![leverage-trading-perpetual-swaps-pools.png](https://storage.googleapis.com/mycelium-bucket/leverage_trading_perpetual_swaps_pools_3bdd695c1a/leverage_trading_perpetual_swaps_pools_3bdd695c1a.png)


## Leverage Trading: Comparing Financial Instruments

Perpetual Swaps and Perpetual Pools are two financial instruments that have plenty in common. They both give traders the ability to take leveraged positions on asset(s) for any amount of time, but each have a few stark differences that make them unique and useful in different contexts.

***Perpetual Swaps*** are useful if you’d like leverage for the exact spot price movements ($) of an asset. ***Perpetual Pools*** are useful if you want leverage for the hourly returns (%) of an asset.

So, when should you use a perp-swap and when should you use a perp-pool? Well, we’ve got you covered with this explainer. Read on and you’ll learn what the difference in mechanisms means for payoffs and how each instrument should be used. 


Let’s dive right in. 

## **Perpetual Swaps**

First, a quick history lesson will help us understand the properties of a Perpetual Swap and its most obvious use cases. Step back in time to 1864:

### Futures

The Chicago Board of Trade lists the first ever exchange-traded foward contract and calls it a *future*. This contract lets traders buy and sell grain for a set price, on some pre-determined future date. It’s good for farmers – they can lock in a price for their grain and be sure of the future cash-flow when they deliver it. It’s also good for the bakers – they rely on the grain and can now account for their future consumption. 

![futures contract example](https://storage.googleapis.com/mycelium-bucket/futures_contract_example_d3cb8acc82/futures_contract_example_d3cb8acc82.png)

Skip forward to 1972 and now we can trade currency futures (on top of the many other commodity futures offered) thanks to the Chicago Mercantile Exchange (CME). Futures have become standardised instruments and are useful for gaining exposure to assets for a certain period. That’s because you’d only need a small percentage of the price of the asset to enter into a futures contract, while the contract payoff replicates exposure to the entire asset – making them perfect for not just speculating, but hedging too. Hedging is a trade that offsets exposure to price risk. If we can do that for our total exposure, using only a fraction of its notional value (notional value accounts for the total value of the position), then we’ve freed up a lot of capital to use elsewhere. 

Only, futures aren’t so great for traders seeking exposure over longer periods because they have an expiry, which means they can’t be used indefinitely. You’d need to manually “roll over” futures if you want to maintain a position, which costs money (transacting with the exchange) and can be risky if not executed in time, as you may be required to make or take delivery of the underlying asset (many futures traders do not have use for a whole ton of wheat or barley). 

### Perpetual Futures

Fast forward again and it’s 1993, a year after the CME migrated futures to the first electronic global trading platform. Robert Shiller, an American economist, has an idea for a type of future that can exist perpetually without rolling over; using a single contract that cash settles every day, with an additional payment to compensate for dividends paid on the underlying ([1](https://ideas.repec.org/a/bla/jfinan/v48y1993i3p911-31.html)).

Except, it goes nowhere. 

Little is done in this area for over 20 years (with the notable exception of CFDs, though they’re seperate, OTC contracts), until BitMEX offers the first perpetual future in May 2016. They call this kind of future the **perpetual swap**. 

### Perpetual Swaps

A perpetual swap has a very similar mechanism to the one explained by Robert Shiller but, rather than settling once daily, there *is no settlement*. Instead, a continuous funding is paid from one side of the contract to the other to tether the price of the derivative to the underlying. For BitMEX, the underlying for their initial contract is the cryptocurrency Bitcoin. 


The funding is calculated as the time-weighted average of the basis (premium to spot) from the last 8 hours. If the price of the perpetual swap contract (**mark** price) and the price of Bitcoin (**index** price) is different, these funding payments help to ensure that traders experience the same returns as if they held the underlying. 

Because of this structure, Perpetual Swaps are like margin trading the spot asset. Margin trading is the way we described using a fraction of the asset price to buy a contract. That fraction is called *margin*. It lets traders lever-up their positions by effectively borrowing more contracts than they could buy or sell outright. As their profit and loss on the position is simply the difference between the price at entry and the current price (± funding), traders can maintain large positions while they still have margin in their account funding their position. But leveraged trading, as this strategy is known, is risky. 

Imagine using only 10% of the notional value as margin to go *long* a whole Bitcoin (long means you’re anticipating a rise in the value of the underlying asset). This position is 10x leveraged, so we stand to gain or lose *ten times* faster than if we’d just bought 0.1 BTC. If the price of Bitcoin goes up, our margin account is credited the gain of an entire Bitcoin. But if the price goes down, our margin account takes the entire loss.  

Whatever the outcome, we don’t remain 10x leveraged. Instead, our leverage (which is measured as notional value / margin) changes. A 5% drop in the price of BTC loses us **half** our initial margin, taking the position from 10x to 19x leveraged. 

For some modern Perpetual Swap contracts, this level is nearing the market’s maximum allowable leverage. If an account exceeds the 20x maximum leverage, then the trader will be liquidated and their position seized by the exchange as they are too close to bankruptcy and likely unable to cover any more losses with their remaining margin. The fee charged for liquidation can sometimes be all of the remaining margin.  


### Recap

What have we learned? A perpetual swap is similar to a futures contract, allowing a trader to lock in a price at which they would like to buy or sell an asset in the future. It’s perpetual, meaning that a user can maintain a position for however long they would like, without having to roll it over. Funding is the payment that allows the contract to be perpetual and is paid based on the difference between the price of the underlying asset (index) and the price of the contract (mark). As the price of the contract changes, profit and loss (PnL) is added or deducted from the trader’s margin account which makes a perpetual swap similar to margin trading the spot asset. We can use margin to gain leverage, which is an efficient use of capital but comes with the risk of accelerated losses and potential liquidation. 

![perpetual swap explained](https://storage.googleapis.com/mycelium-bucket/perpetual_swap_explained_5bce989dd6/perpetual_swap_explained_5bce989dd6.png)


***Perpetual swaps*** are particularly useful for trading exact spot-price movements ($) for an asset with leverage, whether it be to speculate or hedge. On a final, but important, note for this section: perpetual swaps are not reliant on anything but the data for the underlying. This makes them a great vehicle to trade on hard to attain assets or even non-price-related data like GDP figures.

## **Perpetual Pools**

Moving on to our next instrument, Perpetual Pools. Pay attention during the flashback, because the naming etymology is less clear-cut this time around.

### Exchange Traded Funds

The year is 1989 and the CME, the same group soon to be responsible for the worlds first digital futures exchange, launch a successful lawsuit against a product called Index Participation Shares. Like their title suggests, IPS’s entitle participants to a share of a synthetic S&P 500 index proxy. According to the CME, they are like a futures contract and their trade on any platform, other than a futures exchange, should made illegal. And it is. But, the public interest is there and it’s not long before another instrument comes around and fulfils the demand for an index product. 

Enter the SPDR (or “spider”); shares of a unit investment trust that can, for the first time, be updated in-line with changes to the composition of the S&P 500 and traded on an exchange. It is set to become the largest ETF in the world. 

![Hedge fund etfs](https://storage.googleapis.com/mycelium-bucket/hedge_fund_etf_2e41b01708/hedge_fund_etf_2e41b01708.png)

Seven years later, spiders are joined by webs (World Equity Benchmark Shares, later renamed iShares) which start trading in May of 2000. Webs are composed of non-US equities and track foreign stock market indices. Despite the amusing acronyms, the success of these two investment vehicles cements the demand for Exchange-Traded Funds and by the end of 2009, there are nearly 1000 actively traded ETFs.



### Leveraged (Ultra) ETFs

While ETFs are composed of the index’s underlying assets and shares are usually redeemable for an amount of this asset basket, leveraged ETFs are a bit different. 

Rewind a little to 2006. ProShares launch an ETF that uses a combination of derivatives instruments, like futures and swaps, alongside securities to target twice the daily returns of an index. They also create short, or inverse, funds that target a negative return multiple of the S&P 500’s daily performance. These are constructed using just swaps and cash. 

The new leveraged ETFs allow traders to amplify their exposure to the index without borrowing themselves, meaning no margin accounts or associated management risk. On the surface, this offering seems fantastic. We don’t have to open a margin account or monitor our position *and* we get double the exposure to an index.

However, LETFs (and their promise of constant leverage) hide a lot of complexity that can damage a trader’s PnL. Let’s take a closer look.


Constant leverage requires reinvesting gains and shoring up losses by reducing (read, *selling*) exposure. The more accurately a fund wishes to track a leverage multiple, the more often it needs to “rebalance”. Most ETFs nowadays rebalance at the end of each day. This means a lot of management which, in turn, means a lot of fees: transaction fees, management fees and interest on borrowings. 

But rebalancing also means that leveraged funds have a fluctuating asset base and are, therefore, at the mercy of compounding returns. When gains are reinvested, adverse price movements do more ‘damage’ to the fund because of its increased exposure. After the fund adjusts for losses, its reduced base can’t capture as much upside. Management has to sell low and buy high to maintain the constant leverage; the resulting divergence between the naive expectation of returns and actual returns over time is called *volatility decay*. 

![perpetual inverse swap contract](https://storage.googleapis.com/mycelium-bucket/perpetual_inverse_swap_contract_b04512c15e/perpetual_inverse_swap_contract_b04512c15e.png)

Volatility decay is the reason that traders are often warned to use the instruments for short-term directional bets only. In the long run, you won’t get the returns you expect from an LETF. 

### Leveraged Tokens

When Blockchain technology takes off, it brings with it the notion of a tokenised asset; comparable to company stock but instead, these ‘tokens’ represent shares of a cryptographic application. They also have other sought-after qualities – like their ability to flow freely through the blockchain economy and be owned/transferred by the individual directly, rather than trusting a custodian to manage transactions. These qualities, and their ability to be fractionalised, increases the demand for these tokens. 

Remember BitMEX and their Bitcoin perpetual swap? By 2020, the contract type was widely adopted by crypto exchanges to give users the option to trade on margin for such tokenised assets – but the leveraged positions are non-transferrable and are held by the exchange. It’s not long before FTX, one of the up-and-coming exchanges offering perpetual swaps, seeks to expand into a constant leverage product: bull and bear tokens. 


FTX models bull and bear tokens on LETFs and constructs them using perp-swap positions. The only real difference between these tokens and their traditional counterparts is that they track individual assets as well as indexes. Without spending too much longer on this history, TokenSets ETH 2x Flexible Leverage Index is worth a mention for using a different leverage mechanism that involves borrowing the actual underlying asset. But, however they’ve been achieved, leveraged tokens still suffer from the same shortcomings as LETFs. 

### Perpetual Pools

One thing that we’ve not mentioned so far is the threat of liquidation in constant leverage instruments. 

Though managerial rebalancing generally prevents liquidations, the use of debt means it is not impossible for a leveraged product to default in cases of extreme market activity. Perpetual Pools address this problem head on. 

When they were announced in August 2021, Perpetual Pools was the first leveraged token design that did not require holding the underlying asset or borrowing in any way. Because of this, the tokens are immune to liquidations. 

How’s that possible?

Perpetual Pools is a contract between long and short parties that needs only a price feed and settlement asset. In that way, they are like perpetual swaps – but the similarities end there. The first difference is that these contracts rebalance every hour; updating how much of the settlement assets in the pool can be claimed by each ‘side’ of the agreement. At any time, leveraged tokens, which represent claims on the assets, are fully backed: they can be redeemed for settlement assets at a rebalance.

![perpetual pools explained](https://storage.googleapis.com/mycelium-bucket/perpetual_pool_ee2aad30d5/perpetual_pool_ee2aad30d5.png)

This isn’t what prevents liquidations or default. The reason Pools are perpetual – meaning that the contract lasts indefinitely – is because of the unique leverage function, which is used to calculate the new split of assets. It’s called power leverage, and it amplifies short and long PnL relative to the price change since the last rebalance; giving traders leveraged returns. 

The calculation also compresses returns when there are extreme short term market movements so that no party is able to lose 100% to the other. PnL compression during severe upswings or downturns is a small trade-off that traders make for un-liquidatable positions. 

Let’s look at an example position using a 3p (p = power leverage whereas x = linear leverage) perpetual pool to go long Bitcoin. If we open the position and the price of BTC increases by 1% in an hour, the profit on our position is not 3% but 2.94%. That small discrepancy is the result of PnL compression. At larger movements, compression is more pronounced. Consider a price increase of 33%, enough to default short traders using a regular 3x leveraged instrument (100% profit for longs). In this extreme example, the profit for long traders using the leveraged tokens is only 57.5%. While dampened, our gains are still significantly more than if we had just held the underlying; and we maintain no risk of liquidation perpetually.

There’s one more factor to think about: although perpetual pools don’t have an explicit funding payment that tethers their price to the underlying, they *do* have an implied rate that manifests in the skew of assets between the pool’s two parties. 

When demand for one position outweighs the other, the effective leverage on profits diverges for longs and shorts. Traders are encouraged to take the opposite side of the excess positions because they can arbitrage this ‘polarised leverage,’ but there’s still some risk for which they must be compensated; and it becomes reflected in the skew. 

### Recap

In a nutshell: perpetual pools are similar to leveraged ETFs, allowing traders to enter constant-leverage positions without having to manage margin or worry about liquidation. However, their mechanism is quite different: leveraged pool tokens are constructed without debt, using the losses of one party to fund the profits of the other. Pools are rebalanced every hour instead of daily and it is active traders, rather than fund managers, who keep returns in-line with expectations by providing liquidity to the undersubscribed side of the contract. 

One side-effect of this is polarised leverage, which discovers an implicit funding rate required by one party from the other, so traders don’t have to worry about funding payments.

***Perpetual Pools*** are best if you want leverage for the hourly returns (%) of an asset and they work well in trending markets over the short-to-mid term. Positions are tokenised, so they’re easy to trade on secondary markets. Like perp-swaps, perp-pools contracts only require data for the underlying in order to function, so they can track obscure or unobtainable assets. 

Watch out for the second iteration of the Perpetual Pools contracts, and Tracer’s new approach to pricing. Using the simple moving average of an underlying price, we can extend the duration leveraged tokens can be held for. From February 2022, get crypto’s best leveraged token on [tracer.finance](http://tracer.finance).

![crypto-leverage-trading.png](https://storage.googleapis.com/mycelium-bucket/crypto_leverage_trading_eea46b2a6a/crypto_leverage_trading_eea46b2a6a.png)



Leverage trading in crypto and comparing perpetual swaps to perpetual pools as financial instruments. Both give traders the ability to take leveraged positions on asset(s) for any amount of time, but each have a few stark differences that make them unique and useful in different contexts.

large_leverage-trading-perpetual-swaps-pools.png

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Leverage Trading

![PPLite_twitter_01_D01-01.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_01_D01_01_1863d49807/PP_Lite_twitter_01_D01_01_1863d49807.png)

Introducing **Perpetual Pools**, a new derivative primitive developed by Mycelium on behalf of Tracer DAO. We’ll run you step-by-step through Perpetual Pools usage basics; then we’ll highlight a proposed liquidity mining incentive structure suitable for Perpetual Pools.

So, what are Perpetual Pools? [Read the Tracer: Perpetual Pools Litepaper](https://tracer.finance/static/Tracer%20Perpetual%20Pools-efc7c29f638cb788832aafe0f41c07bd.pdf).


## Overview

Perpetual Pools is a new financial primitive that enables anybody to take a short or long position on any underlying asset. These positions are non-liquidatable, fully
collateralised, fully-fungible and can exist perpetually without upkeep. By taking a position, users mint fungible ERC20 tokens representing ownership of the pool of assets. These fungible positions allow users to interact with the DeFi economy seamlessly and sustain their leveraged exposure.

Perpetual Pools is a financial contract for the transfer of value between **long** and **short** sides of a collateral pool, based on an underlying price feed. For example, a long user places collateral into the long side to mint an **L-token**. A short user will have the same interaction with the short side, and mint an **S-token**.

The value of these tokens is determined by the proportion of collateral held in each side of the pool. Periodically (eg, each hour), value will transfer from one side to another based on a transfer function which mimics leveraged exposure. This is what we call power leverage. Denoted as p.

**Example**

> *Take a 1-BTC/USDC pool. For this pool there is a long side and a short side. The long side is represented by an L-token, and the short side is represented
by an S-token. Users who intend to take a long position on BTC/USDC will purchase an L-token. Users who intend to take a short position on BTC/USDC will purchase an S-token.*

![PPLite_twitter_02_D01_3-01.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_02_D01_3_01_c8204316d9/PP_Lite_twitter_02_D01_3_01_c8204316d9.png)

> *In the case where the BTC price goes up, the short side will transfer some of its USDC to the long side. As such, the L-token price appreciation will act like traditional leverage (1x in this case) for normal price movements. The S-token price depreciation will also act like traditional leverage (1x in this case) for normal price movements.*

![PPLite_twitter_03_D01_6-01.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_03_D01_6_01_7ad2245d4e/PP_Lite_twitter_03_D01_6_01_7ad2245d4e.png)


## Rebalancing Rate

In the case where long and short collateral is at parity, an x% transfer from one side will equate to an x% gain for the other side. However, in the case where long and short collateral is not equal, an x% transfer from one side will not result in an x% gain for the other side. Instead, the side’s gain is adjusted by the **rebalancing rate**. A favourable rebalancing rate presents asymmetric upside for the less collateralised side.

![PPLite_twitter_graphs-04.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_graphs_04_4609070d78/PP_Lite_twitter_graphs_04_4609070d78.png)


The existence of this rebalancing rate will mean that liquidity providers on the under-collateralised side will have **amplified leveraged gains** while keeping their losses fixed. e.g., for a 1p pool with a rebalance rate of 10%, the short side will have a power leverage of **1.1p for gains** while only *1p for their losses*.


### Use Cases

Here we detail basic use-cases for Perpetual Pools. We intend to provide more sophisticated strategies, both at an informational level as well as strategies for users to stake or earn yield:

**Directional Positions:** Take one side of a pool and indicate your beliefs to the market at varied leverages.

**Rebalancing Rate Returns:** Farming asymmetric returns that arise from the rebalancing rate.

**Long Straddle Payout:** Buy equal notional value of L/S-tokens, and profit if the price moves in one direction.

**Liquidity Provision for Secondary Markets:** Take both sides of the pool and generate revenue through secondary market (swap) fees.


## TCR Distribution

Tracer DAO proposes to distribute TCR to liquidity miners based on an initial 5 year forecast. See the graph below. The 64.7% represents the current initiatives already passed and voted, or proposed and currently in the execution phase, leaving 35.3% remaining for distribution. We project that, from the Perpetual Pools liquidity mining distribution, 50% will be allocated within the first 6 months, while the remaining balance will be emitted over the remaining 4.5 years.

![PPLite_twitter_graphs-03.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_graphs_03_d3fe312e92/PP_Lite_twitter_graphs_03_d3fe312e92.png)


Perpetual Pools reimagine the way that derivative contracts function and position Tracer as a pioneering protocol on the bleeding edge of financial innovation. As Tracer DAO's beachhead contract type, Perpetual Pools must be tested and adopted by community members, builders and market participants. Accordingly, Tracer DAO will seek to incentivise these kinds of behaviour.


## Liquidity Mining

Sentiment among Tracer DAO community members ([Discourse](https://discourse.tracer.finance/t/current-and-future-token-distribution/224)) is to introduce Liquidity Mining incentives for providers at market genesis. See below an example schedule projection of liquidity mining in the context of Tracer DAO’s Perpetual Pools contracts.


