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Perpetual Futures (Perps)

Mars Protocol offers oracle-based perpetual futures trading, seamlessly integrated into its Credit Account system.

This architecture enables cross-margined and cross-collateralized leveraged trading using USDC as the settlement asset.

Unlike traditional orderbook-based systems, Mars executes perp trades at real-time oracle prices, ensuring deep liquidity access and deterministic execution - making it especially suitable for capital-efficient DeFi trading.

Key Mechanics

Trading and Collateralization

  • Oracle Pricing: All perpetual futures trades are executed at the oracle price, removing reliance on orderbook liquidity and minimizing front-running risks.

  • Cross-Margining: Unrealized Profit and Loss (PnL) across positions can be used as additional margin, increasing capital efficiency.

  • Cross-Collateralization: Any whitelisted asset within a Credit Account (e.g., ATOM, stATOM, dATOM, etc.) can serve as collateral for perpetual futures positions, not just USDC.

Trading Fees

  • Per Trade Fee: A fixed 0.075% fee is charged on the notional value of each perpetual futures trade. This fee is collected in USDC and partially allocated to the Perps Vault.

Funding Rate Mechanism

To maintain alignment between perpetual futures prices and the underlying spot price, Mars implements a skew-based funding rate model:

  • Skew-Based Calculation: Funding rates are determined by Open Interest (OI) imbalance between long and short positions - referred to as skew.

  • Velocity and Accumulation:

    • The longer the skew persists in one direction, the faster funding costs accumulate.

    • If skew reverses, the funding rate dampens accordingly.

  • Key Parameters:

    • SkewScale: Determines the sensitivity of funding rate to skew size.

    • Funding Rate Velocity: Controls the rate at which funding accrues.

Expected Price Dynamics

The effective trading price of a perpetual contract can deviate from the oracle price depending on skew:

  • Reduced Skew = Favorable Price: When a trade reduces skew, execution price is more favorable to the trader.

  • Increased Skew = Unfavorable Price: When a trade increases skew, execution price becomes less favorable, discouraging imbalance.

The Perps Vault

The Perps Vault acts as the counterparty to all trades and manages trade settlements in USDC.

  • PnL Settlements:

    • Positive PnL: Paid out from the vault to the user's Credit Account.

    • Negative PnL: Collected from the user's Credit Account.

      • If the account lacks sufficient USDC, the deficit is borrowed from the Red Bank (Mars Money Market).

  • Deposit Lock-Up: Deposits into the vault are subject to a 10-day lockup period.

  • Fee Participation: The vault receives a portion of trading fees, supporting long-term sustainability.

Keeper Order Bots

Mars supports automated order execution through third-party Keeper Bots, enabling:

  • Advanced Order Types:

    • Limit Orders

    • Stop Orders

    • Take Profit / Stop Loss

  • Keeper Fee System:

    • Minimum Fee: $0.20 (adjustable by user).

    • Priority Queue: Higher Keeper Fees result in faster execution priority.

    • Health Checks: If the order violates health checks (e.g., insolvency), it is cancelled and the Keeper Fee is still paid.

Risk Parameters and Controls

Mars Protocol enforces robust limits to mitigate systemic risk:

  • MaxOI (Maximum Open Interest): Caps total open interest across long and short positions based on vault liquidity and asset volatility.

  • MaxSkew: Defines the maximum allowed imbalance between long and short positions to prevent destabilization.

  • Auto-Deleveraging (ADL): Triggered when either MaxOI or MaxSkew limits are breached. Positions with larger notional values are prioritized for forced reduction, ensuring system solvency.

Mars Perpetual Futures combine high capital efficiency with risk-aware design, enabling a scalable, transparent, and fair trading environment without traditional orderbook dependencies.

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