Market Opportunity for PepperDEX
Let's take a quick look at perpetuals. Perpetuals are futures contracts that never expire. For a perpetual futures contract holder to maintain their position, they are required to either pay or receive some sort of fee. This fee is called the "funding rate." A negative funding rate means you have to pay to be short (you get paid to be long), and a positive funding rate means you pay to be long (you get paid to be short). If the perp price is higher than the mark price (which is an index of the underlying spot price), then funding will be positive, and if the perp price is lower than the spot index price, funding will be negative.
During 2021, collective perp volumes on centralized exchanges exceeded more than $2 trillion per month. In comparison, decentralized derivative platforms were doing close to $100B/month. However, trading volumes declined throughout 2022 and the first half of 2023, resulting in centralized exchanges averaging ~$1 trillion per month between BTC and ETH futures over the second half of 2022 and the first half of 2023. In comparison, the top 10 decentralized exchanges by volume have averaged ~$55 billion in total monthly trading volume. However, despite the current bear market, the gap between CEX and DEX perp volumes has begun to narrow thanks to projects that maintain similar mechanics to PepperDEX (GMX, DYDX, etc.); some of the reasons for this are:
Regulatory limits on centralized exchanges make those products too difficult.
Market participants using similar products in DeFi are rewarded more for the same trading activities through incentives and staking.
Historically a hindrance to DeFi derivatives like perpetuals has been due to blockchain scaling. However, thanks to layer-2 networks, they help solve scalability issues.
New and innovative DeFi flywheels create a positive feedback loop and help drive adoption.
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