![PPLite_twitter_graphs-01.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_graphs_01_c9da5c19c2/PP_Lite_twitter_graphs_01_c9da5c19c2.png)


From the day of launch, liquidity providers will receive a concentrated distribution of TCR, where 57% (out of the allocated 5%) will be distributed in the first 4 weeks following launch. The alignment between TCR token holders and Tracer DAO stakeholder primacy is crucial for successful decentralised governance and it will ultimately deliver a stronger Tracer DAO.


## How will it work?

There will be two methods of liquidity mining. One that incentivises Primary Market Liquidity (i.e. buying a pool token), and one that incentivises Secondary Market Liquidity (i.e. putting that pool token into an AMM liquidity pool).

TCR will be allocated to both Primary Market Liquidity and Secondary Market Liquidity. At genesis, 40% of TCR allocation will be given to Primary Market Liquidity, and 60% will be given to Secondary Market Liquidity.
 

- The TCR Allocation (Primary Market) and the TCR Allocation (Secondary Market) will be a configurable parameter which can be adjusted depending on market conditions.

To earn *Primary Market Liquidity Rewards*, users will stake a pool token(s). To earn *Secondary Market Liquidity Rewards* users will stake an appropriate AMM LP token(s) into the staking farm contract.

In this model, 2.85% of total TCR supply (1B TCR) will be distributed within the first 4 weeks of the liquidity mining scheme.

**Please Note:** Users will need to use the Arbitrum bridge [https://bridge.arbitrum.io/](https://bridge.arbitrum.io/) to move their assets from L1 to L2 when using the Perpetual Pools Interface. Also, noting the 7-day withdrawal timeframe back to main-chain (L2 to L1)


## What is the allocation?

Liquidity mining rewards are calculated at the end of each Rebalance Period (60-minutes).

For *Primary Market Liquidity Rewards*, the liquidity mining rewards are determined by the proportion of pool tokens provided by the unique address in the staking farm contract.

- e.g. User deposits five 1L-ETH/USDC. There are a total of 100 1L-ETH/USDC.
Therefore, this user has a 5% claim on the TCR rewards for that hour.

The same logic applies for staking AMM LP tokens.


## What is the schedule?

No vesting for TCR rewards. Rewards will accrue continuously and can be claimed at any time. TCR is earned continuously.

- e.g. for the first week, the contract will release a total of 8,000,000 TCR. This will be released continuously.

 A new rate is given weekly.

- e.g. for the second week, there will be 7,500,000 TCR emitted.


## Markets at Launch

The initial Perpetual Pool markets proposed to be deployed will be 1-BTC/USDC, 3-BTC/USDC, 1-ETH/USDC and 3-ETH/USDC.


## Secondary Markets

These are fungible tokens: positions in a Perpetual Pool can be used for further yield-bearing opportunities. For example, a long/short user can provide liquidity in a Balancer, SushiSwap or Uniswap AMM to earn returns from swap fees over time. We expect secondary markets to be naturally liquid as users seek these fees.


## Timeline

Here’s the current and forecast timeline for Tracer DAO:

![PPLite_twitter_graphs-02.png](https://storage.googleapis.com/mycelium-bucket/PP_Lite_twitter_graphs_02_296c15568f/PP_Lite_twitter_graphs_02_296c15568f.png)


## What Happens Next?

Stay tuned by following Tracer DAO on [Twitter](https://twitter.com/TracerDAO) and jumping into the community on [Discord](https://discord.com/invite/kvJEwfvyrW) and [Discourse](https://discourse.tracer.finance/t/current-and-future-token-distribution/224).



### Legal and Financial Advice Disclaimer:

The information provided in this article is for informational purposes only. Any material in this article should not be considered as legal or financial advice. Tracer DAO is not an investment advisor and this is not a place for the giving or receiving of financial, tax or legal advice or investment strategy. Tracer DAO is not regulated by any financial services authority. You should consult with a financial advisor, attorney or other professional to determine what may be best for your individual needs.

Accordingly, Tracer DAO will not be liable, whether in contract, tort (including negligence) or otherwise, in respect of any damage, expense or other loss you may suffer arising out of such information or any reliance you may place upon such information. Any arrangements between you and any third party contacted via Tracer DAO’s website are at your sole risk.

Introducing Perpetual Pools, a new derivative primitive developed by Mycelium on behalf of Tracer DAO. We’ll run you step-by-step through Perpetual Pools usage basics; then we’ll highlight a proposed liquidity mining incentive structure suitable for Perpetual Pools.

large_PPLite_twitter_01_D01-01.png

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small_PPLite_twitter_01_D01-01.png

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Tracer Perpetual Pools Explained

![Voyage_Announcement_Blog_02-01.png](https://storage.googleapis.com/mycelium-bucket/Voyage_Announcement_Blog_02_01_01f2229375/Voyage_Announcement_Blog_02_01_01f2229375.png)

## The Tracer Voyage: setting sail towards Perpetual Pools V2

The Tracer Voyage has officially commenced! [Jump into our dApp now](https://pools.tracer.finance/) and start trading the first ever long-term leveraged tokens in DeFi on Arbitrum mainnet. Find the Voyage Week 1 article [here](https://tracer.finance/radar/v2-mechanism).

Our journey begins with the exploration of the core value of V2: **the creation of long-term leveraged tokens which can never be liquidated.**

Our two markets which let us explore this concept are live now!

- 3x ETH/USD settled in USDC
- 3x BTC/USD settled in USDC

Learn how to get started with Tracer’s Perpetual Pools with our [guide to minting tokens here](https://tracer.finance/radar/minting-burning/).

## About The Tracer Voyage

The Tracer Voyage will serve as a guided tour of each of the novel use cases Perpetual Pools V2 enables. Before we arrive at our final destination - the official launch of Perpetual Pools V2 - we will drop anchor along the way to explore some of the exciting use cases.

On our journey towards the future, we are showing off the new world we have built. A world where any governance token can be used to take positions or hedge; where you can create custom, diversified portfolios represented by a single token; and where liquidations have been cured. Only with Tracer will you be able to trade the “Flippening”, get exposure to Cryptopunks and hedge your exposure to oil all on a single platform.

At the conclusion of The Tracer Voyage, we will push out the full release of Perpetual Pools V2 along with our Indices and Factory interfaces to let the Cambrian explosion of new markets commence.

<div style="position:relative;margin:70px 0;pointer-events:none;">
    <img src="https://storage.googleapis.com/mycelium-bucket/Voyage_Main_GIF_3_c7ac570fd7/Voyage_Main_GIF_3_c7ac570fd7.gif" style="border-radius:5px" />
  <img style="position: absolute;top: 50%;left: 50%;transform: translate(-50%, -50%);margin-top: 0px;width:36%;min-width:160px;margin-left:0px;" src="https://storage.googleapis.com/mycelium-bucket/Voyage_V2_Island_Twitter_post_FA_01_08_6f840e227b/Voyage_V2_Island_Twitter_post_FA_01_08_6f840e227b.png" alt=""/>
</div>

<div style="position:relative">
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      <img src="https://storage.googleapis.com/mycelium-bucket/Voyage_Map_V2_Island_Assets_05_323e5c07d4/Voyage_Map_V2_Island_Assets_05_323e5c07d4.png" style="width:291px;height:274px"/>
  </div>
</div>

## Where to next?

Following our first stop, we’ll bring you along for the journey as we explore several other use-cases of Tracer. Will it be venturing into the lands of exotic collateral? Or will we find ourselves trading real world assets or NFT markets? Stay tuned via [Twitter](https://twitter.com/TracerDAO) to find out where the Voyage takes you next.


## Why join The Tracer Voyage

By joining The Tracer Voyage you can share in over 6.3 million TCR rewards. You’ll also be working your way towards an exclusive NFT. Each week TCR emissions will be used to reward our first voyagers, with enhanced emissions directed to the focus market of that destination.

### **The Voyage NFT**

Qualify for the Voyage NFT by participating in The Voyage each week. Simply take a long or short position in the market(s) of the week, read the official related article(s) released each week, and complete a weekly quiz to collect a POAP. If you **collect a majority of the POAPs** by the end of the Tracer Voyage, you’ll be airdropped the Tracer Voyage NFT. The Voyage NFT is an indication of your interest and dedication to Tracer’s PPV2, and these NFTs might just be tied to further benefits down the track - more on this to come.

<div style="position:relative">
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      <img src="https://storage.googleapis.com/mycelium-bucket/Voyage_Map_V2_Island_Assets_06_e60a8c65ce/Voyage_Map_V2_Island_Assets_06_e60a8c65ce.png" style="width:277px;height:148px"/>
  </div>
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## How to Participate in the Voyage

There will be several unique destinations that we stop off at during the Voyage; but each time we drop anchor there are a few common activities you should complete.

1. Read that destination’s official Tracer Voyage article - it will reveal to you the secrets and power of the focus market of that destination. [Week 1 is here](https://tracer.finance/radar/v2-mechanism).
2. Complete the short quiz on the article to be eligible to receive your POAP. The quiz link will be at the bottom of the article under the “For the Voyagers” heading.
3. Take a long or short position in the focus market of that destination using the Perpetual Pools V2 beta interface. This combined with Step 2 above will enable you to receive that destination’s POAP.
4. Stake your long or short tokens on the Tracer “Stake” page to earn TCR rewards.
5. Tell your friends!

Don’t forget, you’ll need to collect a majority the Voyage POAPs to be eligible for The Tracer NFT drop at the end of the journey!

![Voyage_V2_Island_Blog_post_FA01.png](https://storage.googleapis.com/mycelium-bucket/Voyage_V2_Island_Blog_post_FA_01_b9f1df28fb/Voyage_V2_Island_Blog_post_FA_01_b9f1df28fb.png)

## What’s Possible With Perpetual Pools V2

**Is the merge making you bullish on ETH?**

Go long without worrying about timing your entry perfectly or short term volatility triggering a liquidation.

**Mad that you were late to the party on Cryptopunks?**

Get the Cryptopunk exposure you desire without needing to wrangle up ~50 ETH.

**Do you believe that ETH will flip BTC one day or are you sure BTC will maintain dominance?**

Take a position which ignores the volatility and cyclicality of the aggregate market by trading your belief using a ‘Flippening’ market which bets on the relative market capitalisation of ETH and BTC.

**Do you want exposure to a group of tokens but are sick of having to manage multiple positions?**

Create an index products which gives you exposure to the assets you’re most bullish on.

**Long time OHMie looking for some more utility from the decentralized reserve currency of the future?**

Gain some exposure to another asset using gOHM as settlement collateral.

**Worried about inflation?**

Hedge your risk by going long gold with an XAU market.

These are just some of the exciting ways you can use the proof-of-concept markets. Imagine what else is possible.

## About Perpetual Pools

Tracer’s Perpetual Pools V1 contracts have been live since September 2021 allowing the creation of long-term leveraged tokens which provide the ability to hedge downside risk, or speculate with leverage without the fear of liquidation or the need to maintain a margin account. Since launching, the contracts have handled over $500M in primary market volume and had a peak TVL of over $50M all with zero exploits, security incidents or positions liquidated.

V2 brings to the fray a series of improvements targeted at minimising the impacts of volatility decay and unlocks the ability for users to permissionlessly create new exotic markets, using any available price feed, that can settle in any token, without writing a single line of code via our factory interface.

The ability to permissionlessly deploy any market, on any Chainlink oracle feed using any ERC20 as settlement will be pushed out during a later release at the completion of this initial launch marketing campaign.

*Bon voyage, Tracers!*

## Useful Links:

- [V1 —> V2 Migration FAQ’s](https://tracer.finance/radar/v2-migration/)
- [Perpetual Pools ELI5](https://tracer.finance/radar/tracer-perpetual-pools-eli5/)
- [Mint and Burn Guide](https://tracer.finance/radar/minting-burning/)
- [Staking Pool Tokens Guide](https://tracer.finance/radar/staking)
- [Documentation](https://docs.tracer.finance/tracer/master)
- [Tracer Vision](https://tracer.finance/radar/future-of-derivatives/)



___________________



The Tracer Voyage has officially commenced! Jump into our dApp now and start trading the first ever long-term leveraged tokens in DeFi on Arbitrum mainnet.

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Perpetual Pools V2: The Tracer Voyage

A decentralised autonomous organisation (“DAO”) is an entity whose decentralised governance is encoded in a smart contract framework. [Tracer DAO](https://tracer.finance/) is one such DAO. Within Tracer DAO’s [smart contract framework](https://etherscan.io/address/0x515f2815c950c8385c1c3c30b63adf3207aa259a#code) (both the [DAO contract](https://etherscan.io/address/0x515f2815c950c8385c1c3c30b63adf3207aa259a#code) and the [TCR token contract](https://etherscan.io/address/0x9c4a4204b79dd291d6b6571c5be8bbcd0622f050#code)), you will find the Tracer DAO Participation Agreement.

![The beginning of the Tracer DAO Participation Agreement.](https://storage.googleapis.com/mycelium-bucket/DAO_participation_Agreement_2_74452803ca/DAO_participation_Agreement_2_74452803ca.png)

> The beginning of the Tracer DAO Participation Agreement.

**Why are Participation Agreements relevant to DAOs?**

DAO’s are a form of on-chain entity that allow an infinite number of participants (such as individuals, companies or other DAOs) to coordinate their efforts and resources transparently. Like traditional companies, DAOs have:

1.  Bank accounts (called “treasuries”);
2.  Formal governance (achieved by voting on “proposals”);
3.  Stakeholders who participate in that governance (usually referred to as “governance token holders”, in the context of Tracer DAO, these are holders of the TCR token); and
4.  The ability to engage third parties (called “service providers”).

DAOs often do not have “managers” or “directors” and are owned and controlled by their governance token holders. For this reason, DAOs are analogous to member-managed companies, which exist only in some jurisdictions. Nobody understands this analogy better than the team at [OpenLaw](https://www.openlaw.io/) who used a Delaware member-managed LLC to “wrap” a DAO, thereby creating [The LAO](https://www.openlaw.io/), which is the first for-profit, limited liability, decentralised autonomous organisation. However, as a relatively new way of conducting business, leveraging relatively new technology, when a DAO is deployed on-chain it will not be recognised as an entity with legal personality or limited liability. Until such recognition, we are left with DAOs who do not operate as people within the eyes of the law. Currently, most legal minds interpret DAOs as unregistered organisations, unincorporated associations or general partnerships. These interpretations each lead to concerns that, amongst an organisation of potentially infinite parties, each individual party could be held personally liable for the debts of the organisation.

![The_LAO.](https://storage.googleapis.com/mycelium-bucket/The_LAO_91f4cd4a87/The_LAO_91f4cd4a87.gif)
> 
> OpenLaw’s LAO was a step in the right direction for DAO recognition.

Development is underway in the international law arena, where the [Coalition Of Automated Legal Applications](https://coala.global/) (**_COALA_**) has been working on [The DAO Model Law](https://medium.com/coala/the-dao-model-law-68e5360971ea). The goal of the model law is to assist jurisdictions in crafting their own DAO laws, so as to recognise full or partial legal personality to DAOs. We have already seen signs of a shift in some jurisdictions, such as [Wyoming](https://defirate.com/wyoming-dao-bill/) and [Malta](https://chainstrategies.com/2018/03/11/malta-blockchain-regulation-proposal-legal-personality-for-daos-and-smart-contracts/), but we generally advise against holding your breach while waiting for legal and regulatory wheels to turn. In the case of Wyoming, the “[DAO Bill](https://defirate.com/wyoming-dao-bill/)”, recently approved by the Senate, allows DAOs to register themselves as LLCs and provides a framework for their formation and management. [Otonomos](https://otonomos.com/)' most recent newsletter considers this framework and queries: “What does the DAO Bill add that contract law cannot provide?”

**What is a Participation Agreement?**

A Participation Agreement uses contract law to provide a framework for the formation and management of a DAO and govern the rights and obligations of each member of the DAO, including governance token holders and service providers. With respect to the Tracer DAO Participation Agreement, some important features of the Participation Agreement include:

1.  An explanation of Tracer DAO’s governance mechanism;
2.  DAO members releasing other DAO members from claims arising in connection with the Tracer project;
3.  DAO members waiving their claims against other DAO members;
4.  A limitation of liability for DAO members in relation to loss or damage arising under or in connection with the use of Tracer’s contracts; and
5.  In-built complaints and dispute resolution procedures for problems and disputes arising in connection with the Tracer project.

![Participation Agreement.](https://storage.googleapis.com/mycelium-bucket/Screenshot_Participation_Agreement_a53f3b6523/Screenshot_Participation_Agreement_a53f3b6523.png)
> 
> The clauses of the Tracer DAO Participation Agreement.

The limited liability status offered to companies allows those companies to better manage risk associated with civil claims which may arise between that entity and its various shareholders, employees, contractors and service providers. Similarly, Participation Agreements allow DAOs to better manage risk associated with civil claims which may arise between governance token holders and service providers of the DAO (ie, those parties impacted by the operations of the DAO).

**How is the Participation Agreement signed?**

A potential DAO member of Tracer DAO will digitally sign the Participation Agreement when they submit a transaction to the DAO contract on the Ethereum blockchain (eg, claiming TCR tokens) which includes the Participation Agreement. Each DAO member will be a party to the Participation Agreement.

![Tracer Logo Banner.](https://storage.googleapis.com/mycelium-bucket/TCR_Logo_Participation_Agreement_bc485ea2e2/TCR_Logo_Participation_Agreement_bc485ea2e2.png)
> 
> Each member of Tracer DAO is party to the Participation Agreement.

The Tracer DAO Participation Agreement is not the first of its kind. It is inspired by the [dxDAO Participation Agreement](https://dutchx.readthedocs.io/en/latest/dxDAO.html), published by [Gnosis](https://gnosis.io/). A similar agreement was also used by the Ethfinex team for [The Nectar DAO](https://nectar.community/dao#).

**The path ahead.**

Participation agreements are important in enabling DAOs to operate as sophisticated entities. The authorship of the Tracer DAO Participation Agreement contributes to an already rich DAO history and accords with Tracer DAO’s broader purpose: to provide strong foundations for future financial innovation. Tracer DAO will continue to evolve with the demands of both its members and the broader market. Its leadership and innovation will serve as a source of guidance for future DAOs.

A decentralised autonomous organisation (“DAO”) is an entity whose decentralised governance is encoded in a smart contract framework. Tracer DAO is one such DAO. Within Tracer DAO’s smart contract framework both the DAO contract and the TCR token contract, you will find the Tracer DAO Participation Agreement.

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The Tracer DAO Participation Agreement

![arbitrum-in-10.png](https://storage.googleapis.com/mycelium-bucket/arbitrum_in_10_227e2b19cf/arbitrum_in_10_227e2b19cf.png)

Arbitrum is a layer 2 scaling solution for Ethereum. Tracer will be deploying its Perpetual Swaps on [Arbitrum](https://arbitrum.io/) in the coming month. The following read will give you a thorough understanding of the mechanisms that power Arbitrum to give you more comfort and understanding when trading on Tracer in an L2 environment.

**UPDATE:** Tracer [Perpetual Pools](https://pools.tracer.finance/) is now live on Arbitrum One

## Architecture Summary

*   As Arbitrum (L2) exists as a scalability solution for Ethereum (L1), the Arbitrum architecture naturally exists in part on L1 and in part on L2.
*   The component of Arbitrum that exists on L1 is the EthBridge, which is a set of Ethereum contracts.
*   The EthBridge is responsible for refereeing the Arbitrum Rollup protocol, as well as maintaining the inbox and outbox of the chain.
*   The inbox and outbox of a chain is what allows users, L1 contracts, and full nodes to send their transactions to the chain as well as observing the outcome of those transactions.
*   The Arbitrum Virtual Machine is the gateway between L1 and L2, and the function provided by the EthBridge.
*   The AVM is what is capable of reading inputs, and executing computations on these inputs to produce outputs.
*   ArbOS is run on top of the Arbitrum Virtual Machine, and is responsible for ensuring the execution of smart contracts on the Arbitrum chain.
*   ArbOS exists completely on L2, and runs EVM contracts just like how they would be run on Ethereum.

