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DOI: 10.4230/LIPIcs.AFT.2025.34

PvpAMM: A Perpetual Market for Unbalanced Long-Short Positions

Authors: Zhenhang Shang, Zhenyu Zhao, and Kani Chen

Published in: LIPIcs, Volume 354, 7th Conference on Advances in Financial Technologies (AFT 2025)

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.

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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)

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@InProceedings{shang_et_al:LIPIcs.AFT.2025.34,
  author =	{Shang, Zhenhang and Zhao, Zhenyu and Chen, Kani},
  title =	{{PvpAMM: A Perpetual Market for Unbalanced Long-Short Positions}},
  booktitle =	{7th Conference on Advances in Financial Technologies (AFT 2025)},
  pages =	{34:1--34:19},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-400-0},
  ISSN =	{1868-8969},
  year =	{2025},
  volume =	{354},
  editor =	{Avarikioti, Zeta and Christin, Nicolas},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2025.34},
  URN =		{urn:nbn:de:0030-drops-247534},
  doi =		{10.4230/LIPIcs.AFT.2025.34},
  annote =	{Keywords: Perpetuals, Decentralized Finance, Auto Market Making, Blockchain}
}

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PvpAMM: A Perpetual Market for Unbalanced Long-Short Positions

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