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Table of Contents
Core features
Trading mechanism
Risks and Challenges
Application scenarios
Home web3.0 What is Ethereum Perpetual Contract

What is Ethereum Perpetual Contract

Jul 15, 2025 pm 08:51 PM
binance Ethereum btc Binance exchange Huobi trading platform okx Ouyi Decentralized exchange Ouyi okx miner forced liquidation

The Ethereum Perpetual Contract is a derivative based on ETH or ERC-20 tokens that allows leveraged trading without expiration date. 1) Support long-term holdings without maturity; 2) Leveraged trading can amplify returns and risks; 3) The fund rate mechanism maintains price anchoring; 4) The margin mechanism manages risks and triggers forced flats; 5) The target assets are diverse and covers a variety of tokens. During trading, you can do long, short or automatically reduce positions, but you need to pay attention to high leverage liquidation, impact of capital fee rates and market manipulation risks. Application scenarios include arbitrage, hedging and speculative trading. This product is available on both centralized and decentralized exchanges, and is suitable for users familiar with derivative mechanisms to participate.

What is Ethereum Perpetual Contract - php Chinese

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The Perpetual Contract is a derivative contract based on Ethereum (ETH) or other ERC-20 tokens that allows investors to trade leveraged without actually holding the underlying asset. Unlike traditional futures contracts, perpetual contracts have no expiration date and can hold positions indefinitely. At the same time, the funding rate mechanism is used to maintain the anchoring of the contract price and the underlying asset price.

Core features

  1. No expiration date: Perpetual contracts will not expire and settle like traditional futures. Users can hold positions for a long time, which is suitable for short-term or long-term trading strategies.

  2. Leveraged trading: Supports high-power leverage (such as 5x, 10x or even 100x), which amplifies returns while also increasing risks.

  3. Fund rate mechanism: Payment of funds regularly (usually every 8 hours) between long and short parties to balance market supply and demand and prevent prices from deviating significantly from the spot market.

  4. Margin mechanism: Use a position-by-position or full-position model to manage risks. When margin is insufficient, forced liquidation will be triggered.

  5. Diverse assets of the target: In addition to ETH, it may also be based on ERC-20 tokens such as WBTC, LINK, and even cross-chain assets (such as SOL perpetual contracts).

Trading mechanism

  • Long: Buy when the price is expected to rise, close the position and make a profit after the price rises.

  • Short: Sell when the expected price falls, buy back to close the position after the price falls.

  • Automatic position reduction (ADL) or insurance fund: In extreme market conditions, the exchange may forcefully close some counterparty positions to maintain market stability.

Risks and Challenges

  • High leverage risk: Leverage amplifies returns while also increasing the risk of liquidation, and positions need to be managed carefully.

  • Impact of capital rate: Long-term holdings may affect profits due to positive and negative changes in capital rate.

  • Market manipulation risk: Perpetual contracts of small-cap tokens may cause severe price fluctuations due to insufficient liquidity.

Application scenarios

  • Arbitrage trading: Use the price difference between the perpetual contract and the spot market for arbitrage.

  • Hedging risk: Miners or investors holding ETH can hedge the risk of price decline by shorting perpetual contracts.

  • Speculative trading: Short-term traders use leverage to amplify returns.

Ethereum perpetual contracts are provided on decentralized exchanges (such as dYdX, GMX) and centralized exchanges (such as Binance, Bybit). They are suitable for users familiar with derivative trading, but they need to fully understand their operating mechanism and risks.

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