![Layer 1 to Layer 2.](https://storage.googleapis.com/mycelium-bucket/diagram_1_9294177094/diagram_1_9294177094.png)

> A high level view of the Arbitrum architecture.

## The Rollup protocol

*   The order of messages in the chain’s inbox determines the result of the transactions.
    *   Subsequently, anyone who is watching the inbox is able to know the results of the transactions, simply by self-executing them.
*   The Rollup protocol is responsible for confirming the results of transactions that have effectively already occurred.
*   Users that participate in the protocol are called validators; if a validator stakes Eth into a deposit contract, they become a staker and can stake on blocks in the Rollup chain.
    *   Both the roles of validator and staker are permissionless.
*   In terms of security, only a single honest validator is required to force the correct execution of the chain.
    *   This gives the rollup chain the same degree of trustlessness as the Ethereum main chain.
    *   Arbitrum assumes the existence of at least one honest validator.
*   The Rollup protocol acts upon the Rollup chain, which is a chain of rollup blocks existing separately to the Ethereum chain.
*   It is the role of the validators to propose new blocks to be added to the chain.
*   Every block that is proposed will eventually be confirmed or rejected by the protocol.
*   Each block is made up of a number of fields, and apart from the block number field, the data given in each of these fields are assertions made by the block’s proposer which may or may not be correct.
    *   If any of the asserted fields are incorrect, the protocol will eventually reject the block.
*   Once a block is proposed it receives a deadline for confirmation.
*   If a validator disagrees with the block, they should propose their own correct block which earns the honest validator some reward when they eventually end up in a fraud proof with the incorrect block.

## Staking

*   For a staker to add a rollup block to the chain, they must place their stake on the block they are adding.
*   Staking is permissionless, anyone can stake on any block where staking is possible.
*   Once you are staked on a block you cannot withdraw your stake until that block has been confirmed.
*   When you stake a block, you are confirming that a block is correct, AND every block in the chain between the most recent confirmed block and the block that you are staking is correct.
*   If a block that you stake on is incorrect, or a block in the chain between the most recent confirmed block and the block that you are staking on is incorrect, you will forfeit your stake.
*   If you are not staked on a block, you can stake on the most recent confirmed block.
*   If you are staked on a rollup block, you can extend your stake up to any successor of the block you are staked on.
*   The amount needed to stake is dynamic.
    *   There is the base stake amount that is specified as a parameter in the Arbitrum chain, which will be used most of the time.
    *   As a security measure to prevent an attacker slowing down the network despite losing their stake, the stake amount is multiplied by a factor that increases exponentially with respect to time, since the deadline for the first unresolved node passed.
    *   This is to increase the cost of such an attack during the length of the attack.
    *   This increase in stake is temporary and only occurs when the chain is making slow progress to confirm blocks.

## Challenge protocol

*   When two stakers are staked on different blocks, where one block is not a successor of the other, there will be a particular block that they disagree on and a challenge will occur.
*   Most of the challenge occurs on the Arbitrum chain and is refereed by a L1 contract.
*   The challenge consists of an interactive, multi-round dissection game that occurs on L2, and a one-step proof that is executed on L1.
*   The staker who proposed the disputed block is defending their assertion against a disagreeing staker.
*   The defending staker is essentially claiming that by starting at the preceding block, after some N instructions are executed by the virtual machine, the preceding block state will have been advanced to the state given in their proposed block.
*   The defending staker (Alice) will make the first move in the dissection game by dissecting the N instruction into K parts of size N/K.
    *   Note that the subsections are not equal in size with respect to the number of steps, but rather equal in size with respect to the amount of Arbgas consumed.
    *   Also note that each segment will naturally have a start-point and an end-point (this is trivial, but makes the next dot-point easier to understand).
*   The opposing staker (Bob) will also dissect the set of instructions into K parts of size N/K, except one of Bob’s K segments will have a different end-point to Alice’s corresponding segment’s end-point.
    *   This is essentially Bob identifying the segment with which he disagrees.
*   Bob will then perform the same action as Alice’s initial step and dissect one of the segments into K subsegments of size N/K, and send this segment with identified subsegments back to Alice.
*   Alice then performs the same action as Bob’s initial step and identifies a subsegment where she disagrees with its end-point.
*   This dissection process continues until Alice and Bob have identified a single instruction on which they disagree.
*   This instruction is sent to a L1 contract which executes it and decides the winner of the dispute.
*   The loser of the dispute will have their stake confiscated, part of which will be burnt - to avoid an attacker hedging their bets - and the remainder of the stake will be given to the honest staker as a reward.
*   During the whole dissection process, the L1 contract that is refereeing the game does not know any information about the instructions themselves, it is only checking that each player is following the rules of the dissection game.
*   During the dispute, all other validators are able to determine for themselves the result of the dispute before the dispute is finalised; meaning that essentially a soft fork occurs and the validators can continue to submit rollup blocks on the correct chain.
*   The challenge period has an imposed time limit of roughly one week per staker.
*   Each staker must make all of their moves within their week allocation or they will lose the dispute.
    *   Think of a chess clock.

![Multi-round](https://storage.googleapis.com/mycelium-bucket/diagram_2_5b56f13345/diagram_2_5b56f13345.png)

> A demonstration of the multi-round, interactive disection game played by two stakers during the challenge protocol. In reality, the disputed assertion will have many more instructions (rows with squiggles in it) and thus more rounds will be played but the principle is the same.

## Validators

*   A validator is a node on the Arbitrum chain that has chosen to watch the activity of the Rollup protocol and advance the state of the chain.
    *   Not all nodes act as validators.
*   Offchain Labs expect validators to follow either an active, defensive, or watchtower strategy; although, this is not enforced by the protocol.
    *   An ‘active validator’ is continuously working to advance the chain by proposing new blocks. Only one honest active validator is required per chain; increasing the number of active validators does not increase the efficiency of the chain.
    *   A ‘defensive validator’ watches the Rollup protocol and acts only when they witness dishonest behaviour, at which point they will either propose a correct block - or if a correct block has already been proposed - they will stake on that block.
    *   A ‘watch tower validator’ watches the Rollup protocol just like a defensive validator, but if they witness dishonest behaviour they don’t propose or stake on a correct block themselves, rather they simply alert other validators to do so.
*   Offchain labs will run an active validator on their flagship Arbitrum chain.
*   For most of the time, defensive and watchtower validators will not need to do anything, hence an attacker is never aware of how many defensive validators there are.
*   Although anyone can be a validator, it is expected that the main parties who will choose to become one will be parties who have significant assets invested in the chain, or parties who are hired to be validators by those with significant investments.

## Full Nodes

*   A full node on Arbitrum has the same role as a full node on Ethereum; they track the state of the chain and allow others to interact with the chain
*   Due to a built-in AVM emulator, a full node is able to treat the chain as a matter of computing outputs from inputs, without any knowledge of the actual Rollup protocol.
*   A full node can serve as an aggregator on the chain, further increasing cost efficiency for the users.
*   Arbitrum includes the facility to collect fees from users to compensate the full node for the costs incurred while acting as an aggregator.
*   Full nodes can also compress transactions to further decrease the L1 calldata cost.
    *   The full node submits the compressed transaction to the chain’s inbox, where arbOS receives it and uncompresses the transaction.
*   A full node will typically incorporate both compression and aggregation, i.e. it will submit a batch of compressed transactions to the chain’s inbox.

## Sequencer Mode

*   When an Arbitrum chain is launched, there is the option to launch with a sequencer.
*   A sequencer is a full node that has additional privileges for the ordering of transactions in the chain’s inbox.
*   These privileges allow the sequencer to instantly guarantee the result of a transaction.
*   When an Arbitrum chain is launched with a sequencer, the chain inbox is effectively split in two:
    *   One inbox will operate as it normally would if there was no sequencer, i.e. nodes can send messages to the inbox which will be tagged with a block number and timestamp.
    *   The second inbox will be controlled by the sequencer, and only the sequencer can send messages to this inbox
*   When the sequencer sends messages to their inbox, they can specify the block number and timestamp with which to tag the message.
    *   This includes block numbers and timestamps from the past, up to a specified delta_blocks, blocks in the past and delta_seconds, seconds in the past.
    *   These delta values will typically correspond to roughly ten minutes of wall-clock time.
*   Now when arbOS checks the inbox, it will receive the message with the lowest block number, which may be at the head of either the regular inbox or the sequencer inbox.
*   The limit on how far back the sequencer can backdate blocks is tied to the number of confirmation blocks needed to achieve finality on Ethereum.
    *   If x amount of blocks are needed to achieve finality on Ethereum, then the sequencer will backdate by x blocks so that it knows exactly which transactions will precede its current transaction.
*   When sequencer mode is activated on an Arbitrum chain, transactions that are submitted to the sequencer will achieve finality x blocks faster than it would if there was no sequencer, but transactions that are submitted to the regular inbox will achieve finality x blocks slower than if there was no sequencer.
    *   This is regarded as a positive trade-off due to the large practical difference when comparing instant and five minute finality with five minute and ten minute finality.
*   However, a malicious sequencer is able to take advantage of these privileges to a certain extent.
    *   A malicious sequencer is able to censor user’s transactions by simply not including them to the sequencer inbox, forcing the user to send the same transactions to the regular inbox after realising that they have been censored.
    *   The sequencer would also have the power to frontrun user’s transactions.
*   The initial Arbitrum chain will launch with a sequencer that is run by Offchain Labs.
*   There has previously been some successful research into developing a decentralised fair sequencer algorithm by a team at Cornell Tech, and with some more work this will form the long term solution for Arbitrum.

![with and without a sequencer](https://storage.googleapis.com/mycelium-bucket/diagram_3_764350ae06/diagram_3_764350ae06.png)

> The difference in the chain’s inbox when the sequencer mode is enabled / disabled.

## ArbGas / Fees

*   ArbGas operates similarly to Ethereum gas in that it is used to measure the cost of computation on the Arbitrum chain.
*   However, there is no hard ArbGas limit imposed on an Arbitrum chain, and ArbGas can be consumed much faster than Ethereum gas.
*   A key role of ArbGas is to provide a predictable measure of how long it would take to validate the result of a computation.
*   Every rollup block includes a claim about the total amount of ArbGas consumed in the chain, meaning that the difference between the current block’s claim and the previous block’s claim should be a valid indicator of how much ArbGas is consumed in the current block.
*   This way, a validator who is checking a block’s validity can set their gas limit to this amount, and if they run out of ArbGas before they reach the end of the block, they can be certain that they have identified an invalid block and successfully challenge it.
*   Users are charged fees when they submit their transactions to the chain.
*   If the user sends their transaction to an aggregator, a portion of the fees is automatically paid to that aggregator for costs they incurred.
*   The remainder of the fees is sent to a network fee pool which is used to pay for services that ensure that the chain operates securely.
*   Fees are charged for L2 transactions, L1 calldata, computation, and storage.
*   Fees are paid in Eth.

## Summary

*   Arbitrum is a L2 scalability solution developed by Offchain Labs: an optimistic rollup that uses a multi-round interactive challenge protocol.
*   The flagship Arbitrum chain was released to developers on the 28th of May, and will be open to users once a quorum of projects has been reached.
*   From the User’s point of view, interacting with the Arbitrum chain will be an identical experience to interacting with Ethereum.

Tracer will be deploying its Perpetual Swaps on Arbitrum Mainnet in the coming month, be sure not to miss it by following Tracer on [Twitter](https://twitter.com/TracerDAO) and joining the discussion on [Discord](https://discord.gg/kvJEwfvyrW).

For an even deeper dive on Arbitrum, see the [docs here](https://developer.offchainlabs.com/docs/inside_arbitrum).

_A technical analysis authored by [Nick Crow](https://twitter.com/crypto_crowy) of Lion’s Mane._

Tracer will be deploying its Perpetual Swaps on Arbitrum in the coming month. The following read will give you a thorough understanding of the mechanisms that power Arbitrum to give you more comfort and understanding when trading on Tracer in an L2 environment. As Arbitrum (L2) exists as a scalability solution for Ethereum (L1), the Arbitrum architecture naturally exists in part on L1 and in part on L2.

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Arbitrum Explained In 10 Minutes

It is easy to be myopic in the 24/7 merry-go-round of highly accessible trading. Red and green Candlesticks, pumps, dips and product launches overwhelmingly command the scarce attention of the average retail punter. Regulatory discussions occurring in decision-making corridors certainly play second fiddle to the hype, and sometimes, barely get a look in.

With more and more individuals becoming active participants in decentralised markets, a trend which Tracer believes is desirable, there exists an increased need for sensible educational commentary on regulatory discussion. At least for the foreseeable future, all investors in the decentralised space are at the mercy of the regulator’s hand. It is on this basis that Tracer begins its commitment to being a consistent voice on the topic of regulation, providing credible information on which decentralised market participants can feast. This accords with a core philosophy of Tracer: that educated market participants are indispensable to the overall health of trading markets.

In early May the U.S. House Committee on Financial Services held a virtual hearing titled “[Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide](https://www.youtube.com/watch?v=vX2X8xxHEns&ab_channel=U.S.HouseCommitteeonFinancialServicesU.S.HouseCommitteeonFinancialServices)”. Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (“SEC”) was a notable member of the House Committee’s panel.

<iframe class="blog-video" src="https://www.youtube.com/embed/vX2X8xxHEns" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen=""></iframe>

> Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, Part III. May 6, 2021.

The hearing was the latest in a series examining the extreme market volatility witnessed in early 2021, much of which stemmed from a short squeeze on stocks, including GameStop, AMC, Koss, and others. Specifically, it contemplated the implications of retail investors using popular social media forums like Reddit’s “WallStreetBets” subchannel to collectively induce a short squeeze in stocks they identified as being heavily shorted by hedge funds.

A spattering of topics were covered in the hearing, including: the payment for order flow model, the market-dominance of a few powerful participants, gamification of retail investing, and the growing impact of social media and technology on America’s capital markets.

Some of these head-scratching issues are age-old, some are novel, but they are all genuine issues that warrant discussion. Tracer believes this discussion should not be relegated to a minority whose job it is to contemplate and regulate, but instead be shared throughout the market.

Keep an eye out for Episode 2 of the ‘Education in Regulation’ series to read our thought piece on increased market participation and whether increased regulation is necessary to manage that reality. Be sure not to miss it by following Tracer on [Twitter](https://twitter.com/TracerDAO) and joining the discussion on [Discord](https://discord.gg/kvJEwfvyrW).

It is easy to be myopic in the 24/7 merry-go-round of highly accessible trading. Red and green Candlesticks, pumps, dips and product launches overwhelmingly command the scarce attention of the average retail punter. Regulatory discussions occurring in decision-making corridors certainly play second fiddle to the hype, and sometimes, barely get a look in.

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House Committee Hearing

Decentralised autonomous organisations (DAOs) represent an exciting intersection between blockchain technology and corporate law. A number of innovations in organisational structure have emerged from the rapid rise in both DAO use and popularity. Via its novel approach to engage Service Providers, [Tracer DAO](https://tracer.finance/) is contributing to the swell of new-age innovation in corporate restructuring.

### What is a Service Provider?

A similarity between DAOs and their traditional corporate ancestors is the ability to engage third-parties. Different DAOs use different labels, but in Tracer DAO’s context these third-parties are known as “Service Providers”. As the name suggests, these parties are engaged by DAOs to provide an agreed service. The consideration received for the provision of services is determined at the discretion of the proposing DAO member and will flow as tokens from the DAO’s treasury. It is also possible for a Service Provider to receive Tracer DAO's TCR governance tokens as consideration. Service Providers who receive TCR tokens as consideration for some, or all, of their services will automatically become members of the DAO, and have the ability to make Proposals, vote on future Proposals, and thereby manage Tracer’s governance mechanism, financial contracts and other protocols. A Service Provider holding governance tokens is consistent with the notion of stakeholder primacy, whereby that Service Provider will be held accountable by all stakeholders within the Tracer ecosystem, and is incentivised to perform services with the highest level of quality, become more active within the Tracer ecosystem, and use their knowledge and learnings to inform future decisions through acts of governance.

![TCR_Logo_Participation_Agreement.png](https://storage.googleapis.com/mycelium-bucket/TCR_Logo_Participation_Agreement_bc485ea2e2/TCR_Logo_Participation_Agreement_bc485ea2e2.png)

> Tracer DAO Engages “Service Providers” to Contribute to the Ecosystem

The engagement of Service Providers is voted on by Tracer’s DAO members via its Proposal mechanism. Open forum discussion with the general public on [Discord](https://discord.gg/kvJEwfvyrW) and [Discourse](https://discourse.tracer.finance/) determines the interest in, and the terms of, the Proposals. All DAO members have rights to propose and vote on governance decisions. Generally, records of DAO decisions are recorded on a public blockchain and governance interface. In the case of Tracer, decisions are recorded on the Ethereum blockchain and [Tracer’s Governance App](https://gov.tracer.finance/#/). The transparent manner in which governance is conducted is a hallmark of DAOs and one of their most exciting features.

### Who are Tracer DAO’s current Service Providers?

Tracer DAO started with 100 distributed members who claimed TCR governance tokens from the DAO contract between 6 January 2021 and 27 January 2021.

Since then, Tracer DAO has engaged a variety of Service Providers. The first was [Lion's Mane](https://lionsmane.eth.link/), engaged on 10 February 2021\. Lion’s Mane is a pride of hackers, crypto economists and open-source ideologues. The team was engaged to (among other things) develop smart contracts and aid Tracer DAO’s marketing and communications efforts.

On 19 March 2021, [Sigma Prime](https://sigmaprime.io/) was engaged to conduct an initial audit of Tracer’s Perpetual Swap smart contract codebase. Importantly, the executed Service Agreement between Sigma Prime and Tracer DAO, dated 19 March 2021, includes a “digital signature” in the form of the [Ethereum transaction hash](https://etherscan.io/tx/0x6a6e6c94dbb0d892b3689844ac3669ebb79c8eda6c418f9f2fa0d96626f74b1a) from the successful Proposal. This was the first legal document to have a DAO as a signatory, supporting the precedent that DAOs can contract directly with Service Providers.

Most recently, [RMIT Blockchain Innovation Hub](https://rmitblockchain.io/) proposed a research collaboration with Tracer DAO for the development of governance and cryptoeconomic design relating to Tracer and Tracer DAO. This was [successfully approved](https://vote.tracer.finance/#/tracer.eth/proposal/QmUaFtGvtTa5cwHyG68K1MFbSjv1hL5f6oJqTcATe1cYfU) by Tracer DAO on 30 March 2021, and RMIT’s work is now underway.

![Tracer_DAO_Current.png](https://storage.googleapis.com/mycelium-bucket/Tracer_DAO_Current_90c6c5e573/Tracer_DAO_Current_90c6c5e573.png)

### How do I become a Service Provider?

Service Providers who can add value to the Tracer ecosystem are encouraged to articulate that value to the Tracer DAO. Tracer’s community is already vibrant and increased talent and experience will continue to make it stronger. If you believe that you are well positioned to contribute to Tracer’s ecosystem, be sure to make it known and help Tracer realise its destiny as the future of financial infrastructure.

**Step 1: Submit an EOI.**

The first step for parties interested in working for Tracer DAO is to present their offering via an Expression of Interest (EOI), located under the [EOI category in Tracer’s Discourse](https://discourse.tracer.finance/c/dao-proposals/expression-of-interest/14).

