Perpetual is a decentralized leverage platform that is built on the concept of a virtual AMM (vAMM).
Perpetual is a derivatives exchange that was designed to facilitate the buying and selling of perpetual contracts. This is made possible by the creation of the virtual AMM (vAMM). For Perp V2, the protocol utilizes the Uniswap V3 implementation as the core pricing engine. The Clearing House is a smart contract that accepts the initial user deposit and records their position details around margin amount, leverage direction, and amount of leverage. The Clearing House then sends the deposit to the collateralization vault which helps backstop and secure trading positions. A virtual token (vToken) is a synthetic token with no intrinsic value and is used solely for accounting purposes. The protocol has an insurance fund that serves as a safety net to help maintain system solvency when the protocol accrues bad debt. The insurance fund is shared across all markets on Perp V2 and accrues 20% of all trading fees. When collateral is successfully liquidated, a 5% fee is charged. Perp V2 also introduces the concept of a maker who will be providing liquidity. In Perp V1, the vAMM model combined vTokens with the constant product model, which enabled the use of leverage and removed the need for LPs. The risks with this approach were that the protocol was overreliant on the insurance fund in case of skewed open interest and that traders were exposed to high slippage. By introducing LPs or makers, every trade now occurs between two counterparties. The maker is faced with three choices: 1) place a range order below the current taker (willing to buy); 2) place a range order around the current tick (willing to both buy and sell); or 3) place a range order above the current price (willing to sell). Perp V2 also introduced leveraged liquidity provisioning. Makers can leverage on top of their positions to increase profits in addition to earning trading fees.
Currently, the protocol collects all trading fees in USDC. Of this amount, makers or LPs earn 80% of the fees while the remaining 20% goes towards the insurance fund.
You can earn protocol fees by providing liquidity on Perp V2 as a maker. In addition, makers can leverage their positions up to 10x using the vAMM. You can also use the platform as a trader to place directional bets on assets or hedge your existing positions.