Introduction

The Pioneer Quanto Perpetual Futures Protocol

What is RAVE

RAVE is a Layer-2 blockchain designed to democratize crypto trading. Secured by Initia, RAVE Chain is optimized for trading execution and decentralized finance. RAVE operates within the broader Initia ecosystem and is fully permissionless, enabling any token to participate in on-chain trading.

RAVE Trade is a collection of smart contracts on RAVE that empowers users to trade what they want, how they want. By bringing quanto contracts on-chain, RAVE Trade supports any token as collateral to trade major perpetual markets like BTC-USDT and SOL-USDT. Additionally, RAVE Trade provides permissionless utility for users to deposit any token, provide liquidity, and earn yield.

Key Aspects of RAVE Trade:

• Collateral: Any token can be used as quanto collateral to open perpetual future trades on markets like BTC-USD. Traders can borrow up to 200x leverage from liquidity pools and cannot be liquidated from collateral price volatility, only from market performance.

• Settlement: Positions settle in units of collateral based on the percent change of the perpetual market traded (eg. BTC-USD). The perpetual market's return (in %) acts as a multiplier on your chosen collateral units, unaffected by its own price changes.

• Liquidity: Permissionless single-token pools, called Caves, facilitate counterparty trading liquidity for their respective quanto asset and earn yield from trading fees. Join existing Caves, or create a new quanto collateral market using the RAVE application.

In simple terms, you're trading a perpetual futures market with an altcoin as collateral. Payouts are in units of collateral tokens, based directly on the perpetual market's performance.

Arthur Hayes pioneered perpetual futures and quanto perpetual futures on BitMEX, a crypto trading platform launched in 2014. A quanto contract is a financial instrument used to hedge exchange rate risk for an asset priced in currency A, but traded with a different currency B. Quanto contracts set a fixed conversion factor when trades are opened between A and B. This conversion factor acts as a multiplier, such that the percent change of the asset in $A directly determines the return in units of $B, regardless of the price change between currency A and B.

Quanto contracts are a paradigm shift for altcoins: the ability to gain controlled exposure, and the ability to earn DeFi yield in a fully permissionless environment. Until recently, these use cases were largely isolated to a small basket of bluechip and stablecoin tokens. Through quanto, RAVE empowers all users with these powerful DeFi tools, bringing increased capital efficiency to all tokens, everywhere.