Considerations

Exposure

Now that a position is open, a trader will have leveraged exposure to a price feed. If the price moves in their direction, they will make money; if the price moves in the opposite direction, the trader will lose money. Unlike makers, the leverage you take is the leverage you get, since takers are always at maximum capital utilization.

Margin management

The trader will need to manage its margin to avoid getting liquidated. If the trade moves against them, and the amount of collateral falls below the maintenance requirement, the position will be liquidated by the protocol.

Funding Payments

For the entire duration of the open position, traders & LP will pay/recieve a continuous funding rate, to compensate the other side for taking on the risk & to balance the market. Every block, some small amount of the trader’s collateral will be streamed to the LP pool, not much different than how a traditional funding rate would work. This amount is variable & changes according to the utilization of the pool.

Modifying Position

After a position is open, a user can add/subtract collateral increase or increase/decrease the position size provided the user does not violate margin requirements. No fees are paid when adjusting collateral. In the future, some transaction fees may need to be paid on position adjustments.

Leverage

Perennial is designed for capital-efficient leveraged trading. Put down some small amount of collateral, and get a large notional exposure, depending on the market and maintenance requirement.

No Price Impact

Perennial allows you to trade with no price impact. The price on the oracle is the price you get, regardless of size, creating a trader-friendly trading experience.

Settlement delay

Because Perennial allow traders to trade directly at a given price feed, it runs this risk of servicing a lot of bad flow (ex. arbitraging oracle price with current market price, a guaranteed loss for LPs). To mitigate this, Perennial adds in a small buffer to the time at which trades are priced when positions are opened or closed, preventing obvious harmful flow. This is a non-starter for LPs, who provide the liquidity for traders. This will be reduced significantly over time — ex. when the protocol is on L2s, this delay gets pushed down to a matter of seconds.

Funding Payments

For the entire duration of the trade, the trader will pay a continuous funding rate to the LPs, to compensate them for taking on the risk. Every block, some small amount of the trader’s collateral will be streamed to the LP pool, not much different than how a traditional funding rate would work. This amount is variable & changes according to the utilization of the pool. At times of high utilization, keeping a taker position open could become very expensive.