In its core, Palmswap Protocol aims to create a protocol for trading perpetual contracts on the Binance Smart Chain that anyone can use. Trades on Palmswap v2 can be opened with USDT as Collateral. Your funds will be controlled by your Metamask wallet or another compatible wallet at all times during the trading process.
Perpetual contracts are a type of futures contracts, initially introduced by Bitmex into the cryptocurrency space. Perpetual contracts are one of the most popular derivative products in the industry. In general, trading perpetual contracts on Palmswap is largely similar to trading perpetual contracts on centralized exchanges. However, there are small things that make us different, the main differences being:
- Palmswap is fully decentralized
- Zero Price impact on trades
- The funds and trades are at any time in the control of the user
Perpetual contracts allow traders to speculate on the future price of a particular asset by buying (going long) or selling (going short) perpetual futures contracts. Unlike typical futures, perpetuals do not expire and remain effective until the trader closes his position. It is possible to use leverage of up to 50x. Financial products like perpetual contracts allow investors to better manage risk with their portfolios and open new ways of speculation. In simple terms... if you own 1 ETH and expect an increase in price, but don't have more capital available, you can leverage 1ETH up to 50ETH and profit from an increase of 50ETH. However, we recommend that you acquaint yourself with trading perpetual contracts and the risks related before using the Palmswap protocol.
The price of perpetual contracts may deviate from the general market price (also referred to as the spot market) on most exchanges from time to time. These deviations reflect sentiment on the exchange: if the majority of traders expect the underlying asset to increase in value over time, the price of the perpetual contract will likely be higher than the spot price. If the majority of traders expect the price to fall, the price of the perpetual contract will be lower than the spot price.
There are two mechanisms that guarantee the Palmswap v2 market price cannot deviate from the general market price.
- Synthetic assets
- The Liquidity Provider Pool consists of an index of USDT assets used for perpetual trading. Each trade that is opened is backed by the Liquidity Provider Pool. Liquidity providers provide assets in the place of market makers.
- Real-time custom chainlink decentralized price feed
- The market price of Palmswap is obtained from Price Feed-Keeper. This keeper calculates the prices based on the average price of Binance, Bitfinex and Coinbase. This gives the best price that is traded on an asset.