Decentralized futures project Futureswap (FST)

4 min readSep 30, 2021

Project introduction

Futureswap is a decentralized perpetual future project, which can provide investors with trading, market making and other functions. Users can act as liquidity providers, traders and liquidators. Currently, Futureswap is only on Ethereum, and will be established on Arbitrum later.

In Futureswap, there are three types of users: liquidity provider, trader and liquidator.

Liquidity providers can provide two kinds of tokens to the liquidity pool to add liquidity in the same way as Uniswap, earning handling fees and governance token FST.

Traders can do more short trading, and the profit source can be obtained from successful market judgements.

The liquidator pays attention to the accounts with low margin among traders. Once the margin is lower than a certain level, it will be liquidated. As a result, liquidators obtain some liquidation rewards.

According to Token Terminal data, the TVL of Futureswap has risen steadily in recent days. As of the screenshot, the total TVL was $1.1 billion USD.

Transaction model and dynamic funding rate (DFR)

Futureswap uses the AMM model. According to the official introduction, the current V2 can, “with liquidity of $100 million USD, achieve impact of 0.5% slippage from transaction volume of $1 million USD”. This will be further improved in V3.

The dynamic fund rate (DFR), like the perpetual futures in the traditional CEX, is nominally charged every 8 hours. The calculation method is related to the liabilities and total capital output of multiple short positions.

Function and fees

Transaction pair: At present, only ETH/USDC, V3 version will add more trading pairs

Initial margin: the minimum amount required to open a position. At the same time, the initial margin rate (opening position’s value / position’s margin) also shows your leverage multiple. The function currently supports a minimum of 10% (10x leverage).

Maintenance margin: the minimum margin requirement for holding positions. If the margin is lower than the ratio, it will trigger liquidation, which is currently 5%.

Calculation cycle of funding rate: the perpetual future has no delivery date. The index price is anchored through the capital rate, which is calculated every 8 hours.

Transaction fees:

(1) Close Trade: All close trades have a flat 0.1% trade fee.

(2) Balancing Open Trade: When open trading that is taking the less popular side based on volume, you will receive a lower 0.1125% trade fee.

(3) Imbalancing Open Trade: When open trading that is taking the more popular side based on volume, you will receive a higher 0.225% trade fee

Liquidation mechanism

When the user’s margin rate is lower than 5%, the liquidator can submit the user to the liquidation mechanics. After liquidation, 30% of the liquidated assets will be handed over to the liquidator. In addition, 65% of the liquidation assets will be returned to the liquidated traders, and 5% of the liquidation assets will be injected into the liquidity pool.

Governance voting mechanism

Disabled Mode is the community voting mode of Futureswap. Whether this mode commences or not is determined by community voting. Once the community votes to enter this mode, all financial activities will be frozen and user refund will be enabled. Holders of 100 FST can initiate the proposal, and the community can vote on the proposal within 2 days.

Investment institutions