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Equation: The TVL of the new star DEX of Perptual Futures under the BRMM mechanism increased by 3 times.
Equation: The new star of DEX with the BRMM mechanism for Perptual Futures
Since its launch one month ago, the Equation platform has performed outstandingly, with a total locked value increasing by three times and a trading volume reaching 500 million dollars. Whether in product design, token economics, or user experience, Equation has demonstrated remarkable strength, making it a model for other startup projects to learn from. This article will conduct an in-depth analysis of Equation, revealing the key factors behind its success in the Perptual Futures DEX field.
Industry Background
In terms of spot trading, the decentralized exchange (DEX) has already captured a considerable market share, and users are becoming increasingly adept at using platforms like Uniswap and Curve. However, in the field of Perptual Futures trading, the on-chain trading volume still has a huge gap compared to centralized exchanges. Data shows that the on-chain contract trading volume accounts for only about 1.5% of centralized exchanges, which means there is still a lot of room for development for on-chain Perptual Futures trading platforms. Currently, several on-chain Perptual Futures exchanges such as GMX, Gains Network, dYdX, and Hyperliquid are implementing perpetual trading functions in different ways.
Against this backdrop, Equation quickly attracted a large number of users with its innovative product mechanism and trading mining strategy, with a total locked value of (TVL) reaching 16 million USD.
Product Mechanism
Perptual Futures Overview
The main difference between Perptual Futures and traditional futures is that there is no expiration date. Traditional futures have specific settlement dates, while Perptual Futures allow traders to hold open positions indefinitely and close them at any time. Perptual Futures typically specify a time frame in hours, and at expiration, the exchange will automatically "roll" the position into the next contract.
The flexibility of Perptual Futures makes them very popular in cryptocurrency exchanges, often offering high leverage. Compared to spot trading, the potential profits of Perptual Futures are higher, but the risks are also greater. Perptual Futures use a funding rate mechanism, where one party to the contract regularly pays a small fee to the other party to ensure that the futures price converges periodically with the index price ( of the underlying asset price ).
Design features of the Equation
Trading Mechanism: Establish independent trading pools for different trading pairs as counterparties for traders. When users open positions, close positions, or are liquidated, liquidity providers (LP) will automatically hedge with positions of the same scale, the same price, but in the opposite direction.
Pricing Method: Equation adopts an innovative BRMM( Balance Rate Market Making) method for pricing. Among them, BR represents the liquidity pool balance rate, and the calculation formula is: BR = Value of short positions held by LP / Total liquidity of LP
When the LP has no position, BR is zero, indicating that the liquidity pool is in a state of complete balance. When the LP holds a long position, BR is negative.
Perptual Futures价格溢价率(PR)是Perptual Futures流动性池价格(P)相对于指数价格(Pi)的溢价率,PR = f(BR)。当BR = 0时,f(BR) = 0,即当LP处于完全平衡状态时,溢价率为零。
Funding Rate: In the BRMM model, the direction of the funding rate payment depends on the LP's position status:
Funding rate calculation formula: Funding Rate = IR + APR
Among them, IR( Interest Rate) is the interest rate, which can be adjusted by the DAO; APR( Average Premium Rate) is the average premium rate, calculated every five seconds.
User Experience Advantages
Equation offers lower maintenance margin and higher leverage than dYdX and GMX in trading, which is very appealing to risk-tolerant cryptocurrency traders.
Comparison of Maintenance Margin and Maximum Leverage:
To protect LP, Equation has designed a risk buffer fund (RBF):
The sources of income for RBF include:
Token Economics
The token design of Equation includes functional tokens (FT) and non-fungible tokens (NFT), and maximizes user participation incentives through a 100% fair distribution model.
EQU token
EQU, as a native token, is generated 100% through holding mining, liquidity mining, and referral mining. After being mined, it will be locked for 90 days, and early withdrawal will incur penalties. In addition, Equation uses the ve( vote-escrowed) model to empower the token:
EFC Non-Fungible Token
EFC is divided into different levels, including Member, Connector, and Architect:
Member NFT:
Connector NFT:
Architect NFT:
Through this multi-layered token design, Equation not only incentivizes users to participate and promote but also provides the core team with the motivation for long-term development, contributing to the project's sustainable growth.