Crypto Perpetual Futures: Leverage, Liquidation, and On-Chain Trading
Summary
The document introduces perpetual futures as contracts without an expiry date and explains the basic relationship between leverage, collateral, losses, and forced liquidation. It then contrasts on-chain perpetual trading with centralized exchanges, emphasizing self-custody and transparency while noting that network fees can hinder access. Layer 2 networks and smart contract approaches are presented as ways to reduce transaction costs. KiloEx serves as the article’s example of a decentralized venue, with discussion of gasless trading, multi-chain support, liquidity vaults, incentives, and its stated market-making design.
The text offers a broad platform overview, not a practical method for calculating margin or managing liquidation risk. It provides no formulas, risk limits, comparative performance data, or evidence for claims about fees, liquidity, slippage, or competitors. Self-custody and on-chain transparency do not remove smart contract, oracle, liquidity, or market risks. Traders evaluating leveraged positions still need to understand collateral requirements and liquidation mechanics for the specific venue and contract.
Key ideas
- Perpetual futures have no expiry, but positions require sufficient margin to remain open.
- Leverage magnifies exposure and can cause liquidation when losses erode the required collateral.
- On-chain trading can provide self-custody and transparency while introducing network and smart contract risks.
- Layer 2 networks and transaction design may reduce costs associated with on-chain trading.
- The platform comparison is descriptive and supplies no data to validate claims about execution or liquidity.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.