Perpetual Contract Mechanics

Perpetual Contract Mechanics define the unique design of cryptocurrency derivatives that have no expiration date, unlike traditional futures. To keep the contract price in line with the spot price, these protocols utilize a funding mechanism that periodically transfers payments between long and short traders.

This ensures that the derivative does not drift indefinitely away from the underlying asset's value. The margin engine is another critical component, managing collateral requirements and executing liquidations when a user's position becomes under-collateralized.

Because there is no settlement date, traders can hold positions indefinitely, provided they maintain sufficient margin. This design facilitates high-frequency trading and allows for continuous exposure to crypto assets without the need for rolling over contracts.