Previously appointed Service Providers have drafted EOIs with the following kinds of information, and we encourage you to do the same:

1.  Entity introduction;
2.  Team member introductions;
3.  Envisioned collaboration with Tracer DAO, detailing services to be performed; and
4.  Previous work experience.

![Tracer_DAO_Availability.png](https://storage.googleapis.com/mycelium-bucket/Tracer_DAO_Availability_8247330597/Tracer_DAO_Availability_8247330597.png)

An example EOI has [recently been published](https://discourse.tracer.finance/t/collaboration-between-tracer-dao-and-defi-pulse/180) by [DeFi Pulse](https://defipulse.com/). In this case, DeFi Pulse seek to be engaged by Tracer DAO as a Service Provider to provide services including content delivery. Their content offering focusses on educating future users about technical updates, feature improvements, and statistical analysis of the Tracer protocol.

The success of the Tracer project is dependent on engaging talented Service Providers. If the Tracer project aligns with your skills and offering, Tracer DAO invites you to submit an EOI.

**Step 2: Draft a Proposal, await DAO member submission.**

If interest is gained on the EOI, a community member, including the potential Service Provider, may prepare a draft Proposal in Tracer’s [Proposal Lobby](https://discourse.tracer.finance/c/dao-proposals/proposal-lobby/13) where it will be open for discussion. The process for creating a Tracer DAO Proposal has been detailed in a previous [Discourse Post](https://discourse.tracer.finance/t/how-to-create-a-tracer-dao-proposal/198).

**Step 3: Formal Proposal submitted on Snapshot.**

At any point in time, a DAO member may formally submit the Proposal on [Tracer’s Snapshot instance](https://snapshot.org/#/tracer.eth) to begin the voting process.

**Step 4: Proposal submitted on-chain.**

Once the result of the Snapshot proposal has become apparent, a DAO member can make a proposal on-chain using the [Tracer Governance App](https://gov.tracer.finance/#/proposal/new).

If the [Tracer Governance App](https://gov.tracer.finance/#/proposal/new) does not support the functionality of the relevant Proposal, the DAO member making the Proposal will need to generate the data separately. This is most easily done using Web3.js with the `encodeFunctionCall` function. An example of this being done can be found [in the tracer-dao Github repository](https://github.com/tracer-protocol/tracer-dao/blob/master/test/LionsmaneProposal.js#L73). Any roadblocks at this stage in the process should be brought to Tracer’s Discord or Discourse.

Once the data has been generated, the DAO member must then call the DAO’s `propose` function, which can be found on [Etherscan](https://etherscan.io/address/0xa84918f3280d488eb3369cb713ec53ce386b6cba#writeProxyContract). The implementation can be read [here](https://etherscan.io/address/0x3ad0a0814f5fd76be6bdc0b771df98aafd572107/advanced#code). The function must be called with:

*   `targets` set to the list of function execution targets (the addresses of the contracts whose functions will be called);
*   `proposalData` set to the list of encoded function data;
*   `allowMultisig` set to true; and
*   `proposalURI` set to the IPFS hash of the proposal (this will usually be the IPFS hash of the Snapshot proposal).

Again, an example of how to call `propose` can be found [in the tracer-dao Github repository](https://github.com/tracer-protocol/tracer-dao/blob/master/test/LionsmaneProposal.js).

### What's the relationship between Tracer DAO and its Service Providers?

The legal status of DAOs in most jurisdictions poses an obstacle to their wider adoption. Currently, most legal minds interpret DAOs as unregistered organisations, unincorporated associations, or general partnerships. One innovation intended to address this issue is a Participation Agreement.

The Tracer DAO Participation Agreement was explained in a previous [Radar post](https://tracer.finance/radar/dao-participation/). A Participation Agreement uses contract law to provide a framework for the formation and management of a DAO; specifically, the rights and obligations of each member of the DAO. This is precisely where the concept of a “Service Provider” comes from.

![DAO_participation_Agreement (1).png](https://storage.googleapis.com/mycelium-bucket/DAO_participation_Agreement_1_c006642051/DAO_participation_Agreement_1_c006642051.png)

> The Beginning of the Tracer DAO Participation Agreement

Tracer DAO’s Participation Agreement provides crucial clarity in respect to the relationship between Tracer DAO and its Service Providers. Notably, the Agreement releases Service Providers from claims made by other DAO members that arise in connection with the Tracer project. Furthermore, it guarantees that Service Providers will not be liable for losses arising under, or in relation to, the DAOs activities. The Agreement is embedded in Tracer’s smart contracts. It's included there to shed a welcome light on the rights and obligations of Service Providers in the Tracer DAO ecosystem.

Applications to join Tracer DAO as a Governor are open. Apply and refer your friends [here](https://tracer-finance.typeform.com/to/zHrUFNEn).

Decentralised autonomous organisations (DAOs) represent an exciting intersection between blockchain technology and corporate law. A number of innovations in organisational structure have emerged from the rapid rise in both DAO use and popularity. Via its novel approach to engage Service Providers, Tracer DAO is contributing to the swell of new-age innovation in corporate restructuring.

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Tracer DAO’s Service Providers

For Tracer to become secure financial infrastructure that the world can rely on, the Tracer ecosystem must include experts specialising in security. Currently, individuals place trust in a bank in exchange for a guarantee that their assets are held securely by that bank. Evolving from this traditional model of trust, trust in decentralised financial infrastructure is created through reliable oracles, cryptographic guarantees and secure smart contracts.

On this note, Tracer DAO has two significant announcements:

*   Sigma Prime has been engaged by Tracer DAO. They are conducting an initial audit on the Perpetual Swap smart contract codebase.
*   Tracer DAO has executed a legal document by way of an Ethereum transaction hash, trailblazing the DAO space and legitimising the DAO as an entity. Learn more about this below.

On 19 March 2021, Tracer DAO engaged Sigma Prime through a Services Agreement, to perform a security audit of the perpetual swap contracts developed by Lion’s Mane.

The executed Service Agreement now includes a “digital signature” in the form of an [Ethereum transaction hash](https://etherscan.io/tx/0x6a6e6c94dbb0d892b3689844ac3669ebb79c8eda6c418f9f2fa0d96626f74b1a) of the successful proposal.

![Sigma Prime partnership signature](https://storage.googleapis.com/mycelium-bucket/sigma_prime_partnership_signature_98fd8e5756/sigma_prime_partnership_signature_98fd8e5756.png)

> Tracer DAO’s execution of its Services Agreement with Sigma Prime.

To the best of our knowledge, this is the first legal document to have been “signed by a DAO”. This creates precedent that Tracer DAO, and DAOs more generally, can contract directly with service providers.

#### Sigma Prime
For the Tracer ecosystem, Sigma Prime will:

*   Audit the perpetual swap contracts developed by Lion’s Mane;
*   Run a manual code review;
*   Complete the development of a test framework to support manual review;
*   Run front-end security testing;
*   Conduct report preparation and quality assurance review; and
*   Complete the security review and testing by 23 April 2021.

Sigma Prime are blockchain and cybersecurity experts, specialising in building Ethereum 2.0\. They have an extensive history in traditional penetration testing of corporate networks, cloud infrastructure, and web/mobile applications. Sigma Prime are a leading provider of Ethereum smart contract security assessments.

Sigma Prime founded and maintain [Lighthouse](https://github.com/sigp/lighthouse), an open-source implementation of the Ethereum 2.0 specification written in Rust. Sigma Prime are heavily involved in Ethereum 2.0 engineering and research, making them an ideal team to be working with in growing Tracer.

In addition to the work for Tracer DAO, Sigma Prime has a respectable list of reputable and legitimate clients including: Ethereum Foundation, Synthetix, Chainlink, NEAR, Status, Dapper, and more.

Tracer DAO looks forward to working with Sigma Prime for an initial audit, and will be looking to work with them into the future.

You can follow Sigma Prime on [Twitter](https://twitter.com/sigp_io) or visit their [site](https://sigmaprime.io/).

For Tracer to become secure financial infrastructure that the world can rely on, the Tracer ecosystem must include experts specialising in security. Currently, individuals place trust in a bank in exchange for a guarantee that their assets are held securely by that bank. Evolving from this traditional model of trust, trust in decentralised financial infrastructure is created through reliable oracles, cryptographic guarantees and secure smart contracts.

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Sigma Prime Audit

Tracer is set to define the future of financial infrastructure. It intends to provide unprecedented financial access and agency to people all over the world. By utilising Web3 technology - and leveraging the innate value of blockchain technology such as 100% availability, automation, instant settlement and transparency - Tracer will play an influential role in the next century of finance.

Tracer has been deployed on Ethereum. Currently, Ethereum is the longest running Turing-complete blockchain, with the highest levels of security and unstoppable code. [Capturing almost 70% of all stablecoin supply](https://www.theblockcrypto.com/linked/97894/ethereum-was-home-to-nearly-70-percent-of-all-stablecoins-as-of-january), Ethereum has seen [~9M ETH locked in decenteralised finance (DeFi)](https://thedailygwei.substack.com/p/the-great-migration-the-daily-gwei-e91). On Ethereum, Tracer can maximise the total addressable market of DeFi with better tooling, composability and guaranteed security of the protocol.

Ethereum has network effect. It has lured the brightest minds in the fields of cryptography, software development and economics. The mission of this decentralised collective is to provide people with self custody, censorship protection, and sovereignty over hard cap assets and hard cap money. It is for this reason, that Ethereum is the best blockchain for Tracer.

Scalability is an issue at the forefront of the Ethereum community’s agenda with L2 (layer 2) solutions going live. Eth2 (Ethereum 2.0) initiatives are also underway, with the sharding promising to decongest the in demand network. Tracer will walk hand in hand with Ethereum’s progress and help power the world’s computer.

Tracer DAO is actively seeking companies, individuals and organisations to provide services, including, but not limited to:

-  the highest quality code and smart contract design;

- reliable security audits;

- deep economic analysis;

- innovative governance mechanisms;

- layer 1 and 2 research for scalability and security;

- user experience design or improvements;

- community management;

- marketing and outreach initiatives; and

- branding and content.

Proposals can be submitted by Tracer DAO Governors and voted for by [those who govern](https://tracer.finance/radar/govern-tracer). In a series of announcements, Tracer DAO will share the companies successfully selected to fulfil these functions and deliver on the vision of peer-to-peer finance.

Be sure to check in [here](https://tracer.finance/radar) regularly, hang out with us in the [Discord](https://discord.com/invite/kvJEwfvyrW), get updates on [Twitter](https://twitter.com/TracerDAO), learn more about the activity of Governance on [Discourse](https://discourse.tracer.finance/) and go deep with us on [GitHub](https://github.com/tracer-protocol).

Join us, and build secure railroads for the future of financial transactions.

Tracer is set to define the future of financial infrastructure. It intends to provide unprecedented financial access and agency to people all over the world. By utilising Web3 technology - and leveraging the innate value of blockchain technology such as 100% availability, automation, instant settlement and transparency - Tracer will play an influential role in the next century of finance.

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Tracer’s Future Partners

*As of 28 June 2021, Lion’s Mane rebranded to [Mycelium](https://twitter.com/mycelium_eth).*

Individuals around the world lack access to global stock, commodities and other asset markets for a number of reasons. Brokerages charge high fee rates for international market access and additional licensing can prove costly and difficult to attain. Contract for difference platforms have provided a global trading experience for users, yet such platforms still suffer from third party control issues that result in market censorship. What is required is a contract type that cannot be censored and can grant the retail trader the same global financial access in a low cost, secure and instant fashion. A permissionless perpetual swap contract that can be accessed by anybody with an internet connection fits this mold.

A perpetual swap is a financial contract that grants exposure to any market for any amount of time. Utilising a perpetual swap, trader’s can very simply go long or short at their desired leverage ratio and gain the market exposure that fits their financial beliefs. The perpetual swap contract basically emulates the experience of holding an asset or going short an asset in spot markets.

Tracer’s open-source and accessible perpetual swap framework is a way for any application or user to gain exposure to any asset at anytime. The Tracer Perpetual Swap is an entirely permissionless protocol that appropriately aligns the incentives of liquidators, oracles, liquidity providers, insurers and traders. To date, perpetual swap contracts have been engineered with centralised elements and utilise risky liquidation and insurance mechanisms that rely on third parties. Tracer’s Perpetual Swap contracts change the game and provide a more secure and reliable option.

![Perpetual Swaps](https://storage.googleapis.com/mycelium-bucket/perp_swap_054a7d769c/perp_swap_054a7d769c.png)

The Tracer Perpetual Swap contract template has been engineered for traders to gain maximum exposure for minimum cost whilst experiencing the highest level of security guarantees. Anybody can permissionlessly deploy a new Perpetual Swap market with any quote and base assets. The base asset that clears and settles the agreement can be any ERC20 and the quote asset can be any derivative with an accessible price feed. If there is no price feed, then Tracer Governors or contract creators can utilise oracle financing techniques as a means of price feed discovery. Traders can either trade through a peer-to-peer order-matching mechanism or through on-chain Automated Market Maker contract (AMM). Each deployed market can have multiple AMMs with different pricing functions which have the same privileges as any other trader in the system. The first deployable AMM design is a novel delta-neutral Automated Market Maker (dnAMM) that has been engineered specifically for perpetual swaps.

Unlike traditional futures or swap contracts that expire, a perpetual swap contract allows for users to hold their position in perpetuity. This perpetual nature is permitted by the funding rate. The funding rate is a small interest rate that is paid between counter-parties to balance demand for the derivative position. The funding rate as a mechanism also balances demand for the derivative contract ensuring that it tends towards the spot price for the underlying market. If the derivative position is trading at $110 and the spot market is trading at $100 this indicates a high demand for long exposure. Based on this $10 difference known as the premium, a fee would be paid from the long party to the short party to drive the price down. The opposite would be true if the derivative price was trading below spot price. In the Tracer Perpetual Swap contract, the funding rate mechanism is open to be optimised over-time by governance.

Each Tracer Perpetual Swap market has an isolated insurance pool specific to that market allowing for liquidation risk to be localised, not putting the entire ecosystem at risk. Insurance pool depositors receive an ERC20 iToken in exchange for their deposits which are a tradable fungible claim to their insurance position. For example, if 100 USDC was deposited into a TSLA/USDC market, the insurer will receive an amount of iUSDC proportional to their share of the USDC in the insurance pool. To reclaim the 100 USDC, the insurer would burn their iUSDC. Insurers earn an Insurance Funding Rate for that is paid by traders that leverage their position. The more a trader is leveraged, the higher their insurance funding rate payments. The role of the insurer is to effectively underwrite liquidators, to ensure that they can profitably liquidate positions that are nearing bankruptcy.

## Alpha Testers
Lion’s Mane will be collecting a list of alpha tester applications and presenting it to Tracer DAO. Lion’s Mane recommends to Tracer DAO Governors that 100 initial alpha testers are chosen by the existing DAO Governors and granted 25,000 governance rights (TCR tokens) each. If an applicant is successful and refers another successful applicant, an additional 2,500 governance rights should be granted to the referee.

### Prospective Perpetual Swap Alpha Testers
- Trader:
Speculators and hedgers that trade through the interface will help in providing feedback on the user experience.
- Market Maker:
Perpetual Swaps require market makers that will provide liquidity to the order-book as well as to the system AMM's.
- Insurer:
Each market needs insurers so that liquidators remain profitable. People that understand risk and how to analyse risk will make valuable insurers.
- Liquidator:
In order for the system to remain collateralised and secure, liquidations must occur. Liquidators will run clients and profit from liquidations.
- Oracle Expert:
Each Perpetual Swap market requires an oracle for its funding rate, we are looking oracles and oracle experts that understand how to securely provide feeds for a contract.

Apply to be an alpha tester [here](https://tracer-finance.typeform.com/to/CLDvv8H7).

In the coming months alpha testers will be granted access to a Perpetual Swap frontend interface and asked to provide feedback on the protocol. Radical candour and honest feedback will be welcomed by the Lion’s Mane team who will be managing this process on behalf of Tracer DAO.

Stay up to date with the progression of the Tracer ecosystem here and be sure to join these community links

- [Discord](https://discord.gg/kvJEwfvyrW)
- [Discourse](https://discourse.tracer.finance/)
- [Twitter](https://twitter.com/TracerDAO)

Individuals around the world lack access to global stock, commodities and other asset markets for a number of reasons. Brokerages charge high fee rates for international market access and additional licensing can prove costly and difficult to attain. Contract for difference platforms have provided a global trading experience for users, yet such platforms still suffer from third party control issues that result in market censorship.

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Tracer: Perpetual Swaps

*As of 28 June 2021, Lion’s Mane rebranded to [Mycelium](https://twitter.com/mycelium_eth).*

The traditional financial system is built on the back of trusted banks and institutions that facilitate transactions, provide access to markets and curate financial products. The evolution of the Internet, and efficient computing, nudged the finance industry to undergo a digital migration. This migration has allowed global finance to be conducted with progressively lower operating costs. However, the majority of finance is conducted on software that is centralised, highly insecure and prone to third party risk, which undermines the trusted institutions that use it. Blockchain technology and smart contracts allow for finance to be conducted in a highly secure and trustless environment. This technology enables not just banks, but anybody with an internet connection, to engage in globally connected, highly reliable trade.

**Tracer** is peer-to-peer financial infrastructure that leverages blockchain technology to provide censorship-resistant market connectivity; powering the next generation of finance. Tracer is decentralised by design and provides high levels of security to its users through open-source code and reliable oracle architecture. Tracer is able to host an ecosystem of financial contracts such as derivatives, lending and borrowing tools as well as spot exchanges that will support the future of financial transactions. Once a financial contract has been deployed it is entirely permissionless, unless codified otherwise.

![Tracer DAO](https://storage.googleapis.com/mycelium-bucket/tracer_dao_283c7c28d1/tracer_dao_283c7c28d1.png)

Tracer DAO governors will be at the forefront of financial innovation and act to guide the transition from the current way we do digital finance to a more secure and scalable system. Governors will be responsible for creating and managing efficient financial tools and protocols that will become the standard financial transaction layer for the future.

## Join to Govern

There are 200 open positions for prospective Tracer governors who will be the initial governors of the ecosystem. Lion’s Mane has been engaged (via proposal) by Tracer DAO to present candidate governors for DAO selection. Tracer DAO is looking for prospective governors and will consider nominees from the following categories:

- Oracle Experts
The system is only as secure and reliable as its oracles. Tracer needs oracle experts to build the future of secure financial infrastructure.
- Protocol Governors
Tracer needs those who care to govern the way that we trade. The infrastructure will not govern itself, nor will governance be centralised.
- Smart Contract Engineers
Tracer requires many eyes to audit, and many hands to build globally secure financial infrastructure.
- Ecosystem Advocates
Those that can actively share engaging and effective material regarding Tracer's sustem, vision & market position.
- Market Pioneers
Tracer needs people with innovative ideas for new markets to bring them forth.
- Market Makers
The Tracer financial markets require liquidity providers that will serve and pioneer the exchange highway of the future.
- Active DeFi Users
Tracer would benefit from users who have provably and historically interacted with DeFi protocols and wish to spread the word of Tracer.
- Crypto Economists
Tracer needs financial engineer and crypto-economic thinkers that want to build on the forefront of efficient exchange systems.
- Eth2 Node Operators & Researchers
Those that support the movement to a more efficient and scalable Ethereum that supports Tracer contracts.
- Integrations Team
Tracer needs strategists that will integrate with any front end that could utilise secure financial infrastructure.
- Designers
Tracer requires visuals, videos and graphics, and the designers that create them.
- Layer 2 Experts
Tracer needs to scale and would benefit from Layer 2 experts.

