[RFP]: Trading Perpetuals on Polkaswap ( leverage trading )

[porkchop315]

Proposal Due Date

06/01/2024

Proposal Overview

The proposal to introduce perpetual trading on Polkaswap, the decentralized exchange built on the SORA network, brings several potential benefits to the SORA ecosystem:

Increased Liquidity: Perpetual trading adds a new dimension of liquidity to the SORA ecosystem. Traders can engage in perpetual swaps, which are derivatives contracts that allow them to speculate on the price of assets without owning them. This can attract more traders and liquidity to the platform, enhancing its overall trading volume and efficiency.

Expanded Asset Offerings: By offering perpetual swaps, Polkaswap can expand its range of tradable assets beyond spot trading. This can include various cryptocurrencies, commodities, indices, and even synthetic assets. This diversity can attract a broader audience of traders interested in different types of financial instruments.

Capital Efficiency: Perpetual swaps often require lower capital requirements compared to spot trading or traditional futures contracts, as traders only need to post margin rather than the full value of the asset. This can attract more traders to the platform, including retail traders who may not have significant capital to engage in traditional trading methods.

Integration with SORA Network: The introduction of perpetual trading on Polkaswap would integrate seamlessly with the SORA network. The SORA ecosystem is designed to facilitate decentralized finance (DeFi) activities, and adding perpetual swaps to Polkaswap aligns with this goal. Additionally, the SORA network's interoperability features can enable cross-chain trading of perpetual swaps, further enhancing its utility and appeal.

Competitive Advantage: Offering perpetual swaps on Polkaswap can differentiate it from other decentralized exchanges within the Polkadot ecosystem. While some decentralized exchanges may offer spot trading, the addition of perpetual swaps can attract traders looking for more sophisticated trading instruments, giving Polkaswap a competitive edge.

Proposal Goals

The goal of the proposal to introduce perpetual trading on Polkaswap within the SORA ecosystem is multifaceted:

Enhanced Liquidity: By adding perpetual swaps to Polkaswap, the goal is to increase liquidity within the ecosystem. Liquidity is essential for efficient trading and price discovery, and perpetual swaps can attract more traders and capital to the platform, thereby deepening the liquidity pool.

Diversification of Trading Instruments: Introducing perpetual trading solves the problem of limited trading options within the SORA ecosystem. Currently, most decentralized exchanges within the ecosystem primarily offer spot trading. By adding perpetual swaps, traders gain access to a wider range of financial instruments, including derivatives, enabling them to hedge risks, speculate on price movements, and diversify their trading strategies.

Capital Efficiency: Perpetual swaps typically require lower capital requirements compared to traditional futures contracts, as traders only need to post margin rather than the full value of the asset. This addresses the problem of capital constraints, making trading more accessible to a broader range of participants, including retail traders who may have limited capital resources.

Competitive Advantage: Introducing perpetual trading on Polkaswap can give the platform a competitive edge within the broader DeFi landscape. While some decentralized exchanges may offer spot trading, the addition of perpetual swaps can attract traders looking for more sophisticated trading instruments. This can help Polkaswap stand out and attract a larger user base, thereby increasing its market share and influence within the ecosystem.

Overall, the proposal aims to solve the problem of limited liquidity, trading options, and capital efficiency within the SORA ecosystem, while also positioning Polkaswap as a competitive and innovative decentralized exchange within the broader DeFi space.

Scope of Work

Implementing perpetual trading into the SORA ecosystem, specifically on the Polkaswap platform, involves several steps and a significant amount of work. Here's a detailed breakdown of the scope and the work required:

Research and Planning:

Conduct comprehensive research on perpetual trading mechanisms, including funding rates, margin requirements, and liquidation mechanisms.
Analyze existing decentralized exchanges offering perpetual swaps to understand best practices and potential pitfalls.
Define the scope of the project, including the features to be implemented, technical requirements, and timeline.
Smart Contract Development:

Design and develop smart contracts for perpetual trading, including contracts for trading, funding, and liquidation.
Implement mechanisms for order matching, margin management, position management, funding rate calculation, and auto-deleveraging.
Conduct thorough testing, including unit testing, integration testing, and security audits, to ensure the robustness and security of the smart contracts.
Protocol Development:

