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Perpl
Background:
Euler Vault Kit (EVK)
The Euler Vault Kit (EVK) is a development toolkit that allows for the creation of various lending and borrowing vaults in a permissionless and modular manner. These vaults can be customized to support different governance models, risk management strategies, and collateral types, providing unparalleled flexibility. The EVK supports three initial classes of vaults: Core (governed lending products), Edge (permissionless and modular isolated markets), and Escrow (collateral-only vaults). This modular design allows users to build and integrate vaults tailored to their specific needs, enabling a diverse range of lending products within the Euler ecosystem.
Ethereum Vault Connector (EVC)
The Ethereum Vault Connector (EVC) acts as an interoperability layer, connecting different vaults within the Euler ecosystem. It enables vaults to recognize each other's deposits as collateral, facilitating seamless borrowing and lending across multiple vaults. By abstracting common features of credit-based protocols, the EVC allows developers to focus on creating specialized products, such as lending protocols, stablecoins, and margin trading applications. Additionally, the EVC provides advanced features like multicall batching, flash liquidity, and sub-accounts, which enable efficient risk management and trading strategies.
Collateral Streamlining
An alternative path to creating a collateral-only asset is to create an ERC20Collateral token, which is a simple extension to the ERC20 token standard to enforce compatibility with the EVC. Projects using this extension can unlock an entirely new wave of composability. Users are no longer required to deposit their tokens into vaults in order to use them as collateral; they can do so directly from their wallet. This helps them retain their governance rights and other token privileges while also helping avoid generating unnecessary taxable events.
Problem:
Users often face challenges when their assets are not accepted as collateral on trading platforms, limiting their ability to engage in trading activities. To address this mismatch, we propose integrating lending protocols to allow users to borrow the necessary collateral against their existing assets, facilitating seamless trading.
Solution:
General
As the correlation between crypto assets decreases, it becomes more likely that liquidations will be unlinked, meaning eth as collateral is liquidated long before the btc perp is close to liquidating. As a trader using one asset as collateral towards a bet on another trade, the most efficient expression of the trade would be the direct link between the asset and the directional bet. Therefore the economic incentive for institutional investors would be efficiently collateralized trades liquidated optimally, for Euler would be an increased flow of liquidity to their platform, and for Perpl the kickbacks could then be passed on to traders
Furthermore, traders can set arbitrary conditions on their trades or collateral that perpl can effectively incorporate with chained vaults in Euler. This allows large freedom in structuring trades. Finally, traders would gain access to yield on their assets sitting as collateral that may not be ingrained in the direct asset to asset perp (also going short btc with eth as collateral doesn’t exist as a singular asset) not to mention added liquidity that is inbuilt through the link. Essentially, Perpl whales and large users would be able to use any esoteric or long-tail asset, skirting stable-only collateral forms on Perpl, this allows the perp holder to open positions for any Euler vault in a quasi-atomic manner.
Types of Vaults
This synergistic relationship is compounded by the types of vaults that can be created. While execution to make this as atomic-like as possible is not trivial there are two clear routes: an abstracted ERC20Collateral Token (EVC) or an Euler Edge Vault (EVK). The parameters of the problem are two-fold: firstly, to transition from non-stable collateral to opening positions as quickly as possible, and secondly, to ensure that this process is economically efficient for users.
Integration A
The most basic version would look like the following:
While basic and less streamlined, you have the added benefit of less smart contract risk while keeping the synergistic benefits. Additionally using an edge vault you are more capital efficient, because it enables vault creators to borrow against multiple collateral vaults at once.