## Duties to the DAO

If you see yourself as an eligible candidate for Tracer DAO governance, [apply here](https://tracer-finance.typeform.com/to/zHrUFNEn). The operation of the DAO may include:

- Choosing to install new financial contracts to the Factory
- Allocating TCR governance tokens to ecosystem initiatives
- Choosing to perform liquidity mining programs.

Each decision made by Tracer DAO must be debated with rigor and objectivity. As Tracer’s success is dependent on good governance, potential governors should stay up-to-date with Tracer and its resources. [Apply now](https://tracer-finance.typeform.com/to/zHrUFNEn) and help govern the way we trade.

[Read the Tracer Whitepaper](https://tracer.finance/whitepaper)

We invite the community to join our Discord, Discourse and Twitter channels with questions regarding alpha testing and the protocol moving forward.

- [Discord](https://discord.gg/kvJEwfvyrW)
- [Discourse](https://discourse.tracer.finance/)
- [Twitter](https://twitter.com/TracerDAO)


The traditional financial system is built on the back of trusted banks and institutions that facilitate transactions, provide access to markets and curate financial products. The evolution of the Internet, and efficient computing, nudged the finance industry to undergo a digital migration. This migration has allowed global finance to be conducted with progressively lower operating costs. However, the majority of finance is conducted on software that is centralised, highly insecure and prone to third party risk, which undermines the trusted institutions that use it. Blockchain technology and smart contracts allow for finance to be conducted in a highly secure and trustless environment. This technology enables not just banks, but anybody with an internet connection, to engage in globally connected, highly reliable trade.

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Govern Tracer

![EPNS Integration](https://storage.googleapis.com/mycelium-bucket/epns_integration_bbd07029f1/epns_integration_bbd07029f1.png)

In today's age, push notifications have become an incredibly powerful tool for businesses and applications. They enhance a business' ability to capture a user's attention, encourage action and increase engagement. Just as the demand for push notifications has become prominent in the traditional sense, there is a growing need for these notifications within the decentralised ecosystem.

Ethereum Push Notification Service (**EPNS)** is a protocol for blockchain-based notifications that is both platform agnostic and incentivised. EPNS initially [proposed an integration](https://discourse.tracer.finance/t/tracer-to-implement-epns-decentralized-notifications/256) with Tracer DAO on 1 June 2021 for governance, product and community based notifications. Tracer DAO will be looking to integrate a number of notifications under these categories, the first being 'governance'.

The key to distributed decision-making through a DAO is operational efficiency. This is achieved through clear communication and proactive contributors. Tracer DAO welcomes innovative tools to support the democratic decision-making required to power the financial infrastructure of the future and is pleased to announce EPNS as a Service Provider to help achieve this. Historically, participation in network governance has been hindered by fragmented discussion in voting channels. Instant notifications for governors will maintain active participance in Tracer DAO and ensure proposals are voted on and discussed in a timely manner. At a high level, Tracer DAO will leverage EPNS for a variety of use-cases:

1.  Notify Tracer DAO governors/community members when a new proposal is uploaded to Snapshot;
2.  Notify Tracer DAO governors/community members when a Snapshot proposal has passed; and
3.  Notify Tracer DAO governors/community members when a proposal has been implemented and passed on-chain.

The implementation of EPNS in Tracer DAO's ecosystem will establish a direct channel from governance activity to governors. All notifications are sent directly to the wallets of governors, where immediate action is taken.

![EPNS frontend](https://storage.googleapis.com/mycelium-bucket/epns_app_1c2e675d3c/epns_app_1c2e675d3c.gif)

"By leveraging EPNS, Tracer DAO members will be able to remain active in governing the protocol - ensuring that they do not miss a beat. Tracer DAO’s vision of democratic decision-making that supports the evolution of the next financial system will greatly benefit from EPNS technology." [Patrick McNab](https://twitter.com/pat_mcnab), a contributor of Tracer DAO.

In the near future, EPNS will provide value beyond the governance of Tracer DAO. For instance, users of Tracer's Perpetual Swaps can be pushed with notifications such as market order status and margin accounts nearing liquidation. Additionally, members of the community will be notified for upcoming community calls and events. Moreover, Tracer DAO plans to adapt the highly customisable EPNS protocol features to meet the various push notification needs of Tracer's future products.

Tracer DAO welcomes this innovative integration and will continue to create more streamlined processes for governors, community members and users alike. 

---

### 2022 UPDATE: 

- Check out the EPNS User flow for TracerDAO in [this video](https://twitter.com/epnsproject/status/1481672696706760705?s=20&t=c5A6Q7HF9SJuNgsK21LL5w)
- Listen to the deep dive into the EPNS Integration in [this AMA](https://www.youtube.com/watch?v=isndVOQScu8)
- You can follow EPNS on [Twitter](https://twitter.com/epnsproject) or visit their [site](https://epns.io/)
- Check in here regularly for more thought pieces and announcements, hang out with us in the [Discord](https://discord.com/invite/kvJEwfvyrW) and get updates on [Twitter](https://twitter.com/TracerDAO)

In today's age, push notifications have become an incredibly powerful tool for businesses and applications. They enhance a business' ability to capture a user's attention, encourage action and increase engagement. Just as the demand for push notifications has become prominent in the traditional sense, there is a growing need for these notifications within the decentralised ecosystem.

large_epns-integration.png

medium_epns-integration.png

small_epns-integration.png

thumbnail_epns-integration.png

epns-integration.png

EPNS Integration

![Audit Report Header](https://storage.googleapis.com/mycelium-bucket/audit_report_header_8831e96ad8/audit_report_header_8831e96ad8.png)

## Overview

Tracer DAO has recently wrapped up an audit with Sigma Prime on the Tracer Perpetual Pools smart contracts.

Below is Mycelium's analysis of the audit, and responses to any issues raised. For the full audit completed by Sigma Prime, see [here](https://ipfs.io/ipfs/QmTGAU4mF4P9TFPjSBw5gwUydzF3XX1BfRdX68RnsYjvDs). The Perpetual Pools codebase is now fully open-sourced and can be found [here](https://github.com/tracer-protocol/pools-client).

Protocol security – the safety of users' funds primarily – is our biggest priority. As such we want to provide some insight into the audit results, as well as giving the community a more candid insight into perpetual pools.

There were a total of 12 issues raised, with 1 critical, 1 medium, 2 lows and 8 informational issues. The team has already actioned all of the above-mentioned issues in the form of fixes or mitigation strategies and is excited to be bringing Tracer Perpetual Pools to market.

The following is a summary of all issues, their severity, and the corresponding fix if applicable.

## TCR-01 Denial-of-Service Attack on Leveraged Pool via Multiple Commits

Severity: Critical

Status: Mitigated

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162)

This issue has been raised as a critical by the Sigma Prime team because if abused, it has the potential to deadlock a pool and prevent users from interacting with the protocol.

While the team was aware of this issue, finding a suitable mitigation strategy proved difficult. Ultimately we ended up opting for the simple approach of having a minimum commit size and maximum commit queue size. This allows us to compute the cost of attack for each and every pool.

The current mitigation strategy for this issue is to introduce the following two parameters to the Tracer Pools

*   `minimumCommitSize` : The minimum size measured in settlement tokens, that a user must commit to mint or burn
*   `maximumCommitQueueLength` : The maximum number of commits that may be pending for any given period.

The combination of the above two parameters can be fine tuned to increase the economic cost of performing a denial of service attack. It should also be noted that gas fees are a factor in this equation since each individual commit a user makes will cost them gas.

These parameters will be fine tuned by the developer multisig initially, and then once the protocol has been operating smoothly, this responsibility will be passed on to the DAO.

While fine tuning these parameters, consideration must be made of the gas block limit and computational ArbGas limit (when operating on Arbitrum).

The team has also removed the `uncommit` functionality, meaning that for users to perform an attack they must actually commit funds to the protocol and mint pool tokens, hence providing liquidity themselves.

## TCR-02 User Can Reset earliestCommitUnexecuted State Variable

Severity: Medium

Status: Fixed

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/140](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/140).

This issue was raised as a medium due to the fact that a user could manipulate the `earliestCommitUnexecuted` state variable, given they had enough commits in a particular order. This issue did not have the potential to steal user funds or cause issues with minting and burning and has been patched in the following PR [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/140](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/140).

## TCR-03 Invalid string to bytes16 Conversion

Severity: Low

Status: Fixed

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/151](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/151)

## TCR-04 Divide Before Multiply

Severity: Low

Status: Fixed

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/161](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/161)

## TCR-05 Ownable Oracle Allowed in ChainlinkOracleWrapper

Severity: Informational

Status: Acknowledged

Fix: N/A

The Mycelium team acknowledges that this issue is currently present. However, due to the security model of the V1 launch, it is not being patched and is instead considered part of our current model. Deploying trustless oracles is a difficult problem to solve. While the protocol utilises Chainlink oracles, we still need to ensure that these oracles can easily be updated should Chainlink feeds change.

Each Chainlink Oracle Wrapper will be deployed by the developer multisig, with control handed over to the DAO after the initial launch period. By having each oracle wrapper controlled by either the multisig or the DAO means that in order for the mentioned exploit to be executed, the DAO or multisig would have to be malicious and initiate a proposal to change the oracle being used.

Proposals take 2 days to warm up when sent via the DAO and as such any user in a pool that experiences this attack from the DAO will be able to get notified and exit the pool.

## TCR-06 Unnecessary Multiplication by fixedPoint

Severity: Informational

Status: Fixed

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/160](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/160)

This issue was raised as an informational. Primarily due to the fact that it did not cause any problems within the protocol. This is due to how the power leverage formula works to compute the amount of funds to move between each side of the pool. It is based on a ratio, and as both the numerator and denominator were being multiplied, the ratio was still consistent. It did however add unnecessary gas usage to the protocol, and this has been fixed.

The community will be updated as soon as the team moves away from the multisig ownership model to complete DAO ownership.

## TCR-07 Potential MEV Attack When Users Commit

Severity: Informational

Status: Mitigated

Fix: N/A

This threat still exists in the current model. While the team feels this attack is quite unlikely, it is possible for a malicious actor to use a MEV service such as flashbots and bribe a miner to manipulate the block timestamp to ensure they are the last user entering the pool.

To mitigate against this, the front running interval is being set to 5 minutes for each pool deployed. This prevents users from performing this exploit on last minute price updates, as nobody can enter any later than 5 minutes before a price update. The team believes this alone is enough to almost entirely remove any MEV that can be gained using a similar attack to that mentioned in the audit report.

## TCR-08 onlyGov Role Can Withdraw Users’ Fund

Severity: Informational

Status: Mitigated

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/144](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/144).

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/141](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/141)

This issue was raised as an informational. This issue is acknowledged by the team and still exists in the codebase. As mentioned in TCR-05 this issue is mitigated by having the onlyGov role initially be a dev multisig, and then the Tracer DAO. Once control is transferred to the DAO, any action it takes must propagate through the proposal system, meaning users would have two days to act before any of the raised issues could be exploited.

We have also introduced an explicit pause and withdraw function that allows the onlyGov to more explicitly drain user funds. This has been introduced as a safety measure to the protocol, to allow pools to be paused if need be, and to allow user funds to be returned should an exploit occur. The changes that introduce this pause and withdraw functionality can be found in the following two PRs:

Withdraw Functionality: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/144](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/144)

Pause Functionality: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/141](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/141)

## TCR-09 Known Issues

Severity: Informational

Status: Fixed / Mitigated

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/156.](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/156)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/154](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/154).

This raised 4 separate issues that were known to the team. They were:

*   multistep governance transfer;
*   view function for keeper rewards;
*   keeper gas price usage; and
*   new keeper propagation.

### Multistep Governance Transfers

This issue has been addressed in the following PR [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/156](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/156)

### View Function for Keeper Rewards

While a function does exist that allows keepers to compute their tip amount (see `PoolKeeper.keeperReward`), it is difficult to extract this out into a simple view function for any keeper to call. This is due to the fact that there are a number of factors that go into computing the final reward. It is recommended that keepers use this function along with their own data to estimate the reward for each call. This is however outside of the protocol scope.

### Keeper Gas Price Usage

This issue has been addressed in the following PR [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/154](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/154). Once more reliable gas price oracles exist, the team will be looking to migrate over to a more dynamic solution.

### New Keeper Propagation

This issue has not been addressed. For the initial release, the dev multisig and Tracer DAO will be responsible for deploying markets. Any updates that need to happen to the Keeper Contract will be batch propagated by the party performing the upgrade. This keeps this functionality out of the core protocol.

## TCR-10 Test Coverage Improvements

Severity: Informational

Status: Acknowledged

Fix: N/A

The test suite is actively being improved by the team. The tests produced by Sigma Prime are also being integrated into the Perpetual Pools test suite.

## TCR-11 Gas Optimisations

Severity: Informational

Status: Fixed

Fix: [https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/157](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/157).

All gas optimisations have been implemented.

## TCR-12 Miscellaneous Tracer Contract Issues

Severity: Informational

Status: Fixed

Fix:

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/158](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/158)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/147)

[https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162](https://github.com/mycelium-ethereum/perpetual-pools-contracts/pull/162)

All miscellaneous fixes have been implemented.

Tracer DAO has recently wrapped up an audit with Sigma Prime on the Tracer Perpetual Pools smart contracts. Below is Mycelium's analysis of the audit, and responses to any issues raised. For the full audit completed by Sigma Prime, see here. The Perpetual Pools codebase is now fully open-sourced and can be found here. 

large_audit-report-header.png

medium_audit-report-header.png

small_audit-report-header.png

thumbnail_audit-report-header.png

audit-report-header.png

You might have read the bold statement, "the future of finance will be decentralised". The path of innovation that will take us there is Decentralised Finance, commonly referred to as DeFi.

To quantify the impact of DeFi, and understand the value it provides, there is a need to simply and efficiently analyse the industry. This quest led to the metric that defined the crypto wave of 2020/2021; that metric is ‘TVL’ - total value locked. TVL represents the total capital assets secured by smart contracts of a particular protocol, built on the Ethereum blockchain. The motivations for people to commit their digital assets to a DeFi protocol are the trust minimised environment and competitive returns.

Any analysis and discussion of TVL should involve a familiarisation with [DeFi Pulse](https://defipulse.com/), a beating heart of the ecosystem and quickly establishing itself as the authority on TVL. Tracer has been decentralised since inception, so it is fitting that it should find a partner in the media space that also holds this tenet to be so foundational.

DeFi Pulse ranks DeFi protocols according to the TVL in the smart contracts of popular DeFi applications and protocols. Beyond rankings of DeFi protocols, DeFi Pulse curates resources to help drive education on key topics within the DeFi space. These topics include stablecoins, lending protocols, the best yielding opportunities for liquidity providers and interviews with the people behind the protocols, to ensure the community are informed on the opportunities and challenges which lay ahead.

DeFi Pulse gives the DeFi community the opportunity to transparently see the operations, capital flows and depth of the financial institutions of today. DeFi Pulse don't report it quarterly. DeFi Pulse report it every hour. A refreshing shift.

On 20 April 2021, Tracer DAO [received a Proposal](https://discourse.tracer.finance/t/collaboration-between-tracer-dao-and-defi-pulse/180) to engage DeFi Pulse as a Service Provider. On 5 May 2021, the [Proposal successfully passed a vote](https://vote.tracer.finance/#/tracer.eth/proposal/QmZ1ffYLCHJtunuA3vNzV2qnGUNMH6urhu2GPTGSi9EXYD) by Tracer DAO Governors, to make the partnership official.

The partnership between Tracer DAO and DeFi Pulse enables Tracer to grow alongside DeFi pulse in the coming years, as the industry seeps into the mainstream. DeFi Pulse has an impressive track record of gaining attention and traction for other protocols in the space. DeFi Pulse Drops for Rari Capital and mStable helped boost TVL during launch, increased trading volume on FutureSwap in the Early Alpha, drove initiating trades on MCDEX, and helped Akropolis’s yield-farming aggregator tool - Delphi and Balancer boost TVL.

In its partnership with Tracer DAO, DeFi Pulse has committed to delivering the following, at a minimum:

*   Communication of important updates and support on [Twitter](https://twitter.com/defipulse), to DeFi Pulse's >100k followers;
*   Hosting, publishing and moderating five AMAs (Ask Me Anything) to cover important new features and milestones of Tracer;
*   Promotional display advertising on DeFi Pulse website, that will continue to drive traffic to Tracer;
*   DeFi Pulse blog posts each month, for 12-months, to continue education for the community;
*   Newsletter sponsorships each month, for 12-months, to reach qualified people interested in DeFi; and
*   A featured "DeFi Pulse Drop", which as referenced in examples with [Rari Capital](https://defipulse.com/blog/rari-capital-v2/) and [mStable](https://defipulse.com/blog/introducing-mstable/), has the potential to activate the DeFi community and drive early engagement and commitments in a protocol.

Tracer DAO is excited to work with DeFi Pulse in its mission to grow the financial literacy of people globally and provide world class financial infrastructure. You can follow DeFi Pulse on [Twitter](https://twitter.com/defipulse) or visit their [site](https://defipulse.com/).

You might have read the bold statement, "the future of finance will be decentralised". The path of innovation that will take us there is Decentralised Finance, commonly referred to as DeFi. To quantify the impact of DeFi, and understand the value it provides, there is a need to simply and efficiently analyse the industry. This quest led to the metric that defined the crypto wave of 2020/2021; that metric is ‘TVL’ - total value locked. TVL represents the total capital assets secured by smart contracts of a particular protocol, built on the Ethereum blockchain. The motivations for people to commit their digital assets to a DeFi protocol are the trust minimised environment and competitive returns.

large_defi_pulse_graphic.png

medium_defi_pulse_graphic.png

small_defi_pulse_graphic.png

thumbnail_defi_pulse_graphic.png

defi_pulse_graphic.png

DeFi Pulse Partnership

Arbitrum as a Layer 2 native environment will position Tracer’s infrastructure to support innovative market creation efficiently and help power the future of finance. However, there is much to learn about Arbitrum before Tracer deploys, so we’ve compiled the following read to provide you with a greater understanding of the L2\. The most common questions about Arbitrum observed in Discord, Discourse & Twitter have led us to curate a comprehensive FAQ. For a digestible technical summary of Arbitrum, make sure you’ve read [this](https://tracer.finance/radar/arbitrum-in-under-10/).

**UPDATE:** Tracer [Perpetual Pools](https://pools.tracer.finance/) is now live on Arbitrum One

## Does Arbitrum have a token?

No, there isn't a token. The initial ‘Arbitrum One’ chain will exclusively use Ether to pay for fees incurred during the operation of the protocol. However, it is important to note that additional Arbitrum chains can be launched in the future, and each chain can decide the token that it will use to pay for fees. This question has been asked many times in the Arbitrum (formerly Offchain Labs) Discord and of all the answers provided, two that seem to summarise the reason pretty well are:

> “There is no token. This is Ethereum’s scaling solution and so all you need is Ether to use it~”  
> (Rachel Franks | Offchain Labs, 03/07/2021)
> 
> “We don't have a token. Our company is funded by venture capital investors.”  
> (Ed Felten | Offchain Labs — 16/10/2020)

There have been multiple instances of fake Arbitrum tokens being sold as a scam, and the Arbitrum team have repeatedly stated that there are no plans to release a token in the future.

## Why is there no contract size limit?

It's because of the way that the challenge protocol is designed. When one user challenges another user’s disputable assertion, they must play an interactive dissection game that is refereed by a layer 1 contract. Essentially two users will go back and forth, closing in on a single instruction that they disagree on. Only this instruction will be sent to the layer 1 contract to be re-executed, which will determine the winner of the challenge. This means that no matter how large the contract is, only one single instruction will need to be re-executed on layer 1 to resolve a dispute. So Arbitrum does not inherit Ethereum’s contract size limit.


