Introduction

The Pioneer Quanto Perpetual Futures Protocol

What is RAVE

RAVE is a Layer-2 application chain built on Initia that permissionlessly enables tokens as collateral to trade perpetual markets using quanto contracts.

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.

RAVE brings quanto contracts on-chain for any token to collateralize and trade perpetual futures. RAVE Trade enables anyone to use any token as collateral to gain leveraged exposure to perpetual markets in a quanto derivative, or deposit tokens in a single-sided LP to 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.

• Settlement: Positions settle in units of collateral based on the percent change of the perpetual market traded (eg. BTC-USD). Collateral price does not impact settlement: returns depend solely on the perpetual market.

• 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 priced in dollars with an altcoin as collateral. Payouts are in collateral tokens, based on the perpetual market's performance.

Quanto provides a paradigm shift for altcoins: the ability to gain controlled exposure, and the ability to earn DeFi yield, in a fully permissionless environment. Up until recently, these use cases were largely isolated to a small basket of bluechip and stablecoin tokens. Through quanto, RAVE provides these powerful DeFi tools to any token.