Perptual Futures DEX Development Status and Future Outlook

Perptual Futures DEX is rapidly evolving, making significant advancements in efficiency, speed, and scalability. This article aims to explore how Perptual Futures DEX can broaden the application scope of blockchain and pave the way for the large-scale adoption of web3.

Exchanges are the core of the cryptocurrency market, supporting market operations through trading activities between users. The primary goal of any exchange is to achieve efficient, fast, and secure trade matching. Based on this, DEX has made many innovations on the basis of CEX, such as eliminating trust assumptions, avoiding intermediaries and centralized control, allowing users to retain control of their funds, and enabling community participation in product updates and iterations.

However, DEXs often come at the cost of higher latency and lower liquidity, primarily due to the throughput and latency limitations of blockchain. According to data, the current spot trading volume of DEXs accounts for 15%-20% of the total trading volume in the crypto market, while Perptual Futures trading only accounts for 5%.

Developing Perptual Futures business on DEX is not easy, because CEX has several advantages in Perptual Futures trading:

1. Better product experience
2. Efficient control by market makers provides finer spreads.
3. Better Liquidity
4. All-in-one combination of multiple functions

The centralization and monopoly of CEX have become issues that users cannot ignore, especially with the collapse of FTX further exacerbating the trend of centralization. By increasing the usage rate of DEX and enlarging market share, systemic risks can be effectively reduced, promoting the sustainable development of the crypto ecosystem.

The rise of Layer 2 and multi-chain ecosystems has created excellent conditions for the development of DEXs. Perptual Futures allow traders to hold positions indefinitely, popularizing a trading method that in traditional finance is only available to accredited investors by introducing the concept of funding rates. The current monthly trading volume of the Perptual Futures market has exceeded $120 billion.

Perptual Futures have four advantages over traditional futures contracts:

1. Eliminate extension fees and other related costs
2. Avoid making futures contracts more expensive
3. The funding rate system provides continuous real-time profit and loss, simplifying backend processing.
4. Provide a smoother price discovery process

Since BitMEX first introduced Perptual Futures in 2016, the Perptual Futures DEX has rapidly developed. Now there are more than 100 DEXs supporting Perptual Futures in the market, with active Perptual Futures DEXs on various chains.

However, the perpetual futures DEX is facing bottlenecks due to blockchain performance limitations. To further promote the development of the perpetual futures market, it is essential to address two core issues: low liquidity and high latency on-chain. High liquidity can reduce slippage; low latency enables market makers to quote tighter prices, enhancing market fluidity.

In the Perptual Futures DEX, the pricing mechanism is key to ensuring that market prices accurately reflect supply and demand dynamics. The main pricing models include:

1. Oracle Mode: Obtain price data from top exchanges
2. Virtual Automated Market Maker ( vAMM ): Simulating the buying and selling behavior of trading pairs through mathematical models.
3. Off-chain order book combined with on-chain settlement: trade matching is completed off-chain, while settlement and asset custody are on-chain.
4. Full-chain order book: All transaction order-related data and operations are fully processed on-chain.

Liquidity is fundamental to exchanges. Recently, two new approaches have emerged to address the challenge of acquiring initial liquidity for DEX: community-supported active liquidity vaults and cross-chain liquidity acquisition.

In terms of UX, DEX competes by introducing features such as gas-free trading, session keys, and social logins. Cross-chain DEXs are breaking limitations, such as DEX aggregators that integrate liquidity and price information from multiple DEXs into a single interface. Telegram trading bots are also continuously optimizing the UX.

Innovative financial products in the Perptual Futures DEX include:

1. Variance Perptual Futures: The trading content is the volatility of the underlying asset.
2. Pre-Launch Contract: Allows traders to speculate on the future price of the Token before it officially launches.
3. RWA Perptual Futures: may become the main way for real assets to be on-chain.
4. ETP Perpetuals: tracking the performance of underlying assets or indices

Prediction markets are a branch of financial markets, and perpetual futures DEX can revolutionize prediction markets by providing flexible and continuous trading mechanisms.

In the future, the design of decentralized perpetual futures exchanges (DEX) will better leverage the unique advantages of decentralization. An ideal design needs to find a balance between efficiency and security. Additionally, DEX is increasingly emphasizing the participation of the community and developers, and enhancing users' sense of belonging and loyalty through various mechanisms.

To promote the widespread adoption of cryptocurrency, it is necessary to develop more intuitive user interfaces and ensure a smooth user experience throughout the process. In the next decade, DeFi may intersect with various fields such as news, politics, and sports, and is expected to become a widely used tool, further driving the mass adoption of cryptocurrency.