![Arbitrum does not inherit Ethereum’s contract size limit](https://storage.googleapis.com/mycelium-bucket/Tracer_Arbitrum_FA_Qs_Infographics_1_a6fac0d60d/Tracer_Arbitrum_FA_Qs_Infographics_1_a6fac0d60d.png)

> Arbitrum does not inherit Ethereum’s contract size limit

## How long does it take to withdraw funds on Arbitrum?

Third party “fast exit” withdrawal services (such as connext and hop-exchange) will effectively buy your withdrawal from you, for a price that is slightly less than the amount you are withdrawing. This means that for a fee you can receive your withdrawal instantly, while the fast exit service will receive the full amount once the withdrawal window has passed. The service is able to do this without any risk as they can run a node for themselves to determine that the withdrawal can’t be successfully challenged.

## How does Arbitrum’s security compare to Ethereum?

It is the same. As all the data storage and execution occurs on layer 2, the Ethereum main chain is unaware of the details of each rollup block. However, the change in state that has resulted from a rollup block is reported back to layer 1\. Also, Ethereum smart contracts are used to referee disputes that occur on layer 2\. This, coupled with the fact that the result of every rollup block is reported to layer 1, is what allows Arbitrum to completely inherit Ethereum’s security. This further supports Tracer’s users in forming simple derivative agreements on the most secure and reliable infrastructure.

## How much does Arbitrum reduce gas costs?

The reduction of gas costs is approximately a function of the layer 1 calldata, and thus the exact reduction will differ from project to project. As mainnet is currently live for developers—and will be live for users soon—some approximations are known. The Arbitrum website claims that certain projects are benefitting from 50x to 270x reduction of gas costs. With significantly reduced network costs, we’re estimating minimal fees for Tracer’s users when we deploy on Arbitrum.

## What are Arbitrum’s fees charged for and how much are they?

The fees that are charged on Arbitrum are:

*   Layer 1 calldata fee;
*   layer 2 transaction base fee;
*   layer 2 computation fee; and
*   layer 2 storage fees.

All of the functions that determine how much these fees cost are in some way dependant on the layer 1 gas price. Arbitrum’s ArbOS doesn’t know the exact current layer 1 gas price, so it calculates a weighted average of recent gas prices paid by aggregators as an estimate. This estimate is used to calculate Arbitrum’s fees, which are collected by ArbOS, and are detailed below.

**L2 transaction base fee:**  
This base fee is equal to the estimated layer 1 gas price, multiplied by the cost to submit an empty batch on layer 1, divided by the average batchSize - which is tracked by ArbOS. Or for clarity, (L1 gas) * (empty batch) / (batchSize).

**L1 calldata fee:**  
This is simply the estimated layer 1 gas price.

**Computation fees:**  
There is a minimum computation fee that will be charged for all executions. The exact price will increase above this minimum during periods of congestion. The minimum price is 1/10,000 the layer 1 gas price. The mechanism that adjusts the computation fee is largely inspired by EIP-1559\. The price of computation will increase by a factor of the most recent price when demand is greater than supply, and will similarly decrease by a factor of the most recent price when supply is greater than demand, but never decrease below the minimum.

**Storage fees:**  
The cost per allocated storage location on the EVM will be approximately 2000 x layer 1 gas price, which is 90% cheaper than layer 1.

## How is the operation of the rollup impacted during a challenge period?

For the most part, there is no impact on the user. There are a few edge cases to clarify first, namely:

*   Multiple disputes can occur at once.
*   No user can be involved in multiple simultaneous disputes.
*   The same assertion can be disputed multiple times.

Although the protocol has to go through the dispute resolution process to decide the winner of the challenge, any validator can re-run the disputed assertion on layer 2 for themselves and find out who is guaranteed to win the challenge. This allows the validators to essentially preform a soft fork and continue on from the assertion that will eventually be confirmed. A dispute will slow down the withdrawal of funds from layer 2, but this can be sidestepped when the withdrawal involves a fungible token via the “fast exit” services mentioned above.

![Arbitrum challenge period](https://storage.googleapis.com/mycelium-bucket/Tracer_Arbitrum_FA_Qs_Infographic_2_1_07_846b6446e4/Tracer_Arbitrum_FA_Qs_Infographic_2_1_07_846b6446e4.png)

> Although the protocol will take its time to determine the winner of the challenge, the validators can determine the winner instantly and effectively perform a soft fork while waiting for the protocol to catch up.

Tracer is excited to be deploying derivative contracts to Arbitrum mainnet in the coming months. With Arbitrum, we will deliver new financial markets, both for the digital and real world, that unlocks financial access for individuals. Be sure not to miss an update by following Tracer on [Twitter](https://twitter.com/TracerDAO) and joining the discussion on [Discord](https://discord.gg/kvJEwfvyrW). Learn more about the activity of governance on [Discourse](https://discourse.tracer.finance/) and go deep with us on [GitHub](https://github.com/tracer-protocol).

For an even deeper dive on Arbitrum, see the [docs here](https://developer.offchainlabs.com/docs/inside_arbitrum).

A resource authored by [Nick Crow](https://twitter.com/crypto_crowy) of [Mycelium](https://mycelium.ventures/).

Excitement is increasing around Tracer’s deployment to Arbitrum mainnet in the coming months. An L2 native environment will position Tracer’s infrastructure to support innovative market creation efficiently and help power the future of finance. However, there is much to learn about Arbitrum before Tracer deploys, so we’ve compiled the following read to provide you with a greater understanding of the L2. The most common questions about Arbitrum observed in Discord, Discourse & Twitter have led us to curate a comprehensive FAQ. For a digestible technical summary of Arbitrum, make sure you’ve read this.

large_arbitrum-faqs-banner.jpg

medium_arbitrum-faqs-banner.jpg

small_arbitrum-faqs-banner.jpg

thumbnail_arbitrum-faqs-banner.jpg

arbitrum-faqs-banner.jpg

Arbitrum: FAQs

![Tracer Vision](https://storage.googleapis.com/mycelium-bucket/tracer_vision_header_e5b3baa112/tracer_vision_header_e5b3baa112.png)

Risk is everywhere, this is a simple fact. It exists in the digital realm as well as in our lives offline. There are vast capital markets and financial networks being built in the decentralised finance (DeFi) industry, which at present is a high-risk environment; and for builders and users who wish to sustain this environment and evolve its technology, intelligent risk management is essential.

Enter Tracer; an open source, decentralised smart contract protocol for derivatives that enables reliable risk management.

Historically, derivatives tools and technologies have been the domain of financial institutions whose processes, protocols and systems are opaque and prohibitively expensive.

Tracer’s mission is to reimagine trust in the financial industry, by solving the extant problems attached to derivatives and their foundational technologies through its open-source, transparent protocol.

## Transparency

One of the imperfections of the traditional financial system is that it relies on trusted third parties to facilitate transactions.

Tracer, on the other hand, is decentralised by design, allowing it to provide powerful levels of security through its open-source code and reliable blockchain infrastructure. This is a catalysing force for secure, self-determined and autonomous transacting between individuals, businesses and markets.

The inherent result of this transparency is accessibility. Tracer makes derivatives easy to engage with and understand. Simple terms, simple risk management. You can read the [whitepapers](https://tracer.finance/learn/) to familiarise yourself with the inner machinations of this technology and its praxis.

## Barriers to Entry + Accessibility

Tracer’s barriers to entry stand at near zero. All you need is an internet connection.

The Tracer protocol operates as a novel architect for derivative markets. The smart contracts are permissionless, meaning anybody can deploy a new market, circumventing the traditionally exorbitant costs of market creation due to administrative fees, bureaucracy and the time investment; not to mention the requisite guaranteed participation of traders and hedgers in order for the market to function.

The only external input required by a Tracer contract to function as a market is a reliable data feed. Fortunately, a decentralised oracle network can source you this. Put simply, a decentralised oracle network gathers data from multiple operator nodes and uses a consensus mechanism to arrive at an aggregated, single source of truth for that data feed.

In addition, when these foundational derivative protocols are established, myriad applications and markets can be built as services on top — similar to how Apple and Android have cultivated rich development environments and ecosystems.

Tracer contracts can be integrated into incumbent software used by financial institutions as well as neo-banking applications that provide risk management tools.

### The Tracer Factory:

Financial innovation is achieved through the Tracer Factory. This is a facility capable of mass-producing financial markets. For example, a financial contract type, such as the perpetual swap, can be added to the factory once engineered (the addition is voted on by Tracer DAO governors) and will exist as a template in the factory — able to be reproduced on demand.

Contract templates ensure standardisation, an advantage which is significant for traders and applications to be built on top of Tracer.

Anybody can permissionlessly deploy a template installed in the factory, provided they have an oracle price feed to price it; and token to settle the agreement.

## Risk Management & Security

Tracer can ensure an outstanding level of security that traditional financial infrastructure cannot provide.

The cryptographic technology underpinning Tracer allows it to preserve the sovereignty of the individual, the business and the market; and enable consumers to trade with trust through a decentralised and transparent process.

### Tracer Factory Contracts:

The perpetual swap is a derivative contract that is an incredible risk management tool. It’s a financial contract that accords exposure to any market in perpetuity.

Traditionally, these contracts have been engineered with centralised components and use liquidation and insurance mechanisms that are reliant on third party providers — a high risk practice. Tracer’s perpetual swap contracts provide a far more secure and reliable option.

Tracer’s Perpetual Pools contract is a new derivative primitive with no liquidations and no margins. The contract template has been configured for traders to gain maximum exposure at minimum cost, while guaranteeing the highest level of security. Anybody can permissionlessly deploy a new market with any quote and base assets.

Each Tracer Perpetual Swaps market has an isolated insurance pool specific to that market, allowing for liquidation risk to be localised, neatly avoiding jeopardising the entire ecosystem.

### Chainlink:

There are a variety of token risks that require management in the decentralised digital economy.

To demonstrate: take a prospective Chainlink stake and imagine that an entity purchased a LINK token to secure the Chainlink network. They may wish to stake this token for a fixed period of 6 months. By using Tracer derivatives for risk management, the entity can lock in their LINK stake, guaranteeing a fixed price over that 6-month period.

Chainlink node operators, one of the largest gas consumers in the DeFi economy, need to manage their gas risk, which is considerably volatile. Tracer is building a market for these operators so they can continue to reliably provide pricing data for the DeFi economy.

![Fixed Prices](https://storage.googleapis.com/mycelium-bucket/fixed_prices_89ce374b0c/fixed_prices_89ce374b0c.png)

## Impacts and Opportunities for Markets

The Tracer protocol provides a bulwark against being held hostage by constituents of unpredictability, like fluctuating resource prices. It also allows the creation of new, experimental markets at very low cost.

### Agriculture:

The futures and insurance markets for agricultural commodities have enabled farmers to scale their operations and feed the world. Many parts of the world don’t have an existing market, making access to these products challenging.

Tracer infrastructure will support these new markets and deliver risk management tools directly to a farmer’s smartphone, no matter where they are in the world.

### Climate + Environment:

Carbon credit generating companies produce and sell their carbon to other entities that purchase these credits to operate as carbon neutral. These companies require risk management tools so that they can remain carbon neutral at a fixed cost.

Many of these real-world market prices and values will eventually be crypto-economically secured by Chainlink oracles, serving as a reliable, definitive truth for Tracer contracts to consume and pay out each counter-party.

### Natural Resources:

Tracer aims to forge new water derivative markets that allow astute management of one of our most essential natural resources. It’s imperative that sophisticated markets for water exist, so the resource can be effectively shared and priced in the economy.

![New market creation](https://storage.googleapis.com/mycelium-bucket/water_fuel_markets_22a2495216/water_fuel_markets_22a2495216.png)

### Individual consumers:

Tracer envisions a world where individuals are easily able to manage their local consumption risk.

For instance, an Uber driver’s profits are dependent on how much they spend on fuel. They can minimise their fuel pricing risk by locking in a fixed price via Tracer derivatives. The purchase process of this contract can be completely abstracted and easily baked into a user-friendly interface for any driver.

## Trust You Can See

By creating definitive truth through crypto-economic guarantees, many new local and global markets can be formed via Tracer, which meaningfully enable both individuals and firms to manage their risk.

The Tracer protocol is the vanguard answer to the systemic problem of mistrust in traditional financial firms; and is a potent solution against the stranglehold that these financial institutions have over consumers.

Tracer allows users to ‘trace’ any digital or real-world market with an oracle and form simple derivative agreements — the contracts are built and owned by the user, for the user. It’s transparent, secure and decentralised; it is trust you can see.

## Get Involved

We’re currently growing and expanding. There are many roles opening in Tracer DAO and we encourage new contributors and builders to join the ecosystem. For further details of the Tracer Factory and its derivative protocols, visit the [whitepapers](https://tracer.finance/learn/). Be sure not to miss an update by following Tracer on [Twitter](https://twitter.com/TracerDAO) and joining the discussion on [Discord](https://discord.gg/kvJEwfvyrW). Learn more about the activity of governance on [Discourse](https://discourse.tracer.finance/) and go deep with us on [GitHub](https://github.com/tracer-protocol).

Risk is everywhere, this is a simple fact. It exists in the digital realm as well as in our lives offline. There are vast capital markets and financial networks being built in the decentralised finance (DeFi) industry, which at present is a high-risk environment; and for builders and users who wish to sustain this environment and evolve its technology, intelligent risk management is essential.

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Risk Management with Tracer

![Data Wars header](https://storage.googleapis.com/mycelium-bucket/data_wars_header_9ae641eae1/data_wars_header_9ae641eae1.jpg)

For DeFi spectators and commentators, a clear future is emerging; DeFi derivatives will consume and replace any market that has an oracle price feed. It is clear that data relationships will play an important role for many of the DeFi protocols looking to create meaningful products that extend beyond crypto price feeds.

In the Information Age, data wars have been fought on many different battlefields. In this edition of Data Wars, we will discuss the upcoming financial data wars to be fought by oracle providers, traditional financial firms and financial smart contract protocols, such as Tracer.

Within the DeFi economy there will be two sources of data that exist for derivative contracts. In both instances, data inputs are a cost for that contract that will inevitably have to be paid for in fees by the derivative user:

1.  Off-chain proprietary data relayed by oracles such as Chainlink; and
2.  On-chain exchange contracts or meta-oracle contracts that source pricing data from a variety of different on-chain contracts.

The traditional centralised market for derivative pricing data is gigantic. Each day at different frequencies and times around the world, derivative contracts are marked to market using pricing data delivered by proprietary firms who have curated their feeds to be unbiased and reliable.

To grasp the sheer size of this pricing data market, [CME’s financial reports](https://www.cmegroup.com/media-room/press-releases/2021/2/10/cme_group_inc_reportsfourth-quarterandfull-year2020financialresu.html) that determine $545.4M in revenue (of $3.85B total) stems from data services. To zoom a bit further out, the traditional financial market data industry is said to be valued in the range of $33B, and [growing](https://www.prnewswire.com/news-releases/global-spend-on-financial-market-data-totals-a-record-33-2-billion-in-2020--rising-5-9-on-demand-for-pricing-reference-and-portfolio-management-data---new-burton-taylor-report-301264995.html).

The on-chain market for pricing data is only just beginning. Protocols such as Uniswap - which harbour large portions of spot exchange volume - are now able to provide reliable pricing data that can be used to price other ecosystem derivative contracts that can read directly from the on-chain uniswap contract. Due to this emerging model, discussions have led to propositions that [UNI should be an oracle token](https://gov.uniswap.org/t/uni-should-become-an-oracle-token/11988).

A derivative protocol such as Tracer needs to consume these oracle price feeds to provide secure and reliable markets for end consumers. The following article will touch on two property rights models:

1.  Exchange owned data; and
2.  User Owned data.

We will discuss the implications these data wars may have for a data consuming protocol such as Tracer.

## Exchange Owned Data

Consortium Oracle Networks are a likely eventuality in the next 2 year timeframe within DeFi. Centralised exchanges that are seeking additional revenue through data licensing are likely to form agreements with different oracles that form a Chainlink DONs. Such firms will most likely be instantiating master-agreements with cohorts of Chainlink oracles that deal with licensing and data sale. These consortium oracle networks will form around traditional financial exchanges that sell their pricing data as a product, such as the CME, NYSE and the ASX.

![Off-Chain to On-Chain Data](https://storage.googleapis.com/mycelium-bucket/data_wars_graphic_1_4a3a2d4039/data_wars_graphic_1_4a3a2d4039.png)

Traditional financial firms such as the CME have proprietary data relating to the derivatives and products traded on their platform. Oracle providers brokering relationships with firms to re-sell their data for the pricing of DeFi derivative contracts will introduce a new revenue stream for such firms. Within this model, it is likely that relationships will be formed between trusted protocols that pay the appropriate fees and have been able to license their contracts (whether that be through AML/KYC networks or by other means).

Current hurdles around AML/KYC and the reselling of data are still to be solved. These hurdles are preventing a lot of current pricing data from finding its way onto DeFi contracts. Another cause of this issue is that the majority of demand within DeFi is for higher-returning crypto assets, due to the average DeFi user’s risk tolerance.

There are clear economic incentives within DeFi when it is compared to traditional financial markets. Higher yields and lower transaction costs are just some of those advantages. As these advantages become clearer to traditional traders, it is inevitable that equities, commodities and forex markets will be traded using DeFi infrastructure.

For a data consuming protocol such as Tracer, most on-chain oracle feeds have yet to fully determine their pricing and licencing model due to the nascence of the industry. Currently, any protocol can basically gain access to on-chain price feeds for free, without paying the feed provider. Future models will introduce ZKPs for data values and whitelisted read addresses that are either:

*   Paying customers; or
*   A combination of paying and licensed customers.

With respect to data that natively exists on-chain, such as a Uniswap oracle, exchanges now have a choice between the smart contracts owning the data, or the user having rights to the data that they have created.

In the next part of this article we will discuss a new model where the user owns their data inputs and has rights to the revenue stream that is generated from it.

## User-Owned Data

In this reality, the user that contributes volume towards a TWAP value, or whatever form of aggregated data value, has an economic claim to any revenue that is generated from that price. This is somewhat of a brave new world that we’d love to see spot exchanges adopt and consider in more detail.

![User Owned Data](https://storage.googleapis.com/mycelium-bucket/data_wars_graphic_2_6035f2db15/data_wars_graphic_2_6035f2db15.png)

In this model, a Sushiswap user that has contributed 28% of volume towards an ETH/DAI market would have rights to 28% of any revenue derived from ETH/DAI oracle-paying customers. This would be dependent on how the price had been aggregated for a given period of time. Should any Tracer contract be a consumer of the Sushi oracles, the fees paid by Tracer contracts would be sent to a distribution contract within the Sushi protocol and dispersed to users from there.

The protocol then simply acts as a vector for exchange. It’s revenue model is in taking exchange fees. On-chain meta-oracles that source pricing data from many on-chain sources will be able to exist on top of these contract layers and provide effective aggregation services for potential DeFi consumer contracts.

Regulatory arbitrage likely exists for protocols that are not willing to take protocol fees, who can then profit from the oracle data sales instead - creating ambiguity as to the exact economic mode that the user is buying into. For retail customers, usually this financial revenue that is generated from the sale of their data is completely abstracted from their trading experience in the form of zero fees or costs to using the exchange.

Where things become interesting is when a tokenomic incentive for data sales is introduced. In exchange-owned models, you can earn a share of the future revenues generated from the sale of any of your data rights that you had sold to the protocol. This model compensates the user more than current centralised exchange models or even social media platforms.