Example:
A[User A Deposits 1 BTC (worth $40,000) into EVK Edge Vault] --> B[EVK Edge Vault Updates BTC Collateral Balance]
B --> C[User A Borrows 20,000 USD (50% LTV) Against BTC in Edge Vault]
C --> D[Edge Vault Provides 20,000 USD to User A]
D --> E[User A Transfers 20,000 USD to Perpl]
E --> F[Perpl Credits 20,000 USD to User A's Trading Account]
F --> G[User A Trades on Perpl Using 20,000 USD]
G --> H[User A Sells Trading Assets and Converts to USD (no pnl)]
H --> I[User A Transfers 20,000 USD Back to Edge Vault to Repay Loan]
I --> J[User A Repays 20,000 USD Loan to Edge Vault]
J --> K[Edge Vault Updates Loan Balance to Zero]
K --> L[Edge Vault Releases 1 BTC Collateral to User A]
Integration B
In this advanced integration scenario, users can deposit various types of collateral (e.g., BTC, ETH) into Perpl, which supports collateral that is also available in Euler's vaults. The Ethereum Vault Connector (EVC) on Perpl connects with Euler's vaults, allowing users to borrow USD against their deposited collateral. This process happens in an atomic fashion, ensuring that users' trades and collateral management are synchronized and efficient. The EVC acts as an interoperability layer, abstracting away many common features of credit-based protocols and enabling seamless cross-platform collateral recognition and loan management.
Users benefit from this integration through increased capital efficiency and reduced smart contract risk. By using custom pricing oracles and bespoke collateral constraints matched between the vaults and Euler, the system ensures accurate valuations and prevents unintentional liquidations. Additionally, the account manager functionality provided by the EVC allows for advanced trading and risk management strategies, including conditional orders and automated position management. This integration provides a seamless user experience, enabling users to hold collateral directly in their wallets while leveraging their assets for trading on Perpl without unnecessary taxable events or complex manual processes.
Example:
A[User A Deposits 1 BTC on Perpl] --> B[Perpl Smart Contract Updates BTC Balance]
B --> C[Perpl's EVC Smart Contract Registers BTC Collateral with Euler]
C --> D[EVC Ensures Collateral Matches Bespoke Risk Parameters]
D --> E[User A Borrows 20,000 USD Against BTC via EVC]
E --> F[EVC Connects BTC Collateral to Euler's USD Vault]
F --> G[Edge Vault Provides 20,000 USD to User A]
G --> H[User A Transfers 20,000 USD to Perpl]
H --> I[Perpl Credits 20,000 USD to User A's Trading Account]
I --> J[User A Trades on Perpl Using 20,000 USD]
J --> K[BTC Price Drop Triggers Liquidation Event]
K --> L[Perpl Sends Liquidation Notification to Euler]
L --> M[FeeFlow Module Initiates Auction to Liquidate BTC]
M --> N[Liquidated BTC Transferred to Euler's Vaults]
N --> O[Equivalent USD Transferred Back to Perpl]
O --> P[Debt on Perpl Settled with Liquidation Proceeds]
P --> Q[Perpl and Euler Update Records]
Q --> R[User A Notified of Liquidation and Updated Asset Status]
Economic Allignment
Tighter Spreads on Perpl Vaults:
To make financing more attractive, Perpl could offer tighter spreads on its vaults by decreasing the difference between borrow and loan rates. This reduction in spread would lower the cost of borrowing and increase the returns on lending, making Perpl vaults more competitive and appealing to users. Such financial incentives would encourage greater participation and liquidity provision, benefiting both Perpl and Euler.
Potential Token Ownership in Euler:
Perpl and its stakeholders could be incentivized through token ownership in Euler based on the volume of liquidity they contribute. For example, for every $10 million of liquidity deposited on Euler by Perpl users, Perpl and its stakeholders could receive a certain percentage of Euler tokens, aligning economic interests. This approach ensures that Perpl's success in driving liquidity directly benefits from the growth and value appreciation of Euler's ecosystem.
Rebate and Retroactive Kickback System:
Implementing a rebate and retroactive kickback system could further align economic interests between Perpl and its users. By introducing a revenue-sharing mechanism that uses a staking model, users who stake their tokens could earn a share of the platform's revenue. This system not only rewards early adopters and liquidity providers but also fosters long-term loyalty and engagement by continuously distributing earnings based on platform performance.
Perpl
Background:
Euler Vault Kit (EVK)
The Euler Vault Kit (EVK) is a development toolkit that allows for the creation of various lending and borrowing vaults in a permissionless and modular manner. These vaults can be customized to support different governance models, risk management strategies, and collateral types, providing unparalleled flexibility. The EVK supports three initial classes of vaults: Core (governed lending products), Edge (permissionless and modular isolated markets), and Escrow (collateral-only vaults). This modular design allows users to build and integrate vaults tailored to their specific needs, enabling a diverse range of lending products within the Euler ecosystem.
