After several months’ endeavors, we are excited to announce that MCDEX V2 — Perpetual contract is ready!
The first contract live is ETH-PERP, which has following features:
- Deribit-like continuous funding rate
- Introduce Uniswap-like AMM to Perpetual contracts
In Perpetual contracts, the Funding rate reflects the supply and demand for future trades. On centralized exchanges, the impact bid/ask price of the order book accurately provides this information. The on-chain order book for decentralized perpetual contracts is quite expensive, so we don’t use the on-chain order book for decentralized perpetual contracts. In fact, this is the most challenging aspect of designing a decentralized perpetual contract — to derive the funding rate on the chain.
Therefore, our MCDEX team introduced an Automated Market Maker(AMM) to our Perpetual Smart Contract. Since arbitragers will continuously transfer liquidity between the off-chain order book and the on-chain AMM, the AMM should have an “order book” like logic. That’s why we use AMM’s mid-price to reflect the market demand/supply of the trades.
The AMM price can have various formulas, thus many choices. In the first phase, we have chosen the classical x*y=k, which already has several successful use cases. We’ll continuously upgrade the price formula over time.
Meanwhile, MCDEX also provided an off-chain order book for order matching to provide liquidity.
How to trade
With the on-chain AMM and off-chain order book running at the same time, MCDEX users have two trading choices:
a. Trade with AMM, which is simple and intuitive.
b. Trade with order book, which is similar to trading Perpetual contract on a centralized exchange.
Trade with AMM:
Advantages: Fully decentralized trading, simple & intuitive UX
Disadvantages: potential risk of worse slippage
Trade with Order book:
Advantages: Better liquidity, similar experience with Perpetual on centralized exchanges
Disadvantages: Off-chain order book
All you need trade is ETH, no need to any other coins. Also, anyone can add or remove liquidity to the AMM by depositing or withdrawing ETH respectively.
Perpetual Contract Features:
1) Market price soft peg to index price through funding mechanism
2) Up to 10x leverage
3) AMM provides on-chain liquidity & funding rate
4) Off-chain order book enhancing liquidity
5) Isolated margin & liquidation
Please refer to reference, if you are interested in details.
MCDEX V2 is built on Mai2 Protocol, which is open-source on https://github.com/mcdexio/mai-protocol-v2. The Mai2 Protocol will soon be audited.
MCDEX V2 is currently in Beta mode on the Mainnet. We invite users/researchers/traders to play with it. Let us know any feedback you may have.
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