Margined Protocol Whitelisted Address for Deployment of Power Perpetuals Contracts
Proposal Summary
This proposal seeks to grant permission to osmo1g8qypve6l95xmhgc0fddaecerffymsl7kn9muw for deploying Margined Protocol’s
Power Perpetuals contracts on the Osmosis network. The address, managed
by @shapeshed and @maxrobot, will have the authority to upload CosmWasm
contracts without requiring further governance approval for each deployment.
Contracts to be Deployed
The proposal includes the deployment of a suite of contracts to offer Power
Perpetuals on Osmosis:
Power Contract: Minting and burning of power perpetuals.
Query Contract: Provides a price discovery helper.
Staking Contract: Enables $MRG token
Collector Contract: Manages the collection of Margined Protocol fees.
Audit and Security
These contracts have undergone thorough audits conducted by Oak Security,
with financial support from the OGP.
Protocol Enhancements
The Margined Protocol will be further strengthened through the integration of the $MRG
token and the establishment of an OSMO / sqOSMO liquidity pool to support
the initial Power Perpetual use case.
Permissions Clarification
This proposal exclusively addresses the initial Power Perpetual contracts
and their potential future upgrades. It does not grant blanket permission
for all contracts or changes.
About Margined Protocol
Margined Protocol is actively engaged in the development of decentralized
perpetual protocols for CosmWasm networks. One of its significant innovations
is the use of concentrated liquidity pools, which facilitates genuine price
discovery within these contracts. This innovation distinguishes Margined
Protocol from oracle-based “perpetual” protocols, as it empowers traders to
actively contribute to the market’s information flow.
Why Price Discovery Matters Price discovery is the cornerstone of effective
markets. Unlike traditional crypto derivatives, where trading occurs passively
based on external data sources, Margined Protocol’s approach aims to foster
genuine on-chain derivative markets. This enables the transfer of risk
between market participants, a crucial step for the crypto space to mature
beyond a sandbox.
Resources
For more information on Margined Protocol, please refer to the following
resources:
Testing of these contracts is still ongoing on the testnet, and the official
on-chain deployment date is yet to be determined, although it is expected
after October 20th. Your support for this proposal will contribute to the
growth and evolution of decentralized derivatives markets, fostering greater
liquidity and true price discovery in the crypto ecosystem.
How does this perpetuals product differ from Levana?
Great question!
So Margined Power Perpetuals are quite different to Levana in a number of key ways.
Tl;dr
Tightly coupled with Osmosis DEX, as it use’s CL pools for price discovery
Price discovery for the perpetual is on-chain, i.e. it’s DeFi native and decentralised
Payout structure is different as it gives leverage for square of base asset
No liquidation for long positions
Ability for strategies to be deployed directly on-top of the strategy which is something we also plan to do post-release of the initial perp contract
In slightly more detail.
Margined Power Perpetuals use a Osmosis CL pool to price the power perpetual. Thus our power perps will increase usage of the Osmosis DEX.
As a follow on to the previous point this means price discovery is 100% on-chain and not reliant on an external oracle. Having on-chain price discovery is very important for crypto more generally as it allows derivative markets to move on-chain and not have the most amount of volume trade on CEXs. If DeFi cannot have on-chain price discovery then crypto markets will likely remain concentrated on CEXs.
Not using an external oracle for pricing also means Margined Power Perpetuals do not need to continually update prices on-chain and consume blockspace. Further we believe it is a more decentralised solution.
The payout structure of a power perpetual is different to a traditional perpetual as it tracks the square of the base asset’s price. For more details see here.
Margined power perps are to be coupled with strategies that will enable users to utilise perpetual products more easily. Examples of which include a crab strategy that seeks to profit during stable market conditions.
I hope that is a basic overview of how we offer a differentiated product to Levana and hope you see how this will also add value to Osmosis’ offering.
So for a user going long it does not actually involve leverage, rather you are buying exposure to osmo^2 through the squosmo that should have a payout similar to the underlying asset squared.
When a user wants to go long they simply buy the squosmo token from the pool.
However, short positions are at risk of liquidation as user’s going short need to provide collateral to mint the squosmo token and can be liquidated if the collateral ratio goes below 150%.
This is why power perpetuals are often described as an evolution of everlasting options.
So if you go long and the price goes down your position will lose value. However, unlike in a tradition perp it will not get liquidated if the collateral value is lower than the maintenance margin.
So for long positions I would even say decreased losses
That being said it’s not really appropriate to compare like for like as a power perp gives you the exposure of the base asset squared whereas a traditional perp will give you 5x, 10x, 20x…
more so yeah, when you said swap I assumed the long didn’t have collateral. But since you have squared exposure I’m assuming you would lose more on the downside compared to a normal spot position, that’s what I meant by increased losses.
Sure no problem. The flow is a little hard to grok at first because it’s not just open or close a position as in traditional perps.
However, we have a helper functions in the contract, and UI, that automate the more complicated short user journey described below.
High level user flow:
Going short:
Short seller comes to power contract and deposits collateral to mint squosmo token.
a. Short seller LPs squosmo and osmo in the relevant pool, earning a payout of approx. osmo^1.5
b. Short seller sells squosmo for osmo in the relevant pool, and can earn the funding rate
Going long:
User sells osmo for squosmo in the relevant pool
User sells the squosmo in the pool realizing pnl
Tried to keep it brief so let me know if you need more detail
