Pika Protocol
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Features

Deep Liquidity

Pika has its liquidity concentrated acround the current oracle price, making it possible to achieve the same level of liquidity as top perpetual exchanges. This enables capital efficiency and minimum trade slippage without requiring too much exchange liquidity.

Pricing

Pika uses a hybrid price feed of Chainlink oracle and a fast oracle from top exchanges to decide the mark price. Whenever an order is submitted, the fast oracle will fetch the median price from Binance, FTX and Coinbase and update the mark price before executing the order. This prevents the oracle frontrunning, as the mark price is determined only after the order sumission. To safeguard the accuracy of fast oracle, Chainlink oracle is used with a bid/ask spread whennever the fast oracle is not updating or its price deviates too much(2%) from Chainlink. In addition, traders can set an allowed slippage for each order sumission, to make sure the order is executed only if the mark price is within the allowed slippage range.
The trade price is dynamically adjusted on top of mark price. The pricing is determined by these factors in real time:

TradePrice=MarkPriceSlippage+PriceAdjustmentTrade Price = Mark Price * Slippage + Price Adjustment

Mark Price: Pika get the real-time fast oracle price as the base price.
Slippage: the trade slippage is calculated based on the virtual liquidity, trade amount and trade direction, using the xyk model.
Price Adjustment: to reduce the risks of the LPs, Pika has the mechanism to balance the open interest of longs and shorts. When there are more longs than shorts in the protocol, the price will slightly moves up to incentivize more short positions, and vice versa.

Trade Any Assets

Pika Protocol empowers users to trade both crypto and non-crypto assets with leverage. It can support any asset as long as there's a reliable price feed.

Simple Experience

Unlike many other deriavatives exchanges, Pika allows traders to swap directly from wallet without any depositing steps.

Fees

Pika Protocol is launched on Optimism, with low transaction fee compared to Ethereum layer 1. Other than the user gas fee, there are two parts of fees:
Execution Fee: a small execution fee(~0.0003 ETH) is charged when an order is submitted, which is paid to keepers who are reponsible to execute the submitted orders with latest oracle update.
Trade Fee: a small trade fee(0.1%) is charged for each trade. 50% of trade fees are distributed to the vault(liquidity providers), 20% to be used as protocol owned liquidity and 30% to the protocol.
Note: the 20% allocated to protocol owned liquidity will be used to reward LPs who had negative PNLs in Pika v2 first, before used for protocol owned liquidity.

Funding Rate

Pika has funding mechanism is to balance the longs and shorts for each trading pair, reducing the risk for liquidity vault. When there are more longs than shorts, longs pay shorts, incentivizing more traders to short. When the price is too low, shorts pay longs, incentivizing more traders to long. Since the liquidity vault is always at the minority side, it always receives funding. Funding rate of each trading pair is updated whennever a trade happens that pair. Funding is paid or received when closing the position.

Market, Limit and Stop Orders

Pika supports 3 types of orders: market, limit and stop. The market orders are sent to be excuted immediately once it is submitted. For limit and stop orders, they are submitted to be stored in a smart contract instead of centralized servers, with the aim to be as trustless as possible, and are triggerred by keeper bots once the the price requirement is matched.

Liquidation

If the Oracle price reaches the liquidation price, the position will be liquidated. The liquidation price of a position is calculated using this formula:
Long Position:
(entryPrice+currentFunding/positionSize)(1liquidationThreshold/leverage(entryPrice + currentFunding / positionSize) * (1 - liquidationThreshold / leverage
Short Position:
(entryPrice+currentFunding/positionSize)(1+liquidationThreshold/leverage(entryPrice + currentFunding / positionSize) * (1 + liquidationThreshold / leverage
The liquidationThreshold is set to 80% as default. The remaining margin of the liquidated position are shared as reward among liquidators, Pika Protocol, and liquidity providers.
Examples:
For the 50x ETH long position with entry price at $4000, positon size as 4000 USDC and current funding as 10 USDC, the liquidation price would be $3946((4000 + 10) * (1 - 0.8 / 50). If a liquidator liquidates this position at $3946, $54(4000-3946) will be used to pay liquidators, protocol fees and liquidity providers.
For the 50x ETH short position with entry price at $4000, positon size as 4000 USDC and current funding as -10 USDC, the liquidation price would be $4054((4000 - 10) * (1 + 0.8 / 50). If a liquidator liquidates this position at $4054, $54(4054-4000) will be used to pay liquidators, protocol fees and liquidity providers.
At the launch, Pika Protocol team will be the liquidator for all the positions.

Liquidity Vault

The protocol is backed by the liquidity providers. By staking in the vault, liquidity provider takes the opposite position of all traders on the platform. The vault pays for trader profits and receives trader losses. In addition, it also receives trading fees, funding payments and liquidation profit of trades.
To protect vault from big loss in highly volatile conditions, the vault has a maxExposure parameter for each trading pair. When the maxExposure is reached, traders cannot open the additional position that increases the vault's exposure, but can open the position in the direction that decreases the vault's exposure. This should rarely happen when the vault's liquidity is big enough.
The APY shown for the vault is calculated based on the fees distributed to vault in the last 7 days.
Last modified 21d ago