Develop the protocol for perpetual trading on Polkaswap, including protocols for order submission, order book management, and trade execution.
Implement protocols for price indexing, funding rate calculation, and oracle integration to ensure accurate pricing and funding payments.
Test the protocol extensively to ensure compatibility with the existing infrastructure and seamless integration with the SORA network.
User Interface Development:

Update the Polkaswap user interface to support perpetual trading, including adding new trading pairs, displaying funding rates, and providing risk management tools.
Design intuitive interfaces for placing orders, monitoring positions, and managing margin requirements.
Conduct user testing and gather feedback to refine the user interface and improve user experience.
Integration with SORA Network:

Integrate perpetual trading with the SORA network to leverage its interoperability features and access external liquidity sources.
Implement cross-chain functionality to enable trading of perpetual swaps across different blockchains within the Polkadot ecosystem.
Ensure seamless integration with other SORA network components, such as the SORA token bridge and the SORA decentralized autonomous economy (DAE).
Documentation and Education:

Prepare comprehensive documentation for developers, traders, and liquidity providers, explaining the perpetual trading mechanism, risks, and best practices.
Provide educational resources, tutorials, and workshops to help users understand how to trade perpetual swaps on Polkaswap and navigate the complexities of derivatives trading.
Community Engagement and Support:

Engage with the community to gather feedback, address concerns, and promote adoption of perpetual trading on Polkaswap.
Provide ongoing support and assistance to users, including troubleshooting technical issues, answering questions, and resolving disputes.
Collaborate with liquidity providers, market makers, and other ecosystem participants to bootstrap liquidity and ensure a vibrant trading ecosystem.
Overall, implementing perpetual trading into the SORA ecosystem requires a coordinated effort involving smart contract developers, protocol engineers, user interface designers, blockchain specialists, and community managers. It also requires thorough testing, documentation, and education to ensure a smooth and successful launch.

Current Roadblocks and Barriers to Success

Regulatory Compliance: One significant barrier is navigating regulatory requirements and ensuring compliance with relevant laws and regulations governing derivatives trading, especially in different jurisdictions. Addressing regulatory concerns and obtaining necessary licenses or approvals can be time-consuming and resource-intensive.

Security Risks: Smart contracts and protocols governing perpetual trading must be robust and secure to protect users' funds and prevent exploits or vulnerabilities. Conducting thorough security audits and implementing best practices for secure development are essential to mitigate security risks.

Liquidity Challenges: Building liquidity for perpetual trading pairs can be challenging, especially initially. Without sufficient liquidity, traders may face slippage and difficulty executing trades at desired prices. Implementing strategies to incentivize liquidity provision, such as liquidity mining programs or trading fee discounts, can help bootstrap liquidity.

Market Volatility: Perpetual swaps are highly leveraged instruments, and extreme market volatility can lead to liquidations and cascading margin calls, posing risks to both traders and the stability of the platform. Implementing robust risk management mechanisms, including dynamic position limits, circuit breakers, and insurance funds, is crucial to mitigate these risks.

User Education and Support: Perpetual trading can be complex, especially for users unfamiliar with derivatives markets. Providing comprehensive educational resources, tutorials, and customer support channels is essential to help users understand the mechanics of perpetual swaps, manage risks effectively, and navigate the platform successfully.

Interoperability Challenges: Integrating perpetual trading with the broader SORA ecosystem and other blockchain networks within the Polkadot ecosystem requires addressing interoperability challenges. Ensuring seamless cross-chain communication, token transfers, and data sharing is vital for the success of the proposal.

Community Adoption and Participation: Building a vibrant and engaged community of traders, liquidity providers, and developers is critical for the success of perpetual trading on Polkaswap. Fostering community participation through governance mechanisms, incentivization programs, and community outreach initiatives can help drive adoption and liquidity.

To navigate these challenges and ensure the success of the proposal, it's essential to pay special attention to regulatory compliance, security, liquidity provision, risk management, user education, interoperability, and community engagement. By addressing these areas thoughtfully and proactively, you can increase the likelihood of a successful implementation of perpetual trading on Polkaswap within the SORA ecosystem.

Evaluation Metrics and Criteria

Functional Requirements:

Smart Contracts: Ensure that smart contracts for perpetual trading are developed, tested, and deployed on the blockchain network.

Protocol Implementation: Verify that the perpetual trading protocol, including order submission, order matching, and trade execution, is implemented and functional.

User Interface: Confirm that the Polkaswap user interface supports perpetual trading, including displaying trading pairs, funding rates, and risk management tools.

