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The total volume of spot trading on all cryptocurrency exchanges worldwide exceeds $50 billion per day. While this is a large value, it pales in comparison to the trading volume of crypto derivatives, which is $150 billion daily. Derivatives are responsible for the majority of trading volumes in the crypto market, and a significant portion of stablecoin supply is also used in derivative trading. In other words, derivatives are the backbone of the crypto market.

Most of the trading in crypto derivatives is currently concentrated on centralized exchanges, with DEXs accounting for only a few percentage points. However, decentralized exchanges are growing much faster. In the foreseeable future, trading volumes for derivatives on DEXs will increase to hundreds of billions and, eventually—trillions of dollars.

Among the decentralized exchanges for perpetual contracts, notable projects include dYdX, Perpetual Protocol, GMX, Vela Exchange, Metavault Trade, MCDEX, TakePile, Palmswap, and several others. dYdX and Perpetual Protocol are well-known and covered by many analysts. I want to cover their lesser-known counterparts, which are riskier for trading and investing, but could potentially offer a higher upside. This article will examine Palmswap.

Palmswap v1

Palmswap is a decentralized exchange for trading perpetual contracts with leverage on the BNB Chain.

The exchange was launched in 2022, and in October of last year, the team raised over $4 million in investments. Additionally, several million dollars were also raised in March of 2023.

In February, the Palmswap team launched Alpha Mainnet. Palmswap V1 is built on an AMM algorithm and allows trading of perpetual contracts with leverage of up to 10x. The exchange offers limit orders, market orders, stop-loss orders, and take-profit orders.

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Palmswap v2

This summer, v1 will cease operation and be replaced by Palmswap v2. The main difference between v1 and v2 is the on-chain trading engine. While v1 is based on AMM, v2 is built on a synthetic architecture that is more scalable and sustainable.

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The full list of v2 features includes:

Perpetual trading (long and short);
Up to 50x leverage;
No registration or deposit required (non-custodial);
All trades are on-chain;
0% price impact;
Median spot prices. No scam-wicks;
No order books or liquidity for each pair. Single PLP vault for all trading pairs listed for higher capital efficiency;
Synthetic leverage. Up to 50%+ more capital efficient;
Real-time spot prices on-demand and on-chain via Chainlink;
1-click trading;
No front-running;
Liquidity providers (USDT) will be receiving up to 60% of trading fees;
PALM token stakers will be receiving up to 30% of trading fees;
New UI/UX.

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PLP Event

Liquidity providers are critical for the success of Palmswap v2. To attract them, Palmswap plans to hold a PLP Event in the coming months.

In exchange for providing their capital in the form of USDT, liquidity providers will receive a share of the trading fees, as well as PALM tokens. A total of $500,000 worth of PALM tokens will be distributed among liquidity providers.

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Liquidity providers will receive 1 PLP (PALM Liquidity Provider) token for every 1 USDT they contribute. The full list of rewards for PLP token holders includes:

60% trading fees paid in USDT;
Losses credit to vault, PLP benefits;
Borrow Fee;
Liquidation Fees;
Mint / Burn fees.

The PLP vault acts as a counterparty for all trades made on the platform:

When traders win (positive PnL), their profits are paid from the vault.
When traders lose (negative PnL), their losses are sent to the vault.

The vault not only incurs losses from traders, but also receives a significant 60% portion of leverage trading fees, as well as 100% of the mint/burn and borrow fees paid hourly, which are proportionally divided among PLP holders to incentivize them to remain in the vault.

The synthetic nature of the Palmswap protocol v2 is said to exclude impermanent loss risk.

Palmswap’s Roadmap

May 15, 2023: Applications for participation in the PLP event started.
June 1, 2023: Launch of the referral program. Referrers receive a share of trading fees for inviting new users.
June 20, 2023: Deadline for applications for the PLP event.
June 27, 2023: Early PLP event access.
June 27, 2023: Global Event starts.
July 5, 2023: Launch of Palmswap v2.
July 26, 2023: Start of Trade 2 Earn competition, which will run in two stages in July — August of 2023, and in August 2023 — July 2024.

PLP minting will begin on June 27. PLP can be exchanged for USDT eight days after the launch of Palmswap v2.

Conclusion

Palmswap is a DEX for leveraged trading on the BNB Chain. The second version of the protocol, which is launching this summer, looks promising, and the team seems to have enough capital to see their vision through and weather out the crypto winter.

Disclaimer

This post is not financial advice. I own PALM and plan to participate in the PLP Event.

Pamswap on Coinmarketcap: https://coinmarketcap.com/currencies/palmswap/