dollars, not Bitcoin (BTC). Similarly, British subjects buy food at Tesco with pound sterling, not Ethereum (ETH). Hence, Perpetual pays in something that ordinary people can spend in the real world: US dollars.
The US Dollar is the world’s reserve currency. Hence, financial institutions and corporations use dollars for most cross-border transactions. The Federal Reserve estimates they use US dollars in around 60% of international and foreign currency claims and liabilities (deposits).
Thus, the US dollar is DeFi’s future and they could build Perpetual to use dollars. Moreover, they build Perpetual to pay in dollars.
How Perpetual (PERP) Automates Arbitrage
They claim Perpetual (PERP) automates arbitrage profits through Hot Tub Vaults.
To elaborate, they claim Perpetual turns a sophisticated arbitrage strategy into simple vaults anybody can use. These are the Hot Tub Vaults. They claim the Hot Tub Vaults do all the work so traders are not reliant on custodians and third parties. Ideally, Hot Tub Vaults generate held by executing arbitrage strategies.
For example, they claim Hot Tub Vaults maintain Market Neutrality by constantly hedging Ethereum (ETH). Automated smart contracts execute all arbitrage trades in the Hot Vault Tubs. They claim Hot Tub vaults offer full transparency.
Hot Tub Vaults let users earn yield in either ETH or USDC. Hence, Perpetual users accumulate Gwei. Gwei is a denomination of Ethereum (ETH) used to calculate prices on Ethereum. For example, one Ether contains one billion Gwei just as a dollar contains 100 cents.
How Hot Tub Vaults Make Money
Hot Tub Vaults make money by charging users a 2% asset fee and a 20% performance fee. Hence, Perpetual only makes money when the vault makes money.
Hot Tub Vaults are noncustodial. That means only the owner and Perpetual’s Protocol have control over the asset in the vault. This reduces risk from theft or incompetence by a custodian. However, Hot Tub Vaults could be uninsured, unlike bank accounts. Hence, any losses are permanent.
Hot Tub Vault owners receive share tokens that represent the assets they place in the vault. Perpetual pools these assets for arbitrage. Each share token represents a percentage of the pooled assets that a person owns. Perpetual burns share tokens when owners withdraw assets from the vault. Owners receive withdrawn assets as USDC or Wrapped Ethereum (WETH). WETH is a stablecoin that pays in Ethereum rather than fiat currency.
How Perpetual Protocol offers Leveraged Exposure to Crypto
They built the Perpetual Protocol (PERP) as a decentralized exchange (DEX). This DEX supports fast swaps that are permissionless. Permissionless means users can make trades without asking the DEX for permission.
Perpetual Protocol uses the Optimism Layer 2 Optimistic Rollup network to guarantee deep liquidity. Optimism (OP) had a $1.014 billion Market Capitalization and a $5.455 billion Fully Diluted Market Cap on 11 September 2023.
Perpetual DEX features include margin trading. Margin means speculators make trades with money they buy from the DEX. They claim Perpetual offers margin positions up to 10 times the value of their holdings.
Furthermore, they claim Perpetual Protocol concentrates liquidity. This allows leveraged liquidity and supports cross-margin trading in multiple positions. Users can back margin loans with multiple collateral. Advanced trading features include stop losses and limit orders.
Can the Perpetual Protocol (PERP) Generate Revenue in USDC?
The Perpetual Protocol (PERP) uses the Lazy River 2.0 reward program to distribute to distribute revenue to vePERP holders. vePerp is a wrapped token Perpetual uses. vePerp gives holders the ability to participate in Lazy River 2.0 and to vote in the Perpetual DAO.
Lazy River allows Perpetual holders to earn USDC and locked PERP rewards. Users can lock in rewards through the Optimism blockchain. Lazy River 2.0 lets token holders share fees in USDC. It also maintains an insurance fund that backs PERP rewards.
15% of all trading fees will accrue to vePERP holders when the insurance fund revenue exceeds a threshold. They pay another 5% to the Perpetual Decentralized Autonomous Organization (DAO) Treasury.
What Value does the Perpetual Protocol (PERP) Offer?
There is interest in the Perpetual Protocol (PERP). For example, PERP was CoinMarketCap’s seventh-most trending cryptocurrency on 11 September 2023.
In contrast, CoinMarketCap gave Perpetual a 61.98₵ Coin Price, a $40.919 million Market Capitalization, a $92.995 million Fully Diluted Market Cap, and a $32.516 million 24-Hour Market Cap on 12 September 2023. They base those numbers on a Circulating Supply of 66.002 million PERP and a 150 million PERP Total Supply.
If you are seeking a DeFi token with growth potential. The Perpetual Protocol (PERP) could be it. I think Perpetual has growth potential because it pays in US dollar stablecoins.