For today’s episode, I sat down with Su Zhu to learn all about perpetual swaps. There’s probably not a person in crypto who has more authority on this topic than him. The first half of the episode serves as a general introduction to perpetual swaps, while in the second half, we explore how perpetual swaps are coming to DeFi and why they are the single biggest primitive that is still missing from the DeFi puzzle.
While the episode can get pretty technical at times, we tried to follow a logical buildup, so no prior knowledge should be required. Please note that I put some links to definitions and followup reading into the show notes. Enjoy the episode.
In this episode:
What is a perpetual swap and how does it work
The history of perp swaps and their usage outside of cryptocurrency
How the oracle problem is misunderstood
AMM and central limit order book: mapping the two approaches to perpetual swaps in DeFi
Tradeoffs between perps in CeFi and DeFi
Perpetual swaps as money legos
How DeFi perp swaps will enable a new form of stablecoin
The role of insurance funds and auto liquidation
Hasu Twitter https://twitter.com/hasufl
Su Zhu Twitter https://twitter.com/zhusu
Episode transcript https://uncommoncore.co/uncommon-core-podcast-episode-8-transcript/
Definitions and further reading:
TWAP: https://en.wikipedia.org/wiki/Time-weighted_average_price
LIBOR: https://en.wikipedia.org/wiki/Libor
CFD: https://en.wikipedia.org/wiki/Contract_for_difference
Tom next swaps: https://www.investopedia.com/terms/t/tomorrownext.asp
Rolling a futures contract https://www.investopedia.com/terms/r/rollforward.asp
yTokens and yVaults: https://anchor.fm/uncommoncore/episodes/6-Andre-Cronje-and-the-Philosophy-of-Yearn-Finance-ei4vds
Synthetix tokens and inverse tokens: https://docs.synthetix.io/tokens/
Article on crypto banking https://insights.deribit.com/market-research/the-great-race-to-crypto-banking/
Design space for auto liquidation mechanisms https://insights.deribit.com/market-research/crypto-derivatives-exchanges-liquidation-pioneers/