## Wrapping Up

To conclude, there will be a variety of ways that oracle data is sourced and derived on-chain. Many different business models will be formed around them to successfully extract value at the transaction layer.

In this article we have discussed how traditional financial data may be ported on-chain through Consortium Oracle Networks, as well as how users may be able to own their own pricing data and be paid for their contributions.

It is foreseeable that with the progression of technologies such as Ethereum, Chainlink & ZKPs each financial exchange user can be their own oracle, and own their transaction data, having right to its sale. All of us within the DeFi community are in a unique position to ensure that we don’t permit data exploitation, which played such a prominent part in traditional finance over the past 20 years. Tracer as a DeFi protocol will continue to deeply consider the data rights of its users, and will make sure that our future users are compensated for their data contributions.

In future editions of Data Wars we’ll cover many new topics, including tomorrow’s data that will be worth trading, which will be more focused on environmental data, social data, unique index data and sentiment data.

Check in here regularly for more thought pieces and announcements, hang out with us in the [Discord](https://discord.com/invite/kvJEwfvyrW) and get updates on [Twitter](https://twitter.com/TracerDAO).

_This thought piece is authored by [Pat McNab](https://twitter.com/pat_mcnab), co-founder of Mycelium._

For DeFi spectators and commentators, a clear future is emerging; DeFi derivatives will consume and replace any market that has an oracle price feed. It is clear that data relationships will play an important role for many of the DeFi protocols looking to create meaningful products that extend beyond crypto price feeds.

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Data Wars: Pricing Data for DeFi

![Untitled (9).png](https://storage.googleapis.com/mycelium-bucket/Untitled_9_abfc4ea480/Untitled_9_abfc4ea480.png)

We’ve reached the end of what’s been an exciting journey through a handful of Tracer’s Perpetual Pools novel use-cases. The Tracer Voyage has concluded, and we’d like to thank all of our community members who participated in the milestone. We’ve chosen to put an early end to the Voyage so that we can focus on new and exciting developments in our ecosystem - which we’re eager to announce soon. Here’s a short summary of the Voyage.

### What we explored

Voyagers kicked off the journey exploring **V2 island**. We showed you what’s new with V2 as the minimum order size for positions was removed, more predictable value transfers allowed for better hedging, and longer-term holding with SMA pricing and mint fees was introduced. Read more about Phase #1 [here](https://tracer.finance/radar/v2-mechanism/).

Next, we set sail and landed at **Real World Island**, where traders were provided with access to non-liquidatable leveraged long and short tokenised positions on the price of Oil. This opened up the possibilities of what’s to come with real world asset markets on-chain, as more efficient hedging strategies for all sorts of assets and risks will be unlocked. Read more about Phase #2 [here](https://tracer.finance/radar/real-world-assets/).

Lastly, we made our way to **Balancer** where the composability of Tracer’s tokenised leverage positions was highlighted. Pool tokens can be fully distributed throughout the DeFi economy, and trading them on decentralized exchanges such as Balancer is just the tip of the iceberg; fungible ERC20s as a leveraged position open a world of opportunity. Read more about Phase #3 [here](https://tracer.finance/radar/token-composability/).

### The Tracer Voyage NFT

Voyagers who participated in at least 2 of the 3 phases and collected the POAPs are eligible for the Voyage NFT. The Voyage NFT is an indication of your interest and dedication to Tracer’s Perpetual Pools V2 launch, and we congratulate all Voyagers who are eligible for the NFT. The Tracer Voyage NFT will be airdropped to all eligible recipients over the coming weeks. Further announcements will be made in the [Discord](https://discord.com/invite/tracerdao) surrounding this drop. 

**Note:** *In order to be eligible for the POAPs for each phase, voyagers had to take a long or short position in the market highlighted and complete a short quiz linked within each announcement article released.* 

### Staying Involved

The Voyage is over, but there’s more updates coming to our community very soon. We’re excited to be releasing a new derivative product for traders. We can’t say much yet, but we’ll be dropping a new tool for users to manage their risk through leveraged positions with a variety of new markets. Announcements will be made in the coming month. Stay up to date with these announcements via our [Twitter](https://twitter.com/TracerDAO), and speak with the team and community in the [Discord](https://discord.com/invite/tracerdao).

We’ve reached the end of what’s been an exciting journey through a handful of Tracer’s Perpetual Pools novel use-cases. The Tracer Voyage has concluded, and we’d like to thank all of our community members who participated in the milestone.

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The Tracer Voyage: Completion

_As of 28 June 2021, Lion’s Mane rebranded to_ [_Mycelium_](https://twitter.com/mycelium_eth)._

Tracer announces the first in a series of partnerships helping build secure railroads for the future of financial transactions.

Lion's Mane [published an offer on GitHub](https://github.com/lions-mane/tracer-dao/blob/master/proposals/LionsmaneProposal.md) on Jan-27-2021, and was subsequently engaged by Tracer DAO via a [successful proposal, on Feb-10-2021 01:22:11 AM +UTC](https://etherscan.io/tx/0x6cdfd32b9153a265d40b623201787f0966dd4c6e8f34351c9f452099d477d97b).

For the Tracer Ecosystem, Lion’s Mane will be:

*   Developing financial contracts, visualisation, and any development tooling;
*   Driving communication and marketing efforts;
*   Inventing new and optimised financial contracts and tools; and
*   Engaging with and supporting any community efforts.

Lion's Mane is a pride of hackers, crypto-economists and open-source ideologues building technology to support freedom of the individual. The financial system is ripe for disruption and the Lion’s Mane team believe that this will occur at the infrastructure level. They believe that peer-to-peer decentralised finance contracts will be the most efficient way financial transactions will be conducted at a global scale in the near future. With this vision, they wish for Tracer to be the primary open-source financial protocol that is used by anybody with a connection to the internet.

Lion's Mane coordinates their actions so other network participants and governors can operate as efficiently as possible. To build a financial system that replaces the old one, all ecosystem and network efforts must be executed in an open and efficient environment - including the underlying code. Lion’s Mane is committed to preserving this environment of transparency in its work with the Tracer community.

The Lion’s Mane team strive for the reduction of transaction costs within financial systems and for the eradication of information asymmetries. This philosophy drives their software development and communication efforts. Cheap, optimised and fair financial smart contracts are the product of this way of thinking.

Members of the Lion's Mane team have been involved in building prediction markets, oracle infrastructure, insurance contracts and data oracles since 2015.

You can follow Lion's Mane on [Twitter](https://twitter.com/mycelium_eth) or visit their [site](https://mycelium.ventures).

Tracer announces the first in a series of partnerships helping build secure railroads for the future of financial transactions. Lion's Mane is a pride of hackers, crypto-economists and open-source ideologues building technology to support freedom of the individual. The financial system is ripe for disruption and the Lion’s Mane team believe that this will occur at the infrastructure level. They believe that peer-to-peer decentralised finance contracts will be the most efficient way financial transactions will be conducted at a global scale in the near future. With this vision, they wish for Tracer to be the primary open-source financial protocol that is used by anybody with a connection to the internet.

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Lion’s Mane Partnership

![Performance Simulations header.png](https://storage.googleapis.com/mycelium-bucket/Performance_Simulations_header_0a62512163/Performance_Simulations_header_0a62512163.png)

Tracer DAO is coming up on it’s long awaited V2 launch and is ready to present the evolution of the Perpetual Pools product. Part of the V2 offering is the ability to hold leveraged tokens without getting “rekt” by volatility decay. Tracer achieves this feat using a simple moving average (SMA) pricing model. Here’s a preview of the new token performance under this model, arrived at through extensive simulation of the mechanism in thousands of different market conditions. 

### TLDR;

- Before Tracer, you couldn’t hold a constant leverage position for very long without losing a chunk of it by ‘buying high’ and ‘selling low’ during periods of market volatility.
- We’ve solved this problem with our new SMA pricing function, which uses an optimal 8 hour lag period to smooth daily volatility.
- In V2, thanks to this new pricing function, you can now get a leverage token that doesn’t leak value. Get constant leveraged exposure to any asset **long-term** with Perpetual Pools V2!

### Background

The current problem that leveraged tokens (and leveraged exchanged traded funds) face is that they suffer from volatility decay. Volatility decay describes the under-performance of rebalancing leveraged products when the price of the underlying mean-reverts. It’s a function of the fund effectively ‘buying high’ and ‘selling low’. 

### Volatility Decay is the Skew Farmer’s Profits

In Tracer’s Perpetual Pools, the volatility decay experienced by the leveraged tokens is caused by skew farming (akin to basis farming in perpetual swap markets). In other words, volatility decay is the skew farmer’s profits. Pool tokens would not experience volatility decay if skew farming didn’t occur. However, if the skew is left unfarmed, the price of the tokens won't track the performance of the underlying asset. You can learn more about skew farming Perpetual Pools [here](https://tracer.finance/radar/skew-farming-explained/). 

### SMA Pricing

Because we want Pool tokens to track the underlying *as well as* resist decay, the goal is to eliminate as much realised volatility as possible. Our analysis shows that a simple moving average (SMA) lag period smooths volatility in the underlying price movement but still gives the Pools exposure to market trends. Pool tokens perform best in trending markets (markets with directional momentum), so SMA pricing is desirable as it reduces volatility decay when markets are sideways. 

To quantify the presence of volatility decay in a perpetual pool that tracks an SMA price, we ran a number of simulations.

### Expected Reduction in Volatility Decay

Specifically, we ran 1,000 different year-long price pathways for SMA periods ranging from 1 to 30 hours (e.g. 15 on the x-axis indicates a 15 hour SMA), where all pathways start and end at the same price. This results in 30,000 simulations per leverage.

Then, we logged the vol. decay for each SMA period using the 10 feeds that produced the most decay, and took the average of the ten for each. The results are graphed below (where the blue line is the average, mapped against the range).

![V2 Simulations](https://storage.googleapis.com/mycelium-bucket/Screen_Shot_2022_02_13_at_12_23_36_pm_8a8bbee6c6/Screen_Shot_2022_02_13_at_12_23_36_pm_8a8bbee6c6.png)
> Simulations done with 3p leveraged Pool.

**We can see the following things:** 

a) For a single period SMA (1 hour, i.e. the spot price), the volatility decay suffered by the tokens is ~30% for the year. However, the range is wide (50% to 12%). 

b) The inclusion of more SMA lag periods reduces the average. By a lag period of 8, the average of the 10 worst volatility decay scenarios is a 5.5% decrease in token value over the year. 

c) Decay reduction tapers off over time, indicating that the marginal increase in SMA lag periods has diminishing returns. 

### An 8-hour SMA

The simulations show that using an 8 hour SMA price feed smoothes realised volatility (intra-day volatility) while retaining medium-long term tracking. Any period greater than 8 hours has only marginal benefits above its impact on the function of the Pools mechanism. By this, we mean that minting and burning windows must increase to prevent the exploitation of the new pricing, and periods greater than 8 hours both impact the retail experience and skew farming strategies.  

All things considered, we have chosen an 8 hour period for SMA pricing – to be used by Perpetual Pools V2 for **improved leveraged token performance**. However, this new pricing function doesn't prevent vol. decay completely. 

### Mint Fee Addresses Remaining Volatility Decay

We have seen that, on average (under worst-case assumptions), tokens still lose 5.5% of their value to skew farmers. This is fine – skew farmers are needed to keep tokens tracking leveraged returns on the underlying. To compensate for this remaining 5.5% decay, new entrants will need to pay a 1% mint fee on 3p Pools because they are the ones that dilute the gains of existing traders. All mint fees are directed back into the pools to help offset the remaining impact of volatility decay.

To learn more about Tracer’s Perpetual Pools V2, read our latest explainer: [https://tracer.finance/radar/perpetual-pools-v2-roadmap/](https://tracer.finance/radar/perpetual-pools-v2-roadmap/)

Join the Discord: [https://discord.com/invite/tracerdao](https://discord.com/invite/tracerdao)

Follow us on Twitter: [https://twitter.com/TracerDAO](https://twitter.com/TracerDAO)

---

*Disclaimer: Simulated market conditions may be unlike real market conditions. The results of these simulations are indicative only and do not guarantee the performance of Perpetual Pools V2.*



Part of the V2 offering is the ability to hold leveraged tokens without getting “rekt” by volatility decay. Tracer’s achieves this feat using a simple moving average (SMA) pricing model. Here’s a preview of the new token performance under this model, arrived at through extensive simulation of the mechanism in thousands of different market conditions. 

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Tracer’s Perpetual Pools V2 Simulations

![Untitled (1).png](https://storage.googleapis.com/mycelium-bucket/Untitled_1_0af4a5c8d9/Untitled_1_0af4a5c8d9.png)


**EDITS:** The following guide has been updated to reflect the changes live on Perpetual Pools V2.

### **Overview**

With Tracer's Perpetual Pools, fully-fungible, tokenised leveraged positions can be minted, making your access to leverage simple, transparent and easy. These ERC20s can be used *anywhere* in the DeFi economy; and the tokens can also be staked in Tracer's staking contract to earn TCR rewards.

In this short guide, we'll be taking a look at how you can stake pool tokens in the Perpetual Pools interface.

# **Staking Pool Tokens**

### Step 1: Claim your Pool Tokens to your wallet

After you mint a position, your leveraged tokens will by default appear on the portfolio page; not in your wallet. In order to stake your tokens, you will first need to make sure they are in your wallet. 

To view the tokens you have sitting in escrow, navigate to the “Portfolio” page on the Tracer dApp. The window will look similar to the below:

![screens-04.png](https://storage.googleapis.com/mycelium-bucket/screens_04_ddc29bdbd6/screens_04_ddc29bdbd6.png)

To move your pool tokens out of escrow and into your wallet, click the ‘Claim All’ button and approve the transaction.

The tokens will then be sent to the wallet you are connected to the Tracer dApp with. 

To make sure the tokens are visible in your wallet select the three dots and then click “Add token to wallet”.

![screens-03.png](https://storage.googleapis.com/mycelium-bucket/screens_03_20cd4e0010/screens_03_20cd4e0010.png)

### **Step 2: Find the Staking Page**

Now that your tokens are in your wallet; you are ready to stake them!

Go to the '**[Stake](https://pools.tracer.finance/stakepooltoken/)**' page in the Perpetual Pools interface. Once you're there you'll see a list of pool tokens that can be staked and their respective APR’s. Only pool tokens that you've got in your wallet will have the 'Stake' button highlighted.

### **Step 3: Stake!**

Choose 'Stake' on right-hand side of the interface. You'll then be prompted to enter the amount of tokens you'd like to stake. Select 'Max' to stake all of your pool tokens. Accept the MetaMask prompts and your pool tokens will be staked. 

![ezgif-4-22095e7cdde5 (1).gif](https://storage.googleapis.com/mycelium-bucket/ezgif_4_22095e7cdde5_1_ebbac7606b/ezgif_4_22095e7cdde5_1_ebbac7606b.gif)

# **Stake Balancer Pool Tokens**

Pool tokens can also be staked into Liquidity Pools on Balancer’s AMM. People who provide liquidity to these pools assist the functionality of the secondary markets for our leveraged tokens. 

As a reward for providing this service, liquidity providers (LP’s) can earn TCR, BAL and swap fees. Follow the steps below to learn how to provide liquidity.

Note: Liquidity providers are exposed to a risk known as Impermanent Loss. To learn more about Impermanent Loss you can start [here.](https://academy.binance.com/en/articles/impermanent-loss-explained) 

### **Step 1: Navigate to the Invest Page on Balancer (Arbitrum)**

You can go to Balancer’s dApp using this [link.](https://arbitrum.balancer.fi/#/)

### **Step 2: Find the pool you wish to provide liquidity to**

Down the bottom of the ‘Invest’ tab is a list of the pools on Balancer Arbitrum which you can provide liquidity into.

Look for the pools which contain Tracer leveraged tokens and click on them. 

### Step 3: Add liquidity to the pool

If you have eligible tokens in your wallet; Balancer’s dApp will let you know. You can then click invest and follow the prompts to add liquidity to the pool. In exchange you will receive LP tokens which represent your position in the pool.

![screens-02.png](https://storage.googleapis.com/mycelium-bucket/screens_02_c95f129643/screens_02_c95f129643.png)

### Step 4: Stake to earn rewards

Directly below the “Invest” button is the “Staking incentives” menu. Click the drop down box to reveal the following window and it will look something like the below:

![screens-01.png](https://storage.googleapis.com/mycelium-bucket/screens_01_77c7b25ff6/screens_01_77c7b25ff6.png)

If you have LP tokens in your wallet the “Stake” button will be highlighted. Click the button and follow the prompts on MetaMask to start staking your LP position and earning BAL and TCR incentives in addition to swap fees. 

### **More help guides**

- **[Bridging your tokens to Arbitrum](https://tracer.finance/radar/bridging-to-arbitrum)**
- **[Creating a custom RPC](https://tracer.finance/radar/remote-procedure-call-creating-an-rpc)**
- **[How to mint and burn pool tokens](https://tracer.finance/radar/minting-burning)**
- **[How to stake your pool tokens](https://tracer.finance/radar/staking)**

In this short guide, we'll be taking a look at how you can stake pool tokens in the Perpetual Pools interface so you can start earning TCR!

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Staking Pool Tokens Guide

![Chainlink Oracle integration.](https://storage.googleapis.com/mycelium-bucket/chainlink_partnership_6b10f51190/chainlink_partnership_6b10f51190.png)

Tracer DAO is excited to announce an upcoming integration of [Chainlink Price Feeds](https://data.chain.link/) as the default oracle solution for our permissionless financial contract infrastructure. The initial integration will include the use of Chainlink Oracles to support Tracer DAO’s derivatives contracts on Arbitrum.

Chainlink’s high-quality, tamper-proof price oracles are critical to securing several on-chain functions, most notably:

*   maintenance of margin;
*   verification of liquidations;
*   and calculation of funding rates.

Because Tracer markets feature risk-free liquidations, the contracts need more than just the index price; they also need the current fast gas price and the price of ETH in USD (or whatever the market settles in). These liquidations leave traders with more equity and ensure that liquidators make money, representing a win-win scenario.

Chainlink Price Feeds not only strengthen the precision and robustness of Tracer’s derivatives markets, but they have a proven track record of delivering reliable price updates on-chain despite flash crash outliers, API downtime, and oracle manipulation attacks. Combining Chainlink’s time-tested reliability and wide collection of Price Feeds across many asset classes, the creation of derivatives markets for any provided data feed just became a thrilling possibility for DeFi users.

## Tracer Unlocks Digital and Real World Markets with Chainlink Oracles

Tracer allows users to ‘trace’ any digital or real-world market with an oracle and form simple derivative agreements. By porting existing price data on-chain and creating definitive truth through crypto-economic guarantees, many new local and global markets can be formed that meaningfully enable both individuals and firms to manage their risk. Rather than being at the mercy of fluctuating fuel prices, consumers can now lock in their fuel price with an easy-to-use derivative contract. With quick, zero-permission deployment for perpetual swaps, Tracer can capture markets as soon as there is a trusted price oracle.

Tracer DAO is acutely aware of the importance of having accurate, up-to-date, and manipulation-resistant off-chain data being fed to on-chain contracts. Market creators should not trust trader funds with any subpar price feeds. With Chainlink Price Feeds already securing tens of billions of dollars of value across DeFi, it makes for the obvious oracle solution for Tracer DAO, showcasing our firm commitment to providing users with best-of-class data.

![Tracer's Integration with Chainlink.](https://storage.googleapis.com/mycelium-bucket/chainlink_diagram_64f73563ad/chainlink_diagram_64f73563ad.png)

Some of the major benefits of Chainlinking Tracer’s derivatives markets include:

*   **High-quality Data** — Chainlink Price Feeds source data from numerous premium data aggregators, leading to price  
    data that’s aggregated from hundreds of exchanges, weighted by volume, and cleaned from outliers and wash trading.

