Avantis Launches Perpetual Swaps DEX on Base Network: A New Era in Crypto Trading

Jonathan Stoker Feb 02, 2024, 16:15pm 65 views

Avantis Launches Perpetual Swaps DEX on Base Network: A New Era in Crypto Trading

Avantis Launches Perpetual Swaps Exchange on Base Mainnet

Avantis, a new player in the world of crypto trading, rolled out its Perpetual swaps exchange on Base mainnet last Friday. This innovative approach to traditional crypto futures markets is expected to attract retail traders. Avantis is one of the premier trading protocols to debut natively on Base, a CoinbaseCoinbase-backed layer 2 platform. Supporters of Base predict that its close connection with the major centralized exchange could facilitate the transition of numerous DeFi newcomers into the on-chain universe.

The Unlikely Appeal of High-Risk Leverage Trading

Despite the perception that novice traders may hesitate to venture into high-risk leverage trading, many have shown interest in Avantis' offering of 75x leverage. This interest was evident during Avantis' two-month testnet phase, which saw over $5 billion in trading from 50,000 wallets.

A Unique Approach to Financial Trading

Perpetual swaps are a financial innovation exclusive to the crypto market. Essentially, they are futures contracts without a set expiration date. Longs, or those who anticipate a token's price will increase, and shorts, who predict a price drop, can let their bets ride as long as they've provided enough collateral.

Maintaining Balance in the Market

These markets, however, require upkeep to prevent the futures contract price from diverging dramatically from the value of the underlying asset. Funding rates act as the fees buyers and sellers pay each other, which helps maintain Open Interest.

According to Avantis CEO Harsehaj Singh, the challenge lies in the professionalization of both DeFi and CeFi. Many market makers arbitrage away any funding rate, leaving little room for retail traders to participate in the Open Interest game.

A New Trading Strategy from Avantis

Avantis has introduced a slightly different tactic. Rather than utilizing funding rates for market balance, they propose a guaranteed rebate for traders taking contrarian positions. For instance, traders betting that a token's price will decline when the majority predicts a surge. Such a trade can be risky and potentially fail. However, this risk is partially offset by the protocol's guarantee to recover some of the traders' losses.

The system is designed for individuals who are strictly into directional trading, Singh explained.

Edited by Jonathan Stoker

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