Ethereum Vault Connector (EVC)
The Ethereum Vault Connector (EVC) acts as an interoperability layer, connecting different vaults within the Euler ecosystem. It enables vaults to recognize each other's deposits as collateral, facilitating seamless borrowing and lending across multiple vaults. By abstracting common features of credit-based protocols, the EVC allows developers to focus on creating specialized products, such as lending protocols, stablecoins, and margin trading applications. Additionally, the EVC provides advanced features like multicall batching, flash liquidity, and sub-accounts, which enable efficient risk management and trading strategies.
Collateral Streamlining
An alternative path to creating a collateral-only asset is to create an ERC20Collateral token, which is a simple extension to the ERC20 token standard to enforce compatibility with the EVC. Projects using this extension can unlock an entirely new wave of composability. Users are no longer required to deposit their tokens into vaults in order to use them as collateral; they can do so directly from their wallet. This helps them retain their governance rights and other token privileges while also helping avoid generating unnecessary taxable events.
Problem:
Users often face challenges when their assets are not accepted as collateral on trading platforms, limiting their ability to engage in trading activities. To address this mismatch, we propose integrating lending protocols to allow users to borrow the necessary collateral against their existing assets, facilitating seamless trading.
Solution:
General
As the correlation between crypto assets decreases, it becomes more likely that liquidations will be unlinked, meaning eth as collateral is liquidated long before the btc perp is close to liquidating. As a trader using one asset as collateral towards a bet on another trade, the most efficient expression of the trade would be the direct link between the asset and the directional bet. Therefore the economic incentive for institutional investors would be efficiently collateralized trades liquidated optimally, for Euler would be an increased flow of liquidity to their platform, and for Perpl the kickbacks could then be passed on to traders
Furthermore, traders can set arbitrary conditions on their trades or collateral that perpl can effectively incorporate with chained vaults in Euler. This allows large freedom in structuring trades. Finally, traders would gain access to yield on their assets sitting as collateral that may not be ingrained in the direct asset to asset perp (also going short btc with eth as collateral doesn’t exist as a singular asset) not to mention added liquidity that is inbuilt through the link. Essentially, Perpl whales and large users would be able to use any esoteric or long-tail asset, skirting stable-only collateral forms on Perpl, this allows the perp holder to open positions for any Euler vault in a quasi-atomic manner.
Types of Vaults
This synergistic relationship is compounded by the types of vaults that can be created. While execution to make this as atomic-like as possible is not trivial there are two clear routes: an abstracted ERC20Collateral Token (EVC) or an Euler Edge Vault (EVK). The parameters of the problem are two-fold: firstly, to transition from non-stable collateral to opening positions as quickly as possible, and secondly, to ensure that this process is economically efficient for users.
Integration A
The most basic version would look like the following:
While basic and less streamlined, you have the added benefit of less smart contract risk while keeping the synergistic benefits. Additionally using an edge vault you are more capital efficient, because it enables vault creators to borrow against multiple collateral vaults at once.
Example:
A[User A Deposits 1 BTC (worth $40,000) into EVK Edge Vault] --> B[EVK Edge Vault Updates BTC Collateral Balance]
B --> C[User A Borrows 20,000 USD (50% LTV) Against BTC in Edge Vault]
C --> D[Edge Vault Provides 20,000 USD to User A]
D --> E[User A Transfers 20,000 USD to Perpl]
E --> F[Perpl Credits 20,000 USD to User A's Trading Account]
F --> G[User A Trades on Perpl Using 20,000 USD]
G --> H[User A Sells Trading Assets and Converts to USD (no pnl)]
H --> I[User A Transfers 20,000 USD Back to Edge Vault to Repay Loan]
I --> J[User A Repays 20,000 USD Loan to Edge Vault]
J --> K[Edge Vault Updates Loan Balance to Zero]
K --> L[Edge Vault Releases 1 BTC Collateral to User A]
Integration B
In this advanced integration scenario, users can deposit various types of collateral (e.g., BTC, ETH) into Perpl, which supports collateral that is also available in Euler's vaults. The Ethereum Vault Connector (EVC) on Perpl connects with Euler's vaults, allowing users to borrow USD against their deposited collateral. This process happens in an atomic fashion, ensuring that users' trades and collateral management are synchronized and efficient. The EVC acts as an interoperability layer, abstracting away many common features of credit-based protocols and enabling seamless cross-platform collateral recognition and loan management.
