Introducing The First Risk-free Perpetual Contract
The year 2020, although embellished with the unfortunate pandemic, saw the rise in popularity of the DeFi ecosystem, along with the bull run of cryptocurrencies. Decentralized derivatives, in particular, have garnered a lot of eyeballs, allowing people the opportunity to hedge against the volatile nature of cryptocurrencies like Bitcoin and Ethereum.
Although ambitious, decentralized derivative products did not garner mainstream adoption, as there are several problems with the current iteration of Decentralized Derivatives, such as the potential for loss due to a delayed price field (Ethereum is infamous for having a 14-second block time), limitations in order matching, costly market-making and delayed clearing.
Considering these challenges on Layer 1, the need for a derivative product, perpetual contracts in particular with a potential for mass adoption seemingly unlikely. However, that’s set to change, as Shield is proud to announce, the world’s first workable decentralized perpetual contract on Ethereum layer 1. Named the Risk-free perpetual contract, Shield’s product goes above and beyond the mentioned limitations in the current iteration of derivative products, in our ambition to bring you the next generation of global decentralized derivative infrastructure. Once our product is live, we will likely have the world’s first decentralized perpetual contract with mass adoption on Ethereum Layer 1.
What is The Risk-Free Perpetual Contract?
The risk-free perpetual contract is Shield’s answer to the existing limitations within the decentralized derivative ecosystem. It uses a combination of a dual liquidity pool model, SLD (the native token of the platform), a decentralized brokerage system, and external liquidators to counteract the existing limitations.
For instance, the huge downside risk or even liquidation that is caused by the price delay of existing decentralized perpetual contracts is avoided using a funding-fee mechanism, allowing users to open a long or short position with a prepaid funding fee. The maximum loss is limited to this prepaid funding fee, essentially delivering a risk-free protocol in a trustless environment. We’ve talked about how the Risk-Free perpetual contract solves these problems in this post, so make sure to check it out.
Salient Features of The Risk-Free Perpetual Contract
- 100% cover on the position from the price downside. First of its kind on Ethereum Layer 1.
- Exercise at any strike price at any moment.
- Trade 24/7 on-chain in a Non-custodial, trustless environment.
- No registration, KYC procedures, or email required.
- Strong liquidity backed by dual Liquidity Pools (LPs) in a Peer-to-Pool model
- Incentivizes participation of external liquidators using two incentive plans — gas fee-based and competition-based.
- Completely Decentralized Brokerage system to incentivize referrals.
- Highly accessible — All you need is an internet connection along with an Ethereum Wallet
Roadmap and outlook
The decentralized derivatives market is exploding in popularity, potentially becoming a trillion-dollar market in the near future. Shield, being the innovative leader in the decentralized perpetuals market, is positioned in the perfect spot to capture a significant market share in this soon-to-be trillion-dollar market. You can read more about our product, and what our roadmap for the future is, on our whitepaper.
Shield’s decentralized risk-free perpetual contract is only the beginning of what we aim to achieve with this initiative. We aim to bring everyone the ability to trade on-chain and provide our users with the most flexible, decentralized derivative exchange in a non-custodial way. With Shield, we believe we have the potential to unlock a truly safe, stable, borderless, and censorship-resistant protocol — the next generation of global derivative infrastructure with high scalability and openness.
With the implementation of Shield 2.0, decentralized derivatives protocol, Shield will take the lead of global decentralized derivatives trading driven by Shield DAO. We will be launching Shield’s testnet in a few weeks, along with an early adopters program — the perfect opportunity for you to be a part of something that’s going to define the generation.