Market Structure
Overview
Perennial in its most basic form is infrastructure for launching derivative markets. A market in perennial is a two-sided market (makers and taker) that trades exposure to a given payoff function. Each markets is indepedent & has isolated risk.
A Market in Perennial is defined by things like:
Price feed
Payoff function
Utilization curve (relationship between utilization & funding rate)
Fee structure
Leverage & liquidation parameters
Maximum liquidity (a risk parameter controlling the max. size of the market)
Implications of this worth calling out:
Payoffs are fully synthetic — There can be a Perennial market for any price feed (or any programmable deviation of that price feed). A market could theoretically be created for crypto tokens, currencies, commodities, or any other non-manipulable price feed.
Each price feed may have multiple markets — There may be a Long-ETH market with the payoff function 1*ETH, and a Short-ETH market with the payoff (-1)*ETH)
Each payoff function may have multiple markets — There may multiple Short-ETH markets (payoff: (-1)*ETH), each with its own utilization curve, fees structure, parameters, etc.
Market Creation
Perennial allows for permissionless market creation — anyone can come in and launch any market they desire. We anticipate there will be markets with long / short <asset> payoffs for many types of assets, duplicate markets for assets that tweak LP/risk parameters, and many exotic defi-native markets.
Each market created in Perennial has a market operator controlled by an on-chain address (typically a multisig). The market operator serves a few functions:
Design & deploy the market — pick market, choose price feed & utilization curve, launch market
Set and tune parameters — set initial parameters and adjust them in response to market Manage
Market evolution — upgrade the market, help with distribution to users, and more
In return, the market operator receives a portion of the fees collected by the market, creating an incentive for market creation.
Because market operators have the ability to change important system parameters, we recommend that operator keys are managed by a multisig with a timelock (such that there is a delay before changes are implemented).
Most markets will be operated by ecosystem participants — For the Long-SQTH pool, the market operator is Opyn team, and the key is controlled by Opyn protocol core multisig w/ timelock.
Some markets will be protocol-owned — For the Long-ETH & Short-ETH markets, the Perennial protocol will be the market operator, and the key is initially controlled by Perennial's core multisig w/ timelock.
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