*   **Secure Node Operators** — Chainlink Price Feeds are secured by independent, security-reviewed, and Sybil-resistant  
    oracle nodes run by leading blockchain DevOps teams, data providers, and traditional enterprises. Chainlink nodes have  
    a strong track record for reliability, even during high gas prices and extreme network congestion.

*   **Decentralized Network** — Chainlink Price Feeds are decentralized at the data source, oracle node, and oracle network levels, generating strong protections against downtime and tampering by either the data provider or the oracle network.

*   **Reputation** — Chainlink provides a robust reputation framework and set of on-chain monitoring tools such as [Chainlink Oracle Reputation](https://reputation.link) that allow users to independently verify the historical performance of node operators and oracle networks, as well as check the real-time prices being offered.

The integration of Chainlink oracles with Tracer will enable new derivative markets to be pioneered and unlocked by anybody with an internet connection. As market demand reaches a point where the price of data is cheap enough to warrant a derivative agreement, Tracer will utilize Chainlink to source and deliver this data on-chain to open up new and exciting derivatives markets. By working together to develop feeds, “Chainlink will help Tracer unlock markets that enable people to manage their everyday financial risk…” says Mycelium Co-Founder Patrick McNab, “…Chainlink is unrivalled in its offering of reliable and exotic data feeds, and Tracer is eager to scale alongside support from its oracle services.”

The ETH/USD perpetual swaps are set to drop on the Arbitrum mainnet in the coming months.

## About Chainlink

Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.

Chainlink is trusted by hundreds of organizations, from global enterprises to projects at the forefront of the blockchain economy, to deliver definitive truth via secure, reliable oracle networks. To learn more about Chainlink, visit [chain.link](https://chain.link/) and subscribe to the [Chainlink newsletter](https://chn.lk/newsletter). To understand the full vision of the Chainlink Network, read the [Chainlink 2.0 whitepaper](https://chain.link/whitepaper). Want to discuss an integration? [Talk to an expert](https://chainlinkcommunity.typeform.com/to/OYQO67EF?page=announcement).

[Solutions](https://chain.link/solutions) | [Docs](https://docs.chain.link/docs/getting-started) | [Twitter](https://www.twitter.com/chainlink) | [Discord](https://discordapp.com/invite/aSK4zew) | [Reddit](https://www.reddit.com/r/Chainlink/) | [YouTube](https://www.youtube.com/channel/UCnjkrlqaWEBSnKZQ71gdyFA) | [Telegram](https://t.me/chainlinkofficial) | [GitHub](https://github.com/smartcontractkit/chainlink)

## About Tracer

Tracer is an open-source, smart contract protocol for derivatives. Arriving on Arbitrum mainnet in the coming months, Tracer’s Perpetual Swaps are fully decentralised and highly capital efficient. Key characteristics include market-specific insurance, permissionless market deployment, and risk-free liquidations. You can read more about Tracer’s Perpetual Swaps in the [whitepaper](https://tracer.finance/media/whitepapers/tracer/Tracer_Whitepaper.pdf).

Be sure to check in [here](https://tracer.finance/radar) regularly for announcements, hang out with the community in the [Discord](https://discord.com/invite/kvJEwfvyrW), get updates on [Twitter](https://twitter.com/TracerDAO), learn more about the activity of Governance on [Discourse](https://discourse.tracer.finance/) and go deep with us on [GitHub](https://github.com/tracer-protocol).

Tracer DAO is excited to announce an upcoming integration of Chainlink Price Feeds as the default oracle solution for our permissionless financial contract infrastructure. The initial integration will include the use of Chainlink Oracles to support Tracer DAO’s derivatives contracts on Arbitrum.

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Chainlink Oracle Integration

![derivatives-markets (1).png](https://storage.googleapis.com/mycelium-bucket/derivatives_markets_1_1d4b4fc8f4/derivatives_markets_1_1d4b4fc8f4.png)

The global derivatives market is an untouched area of concern that the decentralised landscape could support. Currently, the notional value of derivatives in traditional finance is four times the world’s debt[1] and sixteen times the world’s estimated money supply. How is this so? We’ll take a closer look throughout this education series, starting here at derivatives and the size of this market, and working through topics such as perpetual swaps, options, and what the future of the derivative market really could be.

In 2019 the global derivatives market represented $640T in notional value[2]. The size and scope of this market is staggering. While these figures may seem impossible, it's due to a concept called *leverage* that this large volume can exist. More importantly, the potential for monumental impact in the near future warrants the need for reliable risk management systems. 

With leverage, the *notional value* is the amount the derivatives contract controls, or, the total underlying amount of a derivatives trade. Because of this, the *notional value* of derivative contracts is much higher than the *market value.* 

First things first, let’s examine the basics. Derivatives are contracts based on the value of an underlying asset such as currency or interest rates. Derivatives can be thought of as essential synthetic oil in the economic engine, a crucial element that commands significant sway over the rates we pay for goods and services. And yet, the market is rarely seen or heard of by those outside trading floors. Forwards and futures, options, and swaps are the three types of derivatives. Swaps, which are soon coming to the Tracer DAO ecosystem, allow for the exchange of cash flows between two parties and usually involve the exchange of a fixed cash flow for a floating cash flow.


![Tracer_DerivativeEducation_Infographics_update_13-13.png](https://storage.googleapis.com/mycelium-bucket/Tracer_Derivative_Education_Infographics_update_13_13_724d847be9/Tracer_Derivative_Education_Infographics_update_13_13_724d847be9.png)


## Derivative Examples

Unsurprisingly, derivatives exert a notable impact on modern finance by providing some advantages to the financial markets. They provide a way to lock in prices, hedge against unfavourable movements in rates, and mitigate risks, often at a limited cost. In addition, derivatives can often be purchased on margin — that is, with borrowed funds — which makes them even less expensive. They also enable organizations to gain access to otherwise unavailable assets or markets — for example, by employing interest rate swaps, a company may obtain a more favourable interest rate relative to the interest rates available from direct borrowing.


## Derivative Trading

When we look at current *estimations* of the global derivatives market, the *notional value*[3] is sitting around ~640T$USD. Whilst it is difficult to quantify the exact figure, it is clear that the value of these trading instruments *(or at least the total value these instruments control)*, are an order of magnitude larger than its underlying market. Previously, this may cause one to err on the side of caution. After all, it was the credit default swap that caused the global financial crisis. However, with new technologies there is the potential for safer, transparent, risk mitigation systems to prevent these events reoccurring.


![Tracer_DerivativeEducation_Infographics_update_02-01.png](https://storage.googleapis.com/mycelium-bucket/Tracer_Derivative_Education_Infographics_update_02_01_3e0706da84/Tracer_Derivative_Education_Infographics_update_02_01_3e0706da84.png)
> While **Debt**, **Market Cap** and **Notional Value** are different metrics of value, these images depict quantitative measurements of financial markets in FIAT denomination. 


Currently, the everyday retail trader (regardless of experience) has little to no access to this market. The privilege of this access has only been bestowed upon corporate institutions and hedge funds. The growing decentralised derivatives market highlights the retail investor appetite for this untapped market, utilizing the added benefits of decentralised technology, using a transparent, open source environment. 


### Derivative Contracts on the Blockchain

This decentralised derivatives market is an untapped goldmine, waiting to be discovered. With enormous potential for risk mitigation strategies and protection against price fluctuation. And, with DeFi continuing to challenge the dominance of traditional finance, it's only a matter of time before we see a decentralised derivative protocol such as Tracer DAO emerge as the next generation of financial infrastructure.

To assist this expansion, blockchain networks like Ethereum are allowing for new financial infrastructure, such as derivative protocols, to be built. With the help of smart contracts, this infrastructure provides extremely efficient and secure peer-to-peer transactions and agreements that are redefining the global financial landscape. As the power of smart contracts and blockchain continues to be realised by mainstream institutions, consumers will continue to shift their preferences from traditional fintech and to blockchain-powered technologies.

As reliable data becomes significantly more accessible on-chain, courtesy of projects like [Chainlink](https://chain.link/), the potential for new and exotic derivatives markets is opening up. Tracer aims to utilise these oracle data feeds to allow retail traders to take both long and short positions on any asset with a publicly available price feed. Tracer is bringing previously uncontemplated and inaccessible markets to anyone with an internet connection; allowing more people to gain access to risk mitigation strategies for unpredictable everyday events. 

To keep updated and discuss all things derivatives and Tracer DAO, follow along on [Twitter](https://twitter.com/tracerDAO), join the [Discord](https://discord.com/invite/kvJEwfvyrW), and check out governance on [Discourse](https://discourse.tracer.finance/).


[1][https://fortune.com/2018/04/18/what-is-the-world-debt/](https://fortune.com/2018/04/18/what-is-the-world-debt/)
[2][https://www.bis.org/publ/qtrpdf/r_qt1912j.htm](https://www.bis.org/publ/qtrpdf/r_qt1912j.htm)
[3][https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp](https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp)
[4][https://siblisresearch.com/data/us-stock-market-value/](https://siblisresearch.com/data/us-stock-market-value/)
[5][https://8marketcap.com/](https://8marketcap.com/)
[6][https://www.coingecko.com/en/categories](https://www.coingecko.com/en/categories)



The Derivatives Market will be disrupted and decentralised, providing immense potential for markets and risk applications. We’ll take a closer look throughout this educational series.

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Derivative Markets - An Introduction

![Tracer DAO Raise Header.](https://storage.googleapis.com/mycelium-bucket/raise_header_97151c7d79/raise_header_97151c7d79.png)

Tracer DAO has made tremendous progress this week and is excited to announce the raising of $4.5M of capital.

The round is supported by [Framework Ventures](https://framework.ventures/), [DACM](https://dacm.io/), [Maven 11](https://www.maven11.com/), [Apollo Capital](https://www.apollocap.io/), [Distributed Global Ventures](http://www.distributedglobal.com/), Paperclip Fund and [Supernova](https://supernova.fund/). [GSR](https://gsrventuresglobal.com/) and [Efficient Frontier](https://www.efrontier.io/) have also joined the round as strategic market making partners. The raise was for 10% of the governance token supply, vested linearly over 2 years.

This is a landmark moment in the life of Tracer, and will assist in bringing Tracer’s Perpetual Swaps to Arbitrum mainnet in the coming months. The successful raising of capital also marks a seminal moment in DAO-centric capital raising.

Tracer will continue to innovate and create new financial markets, both for the digital and real world, that unlock financial access for individuals and firms alike. Tracer’s open-source and fully accessible perpetual swap framework will enable high-leverage transactions for any market that has an oracle price feed. An L2 native environment will position Tracer’s perpetual infrastructure to support composable-structured yield and insurance products that will benefit both system liquidity and security respectively.

Michael Anderson, Co-founder of Framework Ventures said “Tracer DAO offers exciting capital efficient derivative infrastructure that we're eager on supporting, given our shared community history with the Tracer team and our view that decentralised derivatives will characterise a lot of the growth in DeFi over the next few years. Tracer's core derivative infrastructure will support structured products that will provide meaningful ways to manage and take risk in the DeFi economy. This successful capital raise marks a landmark moment in DAO-centric capital raising”.

In light of the capital raise, we will be introducing new developers into the team to bring future financial contracts to the Tracer ecosystem. Additionally, innovative Service Providers will be engaged by Tracer DAO to deliver on the vision of peer-to-peer finance.

Mariano Conti, Maker Mafia, believes “Tracer is one of the most interesting projects I've seen, not just in the perpetuals space, but overall. Their approach to governance is purely decentralised and novel. They've been quietly building for a while, but now I expect the market to know Tracer very well in the coming 12 months”.

The Tracer community plans to hold a Gnosis Auction in the coming months, with the goal of raising additional capital to further grow Tracer. Gnosis Auction is a platform for conducting fair, transparent, and decentralised token price discovery. The auction will be open to all, and those interested in participating can stay updated via Tracer’s [Twitter](https://twitter.com/TracerDAO).

Alongside support from our new partners, Tracer is set to define the future of financial infrastructure. If you’re interested in what’s happening at Tracer, be sure to join the [Discord](https://discord.gg/H6wkU6vvnr). Along with this, if you’d like to govern Tracer DAO, apply to be a governor [here](https://tracer-finance.typeform.com/to/zHrUFNEn).

![Tracer Investors Twitter.](https://storage.googleapis.com/mycelium-bucket/tracer_investors_twitter_b0e1c56d13/tracer_investors_twitter_b0e1c56d13.jpg)

A special thank you to all other participants of Tracer’s strategic round: The LAO, Baires DAO, Maker Mafia, Simon Cant (Reinventure), Danny Gilligan (Reinventure), Joyce Yang (GSR), Stani Kulechov (Aave), Ashwin Ramachandran (Dragonfly), Philippe Perzi (MD GS), 0xMaki (SushiSwap), TokenInsight, Henrik Anderson (Apollo/mStable/dHedge), Kevin De Patoul & Juan David Mendieta (Keyrock), Radek Ostrowski (dHedge), Emrin Nurovic (dHedge), Darren Smorgon (Sandbar Investments), Kevin O’Hara (Sentor Investments), Marc Woodward (Apollo), Sid Powell (Maple), Joe Flanagan (Maple), James Simpson (mStable) and Rohen Sood (Reinventure).

See the proposal [here](https://discourse.tracer.finance/t/proposal-strategic-treasury-diversification/286).

Tracer DAO has made tremendous progress this week and is excited to announce the raising of $4.5M of capital. The round is supported by Framework Ventures, DACM, Maven 11, Apollo Capital, Distributed Global Ventures, Paperclip Fund and Supernova. GSR and Efficient Frontier have also joined the round as strategic market making partners. The raise was for 10% of the governance token supply, vested linearly over 2 years.

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Tracer DAO closes $4.5M USD raise

$80,000 USDC. It’s yours for the taking.

Tracer is excited to announce the engagement of Code Arena (Code 423n4) to audit the Tracer Perpetual Swaps contracts as a bug bounty. The primary aim of the audit is to locate bugs, exploits and security concerns throughout the protocol code. Lion’s Mane has generously put together $80,000 USDC for the bounty award pool. The contest will run from 24/06/2021 12am UTC until 01/07/2021 12am UTC.

Code 423n4 is a new, community-driven organisation that has devised a novel way of performing the crucial service of auditing smart contract code. Code 423n4 reviews code with a competitive, crowd-sourced process where all participants “eat what they kill”, as they compete to be the champion of the arena. In addition to the earlier audit performed by Sigma Prime, this second audit accords with Tracer’s vision of deploying impenetrable smart contracts.

By throwing the duty of auditing smart contract code to the community, Code 423n4 allows any skillful developer to gain rewards for their services. It is completely time flexible, with participants free to start and end their reviews whenever they choose. It also allows for specialisation, with the goal for each participant to not find all the bugs, but the bugs they want to find. Highly specialised security researchers stand to earn lucrative rewards for finding rare, high-risk bugs.

This new method of crowd-sourcing developer talent to perform auditing services is extremely powerful. Not only is it an antidote to the inefficiencies of engaging a traditional auditing firm, but it allows unknown talent to gain recognition, perhaps for the first time. The clever incentive structure helps drive creativity, diligence, effort, and quality. The chance to earn relative to your skill and effort means more interest and creativity from security auditors.

Tracer urges all interested developers to join in on the bounty. $80,000 USDC is up for grabs. Enter the arena and prove yourself.

To get involved and find out more, see all the Code 423n4 resources [here](https://docs.code4rena.com/roles/wardens/), and join their Discord [here](https://discord.gg/EY5dvm3evD).

Tracer is excited to announce the engagement of Code Arena (Code 423n4) to audit the Tracer Perpetual Swaps contracts as a bug bounty. The primary aim of the audit is to locate bugs, exploits and security concerns throughout the protocol code. Lion’s Mane has generously put together $80,000 USDC for the bounty award pool. The contest will run from 24/06/2021 12am UTC until 01/07/2021 12am UTC.

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Open Audit: Code 423n4

![Tracer-perpetual-pools.png](https://storage.googleapis.com/mycelium-bucket/Tracer_perpetual_pools_014bbca190/Tracer_perpetual_pools_014bbca190.png)

# Tracer Perpetual Pools Launch

We are pleased to announce Tracer Perpetual Pools is now live on Arbitrum One. This is a monumental moment for Tracer DAO and the decentralised finance ecosystem as a whole. 



### Need To Know

- You can trade via the new [Perpetual Pools Interface](https://pools.tracer.finance/).
- You can read the documentation via the Tracer website here: [Documentation](http://docs.tracer.finance)**.**
- You can read about liquidity mining incentives [here](https://snapshot.org/#/tracer.eth/proposal/QmUo3YP6APLp5ryo8rmRc3bnMZERD1fEwapMySM7PDJMrk).
- For support, enter the [Tracer Discord](https://discord.com/invite/kvJEwfvyrW) and find the #help channel
- Users will need to use the Arbitrum bridge https://bridge.arbitrum.io/ to move their assets from L1 to L2 when using the Perpetual Pools Interface. Noting the 7 day withdrawal timeframe from back to the main-chain (L2 to L1).


### Quick Summary

Perpetual Pools is a new financial primitive that enables anybody to take a short or long position on any underlying asset. These positions are non-liquidatable, fully collateralised, fully-fungible and can exist perpetually without upkeep. These positions exist as ERC20 leveraged tokens which live inside your wallet and are composable within the DeFi economy. 

For a more detailed overview, read: [Perpetual Pools Explained](https://tracer.finance/radar/perpetual-pools-explained/)


### Acknowledgments

Today marks an important milestone for the Tracer DAO as well as every Service Provider, Alpha Tester, Partner, DAO member, and community member that has brought Tracer Perpetual Pools to life. Tracer DAO would like to thank everyone involved and looks forward to continue driving financial innovations through the Tracer Factory. 

To learn more about Tracer, read the whitepapers here: [Learn](https://tracer.finance/learn/)


## **What Happens Next?**

In the coming few weeks there will be many new releases that build upon the Perpetual Pool offering. Automated strategies that leverage pool tokens in yield generating structured products will be released so that market participants can provide capital to the Perpetual Pool contracts in a simple, risk-free way. 

In the next two weeks we will be releasing literature on the Tracer Indices Marketplace, which will enable tokenised index positions to flow throughout the DeFi economy.

To track these updates, stay up-to-date with announcements by following Tracer DAO on [Twitter](https://twitter.com/TracerDAO) and joining the Tracer community on [Discord](https://discord.com/invite/kvJEwfvyrW) and [Discourse](https://discourse.tracer.finance/t/current-and-future-token-distribution/224), and subscribing to our [YouTube channel](https://www.youtube.com/channel/UChQFEjLu4vaaS96iCRbasFg). 


### **Legal and Financial Advice Disclaimer:**

The information provided in this article is for informational purposes only. Any material in this article should not be considered as legal or financial advice. Tracer DAO is not an investment advisor and this is not a place for the giving or receiving of financial, tax or legal advice or investment strategy. Tracer DAO is not regulated by any financial services authority. You should consult with a financial advisor, attorney or other professional to determine what may be best for your individual needs.

Accordingly, Tracer DAO will not be liable, whether in contract, tort (including negligence) or otherwise, in respect of any damage, expense or other loss you may suffer arising out of such information or any reliance you may place upon such information. Any arrangements between you and any third party contacted via Tracer DAO’s website are at your sole risk.

We are pleased to announce Tracer Perpetual Pools is now live on Arbitrum One. Perpetual Pools is a new financial primitive that enables anybody to take a short or long position on any underlying ass
et.