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PvpAMM: A Perpetual Market for Unbalanced Long-Short Positions

Authors Zhenhang Shang , Zhenyu Zhao , Kani Chen

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ACM Subject Classification
  • Applied computing → Digital cash
  • Mathematics of computing → Stochastic processes
Keywords
  • Perpetuals
  • Decentralized Finance
  • Auto Market Making
  • Blockchain

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Abstract

Perpetual futures - swap contracts without expiration dates - are the most widely traded derivatives in cryptocurrency markets. Traditional perpetual trading relies on order books, which require substantial bilateral liquidity and face challenges in high-volatility environments. In this paper, we introduce pvpAMM, a peer-to-peer perpetual trading protocol based on automated market maker (AMM) principles. The protocol enables efficient settlement of long-short mismatched markets and drives positions toward equilibrium: when the minority leveraged side wins, their returns are amplified compared to conventional perpetual contracts, while the opposite occurs when the majority side prevails. We also propose arbitrage mechanisms to maintain economic equilibrium within the pvpAMM system. By incorporating liquidity providers (LPs), the protocol aligns more closely with traditional order book trading. Numerical experiments validate our theoretical findings.

Cite As Get BibTex

Zhenhang Shang, Zhenyu Zhao, and Kani Chen. PvpAMM: A Perpetual Market for Unbalanced Long-Short Positions. In 7th Conference on Advances in Financial Technologies (AFT 2025). Leibniz International Proceedings in Informatics (LIPIcs), Volume 354, pp. 34:1-34:19, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2025) https://doi.org/10.4230/LIPIcs.AFT.2025.34

Author Details

Zhenhang Shang
  • Hong Kong University of Science and Technology, Hong Kong SAR, China
Zhenyu Zhao
  • Hong Kong University of Science and Technology, Hong Kong SAR, China
Kani Chen
  • Hong Kong University of Science and Technology, Hong Kong SAR, China

Funding

We acknowledge the support from the Hong Kong RGC through GRF Grants 16310222, 16308221 and 16308421.

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