Perpetual swaps exchange Avantis began trading on the Base mainnet on Friday, bringing a new approach to the old problem of balancing crypto futures markets that its founder believes will be attractive to retail traders.
Avantis was one of the first trading protocols to be deployed natively on Base. backed by coinbase Layer 2 proponents are betting that proximity to centralized exchange giants could push millions of DeFi newbies into the on-chain world.
It seems unlikely that such a crowd will flock to risky leveraged trading anytime soon, with Avantis offering 75x leverage. But according to a press release, his two-month testnet of Avantis has yielded a lot of results, with him generating more than $5 billion in transactions from 50,000 wallets.
permanent swap is an economic novelty unique to cryptocurrencies. These are essentially futures contracts with no expiry date. Longs (who believe the price of the token will go up) and shorts (who believe the price of the token will go down) can continue to bet as long as they have posted enough collateral.
However, these markets require maintenance. It is a way to ensure that the price of a futures contract does not deviate too much from the value of the asset it represents. The funding rate indicates the fees that buyers and sellers pay to each other, which suppresses open interest.
“The problem is that DeFi and CeFi are all so specialized that a lot of market makers are arbitraging funding rates,” said Harsehai Singh, CEO of Avantis. Stated. “Retailers don’t have the opportunity to play in the open interest game.”
Avantis’ approach is a little different. Guarantees traders who take contrarian positions, betting that a token’s price will go down when they probably think most other tokens will go up, rather than using funding rates to balance the market provide rebates. This is a risky deal that can break down. But the risk is somewhat mitigated by the protocol’s promise to repay some of its losses, Singh said.
“This is really aimed at people who only do directional trading,” Singh said in an interview.