Perpetuals
Perpetual Futures
Derivative contracts that track asset prices without expiration dates
Definition
Perpetual futures are derivative contracts that track an underlying asset's price without an expiration date. They use funding rates to keep prices aligned with spot markets.
Perpetuals (Perpetual Futures) is a strategy term used to understand Derivative contracts that track asset prices without expiration dates. In practice, it matters because it affects how users evaluate protocols, compare opportunities, and avoid hidden assumptions.
Example
Trading ETH perpetuals on dYdX allows you to go long or short ETH with leverage, paying or receiving funding rates based on market sentiment.
How it works
In practice, the concept shows up like this: Trading ETH perpetuals on dYdX allows you to go long or short ETH with leverage, paying or receiving funding rates based on market sentiment.
Why it matters
Perpetuals matters because small misunderstandings in DeFi can turn into bad pricing, liquidation, governance, custody, or smart-contract risk. A good mental model helps you compare protocols without relying on marketing language.
What to check
Treat it as a strategy: map each step, each contract dependency, each exit condition, and the downside before committing capital. The main checks are: Funding rate costs; Liquidation risk; Basis risk; Counterparty risk.
Risks to Consider
- Funding rate costs
- Liquidation risk
- Basis risk
- Counterparty risk
Common Questions
What does Perpetuals mean in DeFi?
Perpetuals means Derivative contracts that track asset prices without expiration dates. The useful question is not only the definition, but how the mechanism changes risk, return, liquidity, or governance for the user.
How is Perpetuals used in practice?
A practical example: Trading ETH perpetuals on dYdX allows you to go long or short ETH with leverage, paying or receiving funding rates based on market sentiment.
What should I check before relying on Perpetuals?
Check funding rate costs, liquidation risk, basis risk, counterparty risk. Also verify liquidity, oracle assumptions, admin controls, and whether the protocol has been tested during stressed markets.