Perp trading on Aave

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Contango has integrated Aave v3 to offer cPerps across multiple blockchains, using a looping strategy with flash loans for leveraged trading without separate liquidity pools, aiming to reduce DeFi fragmentation and boost Aave's volumes. The Aave community is considering derivatives on money markets and has approved a TEMP CHECK for FlashMinter Facilitators, which could promote zero-fee trading and quick integration of Aave's GHO in Contango.

What is this about?

Contango, a protocol co-founded by Kamel, has integrated Aave's v3 to create cPerps (Contango perps) on multiple blockchains including Ethereum, Arbitrum, Optimism, and Polygon. cPerps are designed to leverage existing liquidity from spot and money markets to mitigate DeFi fragmentation and showcase Aave's composability. The protocol employs a looping strategy with flash loans to facilitate leveraged positions without the need for separate liquidity pools. Contango's interface helps traders find the best APR, and profits and losses are tied to the spot price of the underlying asset.

The platform offers benefits such as protection against insolvency, minimal price impact, and stable funding rates due to the combined liquidity. Contango aims to attract loopers and perp traders, which could significantly boost Aave's trading volumes. The team behind Contango has a decade of experience in trading infrastructure, secured $4.5M in funding in 2021, and is supported by prominent venture capitalists. They are exploring the potential of derivatives on money markets and are looking for ways to increase Loan-to-Value (LTV) ratios to stay competitive.

How is the community reacting?

The Aave community has been invited to discuss the potential of derivatives built on money markets. EzR3aL has proposed the use of Aave's GHO in Contango and suggested getting whitelisted as a FlashMinter Facilitator. This would allow for efficient arbitrage and help maintain GHO's peg. A TEMP CHECK has already been approved by the community, setting the initial bucket capacity for FlashMinter Facilitators at 2,000,000 GHO with no fees, which could encourage users to trade on platforms offering zero fees.

Contangoxyz responded positively to the suggestion, noting the benefits of allowing shorting GHO without being a facilitator. They also highlighted the current lack of GHO available to borrow, which could limit trading activities. They expressed interest in enabling GHO as collateral for trading in both directions and mentioned that integration could be completed swiftly.

Why this is positive?

  • Contango's integration with Aave v3 could lead to increased trading volumes for Aave.
  • The looping strategy with flash loans allows for leveraged positions without separate liquidity pools, which could attract more traders.
  • The platform's benefits, such as protection against insolvency and minimal price impact, could enhance the trading experience.
  • The TEMP CHECK approval for FlashMinter Facilitators could incentivize zero-fee trading on platforms like Contango.

Why this is negative?

We have not been able to determine whether this will be negative.

Next actions

The community is currently discussing the potential of derivatives built on money markets and the integration of GHO in Contango. The next steps could involve further feedback from community members and potentially moving towards integration if the community response is favorable.

Posted a month ago

Last reply 14 days ago

Summary updated 11 days ago

Last updated 05/12 01:13