Security and Reliability: Security Audits Conduct comprehensive security audits of smart contracts and protocols to identify and mitigate potential vulnerabilities or exploits.

Stress Testing: Perform stress testing to assess the robustness and scalability of the perpetual trading system under various market conditions and load scenarios.

Reliability: Ensure that the platform is reliable and resilient, with minimal downtime and disruptions to trading operations.
Regulatory Compliance:

Regulatory Approval: Obtain any necessary regulatory approvals or licenses required for offering perpetual trading services in relevant jurisdictions.

Compliance Measures: Implement compliance measures to adhere to applicable laws and regulations governing derivatives trading, data privacy, and investor protection.

Liquidity and Market Depth: Liquidity Provision Monitor and incentivize liquidity providers to ensure sufficient liquidity for perpetual trading pairs, minimizing slippage and enhancing trading experience.

Market Depth: Assess the depth of the order book and trading volume for perpetual trading pairs to gauge market activity and attractiveness to traders.

Risk Management: Risk Mitigation Implement effective risk management mechanisms, such as dynamic position limits, margin requirements, and insurance funds, to mitigate risks associated with leveraged trading and market volatility.
Liquidation Procedures: Define and implement clear liquidation procedures to handle margin calls and prevent cascading liquidations during periods of extreme market volatility.
User Education and Support:

Educational Resources: Provide comprehensive educational resources, tutorials, and documentation to help users understand how to trade perpetual swaps, manage risks, and navigate the platform effectively.

Customer Support: Offer responsive customer support channels to address user inquiries, troubleshoot technical issues, and resolve disputes promptly.
Interoperability and Integration:

Cross Chain Functionality: Ensure seamless interoperability with other blockchain networks within the Polkadot ecosystem, enabling cross-chain trading and asset transfers.

Integration with SORA Ecosystem: Integrate perpetual trading with other components of the SORA ecosystem, such as the SORA token bridge and decentralized autonomous economy (DAE), to leverage synergies and enhance ecosystem-wide functionality.
Once all these criteria are met and validated, the proposal for perpetual trading can be considered completed and fully integrated into the SORA ecosystem. After we just continuously monitor and evaluate the performance of the platform, gather user feedback, and iterate on improvements to ensure the ongoing success and evolution of perpetual trading on Polkaswap within the SORA ecosystem.

Submission Requirements

Alignment with Proposal Objectives: The submission should clearly demonstrate how it aligns with the objectives outlined in the proposal for implementing perpetual trading on Polkaswap within the SORA ecosystem. It should address the goals of enhancing liquidity, diversifying trading instruments, improving capital efficiency, and integrating with the broader ecosystem.

Technical Feasibility: The submission should provide a detailed technical plan for implementing perpetual trading on Polkaswap, including smart contract development, protocol design, user interface updates, and integration with the SORA network. It should demonstrate a clear understanding of the technical requirements and challenges involved in the implementation.

Regulatory Compliance: The submission should address regulatory considerations and compliance requirements for derivatives trading, especially in relevant jurisdictions. It should outline a framework for ensuring regulatory compliance and obtaining necessary licenses or approvals from regulatory authorities.

Security and Risk Management: The submission should prioritize security and risk management, with plans for conducting security audits, implementing robust risk management mechanisms, and protecting users' funds from potential exploits or vulnerabilities.

Liquidity Provision: The submission should outline strategies for incentivizing liquidity provision and bootstrapping liquidity for perpetual trading pairs on Polkaswap. It should address challenges related to liquidity depth, slippage, and market making.

User Education and Support: The submission should include plans for providing comprehensive educational resources, tutorials, and customer support to help users understand the mechanics of perpetual trading and navigate the platform effectively. It should prioritize user experience and accessibility.

Interoperability and Integration: The submission should address interoperability challenges and outline plans for integrating perpetual trading with the broader SORA ecosystem and other blockchain networks within the Polkadot ecosystem. It should ensure seamless cross-chain functionality and data sharing.

Community Engagement: The submission should demonstrate a commitment to community engagement and participation, with plans for fostering a vibrant and engaged community of traders, liquidity providers, and developers. It should prioritize transparency, communication, and collaboration with the community.

Submission Method

Blockchain: Mainnet

Project Due Date

07/12/2024

Budget Amount

This is up to the development team.