Users benefit from this integration through increased capital efficiency and reduced smart contract risk. By using custom pricing oracles and bespoke collateral constraints matched between the vaults and Euler, the system ensures accurate valuations and prevents unintentional liquidations. Additionally, the account manager functionality provided by the EVC allows for advanced trading and risk management strategies, including conditional orders and automated position management. This integration provides a seamless user experience, enabling users to hold collateral directly in their wallets while leveraging their assets for trading on Perpl without unnecessary taxable events or complex manual processes.
Example:
A[User A Deposits 1 BTC on Perpl] --> B[Perpl Smart Contract Updates BTC Balance]
B --> C[Perpl's EVC Smart Contract Registers BTC Collateral with Euler]
C --> D[EVC Ensures Collateral Matches Bespoke Risk Parameters]
D --> E[User A Borrows 20,000 USD Against BTC via EVC]
E --> F[EVC Connects BTC Collateral to Euler's USD Vault]
F --> G[Edge Vault Provides 20,000 USD to User A]
G --> H[User A Transfers 20,000 USD to Perpl]
H --> I[Perpl Credits 20,000 USD to User A's Trading Account]
I --> J[User A Trades on Perpl Using 20,000 USD]
J --> K[BTC Price Drop Triggers Liquidation Event]
K --> L[Perpl Sends Liquidation Notification to Euler]
L --> M[FeeFlow Module Initiates Auction to Liquidate BTC]
M --> N[Liquidated BTC Transferred to Euler's Vaults]
N --> O[Equivalent USD Transferred Back to Perpl]
O --> P[Debt on Perpl Settled with Liquidation Proceeds]
P --> Q[Perpl and Euler Update Records]
Q --> R[User A Notified of Liquidation and Updated Asset Status]
Economic Allignment
Tighter Spreads on Perpl Vaults:
To make financing more attractive, Perpl could offer tighter spreads on its vaults by decreasing the difference between borrow and loan rates. This reduction in spread would lower the cost of borrowing and increase the returns on lending, making Perpl vaults more competitive and appealing to users. Such financial incentives would encourage greater participation and liquidity provision, benefiting both Perpl and Euler.
Potential Token Ownership in Euler:
Perpl and its stakeholders could be incentivized through token ownership in Euler based on the volume of liquidity they contribute. For example, for every $10 million of liquidity deposited on Euler by Perpl users, Perpl and its stakeholders could receive a certain percentage of Euler tokens, aligning economic interests. This approach ensures that Perpl's success in driving liquidity directly benefits from the growth and value appreciation of Euler's ecosystem.
Rebate and Retroactive Kickback System:
Implementing a rebate and retroactive kickback system could further align economic interests between Perpl and its users. By introducing a revenue-sharing mechanism that uses a staking model, users who stake their tokens could earn a share of the platform's revenue. This system not only rewards early adopters and liquidity providers but also fosters long-term loyalty and engagement by continuously distributing earnings based on platform performance.
Hi 👋 I’m Arjun!
I’m a student at Georgia Tech and I am passionate about web3 tech, investing, and crypto.
I am a final-year student at Georgia Institute of Technology, concentrating on Finance with a minor in Computer Science. Besides my coursework, I have also completed prior internships at a digital asset hedge fund, pure crypto-vc.
Check out my latest Research!
Just kidding. Nothing was actually shutdown. It wouldn't have been a good idea. Do it again?
Just kidding. Nothing was actually shutdown. It wouldn't have been a good idea. Do it again?
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Maybe it's not a good idea to shut my website down without a hardware reset button. Proceed?
Just kidding. Nothing was actually shutdown. It wouldn't have been a good idea. Do it again?
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