A new adaptive pricing framework for perpetual protocols using liquidity curves and on-chain oracles

ArXiv ID: 2308.16256 “View on arXiv”

Authors: Unknown

Abstract

This whitepaper introduces an innovative mechanism for pricing perpetual contracts and quoting fees to traders based on current market conditions. The approach employs liquidity curves and on-chain oracles to establish a new adaptive pricing framework that considers various factors, ensuring pricing stability and predictability. The framework utilizes parabolic and sigmoid functions to quote prices and fees, accounting for liquidity, active long and short positions, and utilization. This whitepaper provides a detailed explanation of how the adaptive pricing framework, in conjunction with liquidity curves, operates through mathematical modeling and compares it to existing solutions. Furthermore, we explore additional features that enhance the overall efficiency of the decentralized perpetual protocol.

Keywords: perpetual contracts, liquidity curves, adaptive pricing, decentralized finance, on-chain oracles, Derivatives

Complexity vs Empirical Score

• Math Complexity: 7.0/10
• Empirical Rigor: 3.0/10
• Quadrant: Lab Rats
• Why: The paper features advanced mathematical modeling, including parabolic and sigmoid functions for liquidity curves and fee structures, leading to a high math complexity score. However, it lacks backtesting results, code implementations, or statistical validation of the proposed model, resulting in low empirical rigor.

  flowchart TD
    A["Research Goal: Adaptive Pricing for Perpetuals"] --> B["Data/Inputs: Liquidity, Positions, Oracle Price"]
    B --> C["Methodology: Model Pricing & Fees"]
    C --> D{"Computational Process"}
    D --> E["Parabolic Curve for Liquidity Impact"]
    D --> F["Sigmoid Function for Fee Quoting"]
    E & F --> G["Key Outcomes: Stable & Predictable Pricing"]