PepperDEX: The Future of Trading on Solana

March 20, 2024

In conclusion

It’s undeniable that the Solana ecosystem has been on fire so far this cycle. Its rise from the ashes of the FTX collapse to where it stands today surely sets the precedent for what is to come over the course of the bull market. With so many new projects being launched and bridged over from other chains, it is becoming clear that Solana will be the center of degenerate action going forward.

Keeping this in mind, the launch of a highly innovative, exciting new trading platform with many never-before-seen, novel features will surely stir and add some serious spice to the hottest chain in the cryptosphere.

Introducing PepperDEX

The original seeds were planted when the team at PepperDEX decided to put their big brains together with the exchange known at the time as SpedX. This merge, more commonly known as the “Splerge,” formed the base that led to the creation of the PepperDEX platform.

Being built on top of the HXRO Network’s SPANDEX risk engine and Dexterity Decentralized Global Order Book gives PepperDEX an interesting edge over some of its competitors that will likely play out in serious favor for the platform as time goes on.

The team at PepperDEX prides themselves on their implementation of community contribution and have proven this with the incentivization of feedback, as well as their decision to stray away from the popular points systems we have seen of late.

Instead, they have opted for innovative token rewards that directly give back to their community members and more closely align with the values of crypto as a whole. This allows users to know exactly what they are earning, rather than hoping that their accumulated points will be redeemable for more than just a Big Mac or some shitty merch.

What makes PepperDEX Different?

Zero-Day Futures

Have you ever dreamed of the ability to 100x your shitcoin gains on meme tokens like $WIF? Well, if so, then this one's for you.

For the first time in crypto history, Zero-Day Futures will be available on the PepperDEX platform, all thanks to the use of the HXRO Network’s tech. It goes without saying this is a pretty big deal!

Anyone involved in the world of traditional markets will know how popular the 0DTE has become of late. These ZDFs are futures contracts with a 25-hour expiry cycle allowing users to speculate over a short-term period on their shitcoins of choice.

In the past the ability to gamble with serious leverage on meme coins has been unavailable, mostly due to the fact that market makers have generally been unwilling to buy such volatile tokens to create the market needed to do so.

PepperDEX’s Zero-Day Futures have solved this problem as the short-term contract length means less risk for the market makers and more fun for the degen!

ZDFs will be margined and paid out in $USDC. Any positions not rolled over into the next contract cycle will also be settled in $USDC, so make sure you stay on top of your speculative bets.

SPANDEX Risk Engine

Individual margin requirements have always been a pain point for those redacted traders who can’t get enough of a fix from having just a single position open at a time. Those who, instead, have multiple leveraged plays on the go at once. Who said escaping poverty would be easy, right?

Thanks to SPANDEX, the only real time, portfolio-based risk engine, PepperDEX margin requirements are calculated over your entire portfolio of open positions instead of on an individual basis like you would find on other perps platforms. This is common in the world of TardFi derivatives trading but has not been seen in crypto until now.

These calculations are based on factors like overall position size, volatility, and asset correlation. As we know, most of crypto is pretty highly correlated, so this means that holding multiple positions will generally come with lower margin requirements than you will find elsewhere, allowing for easier position management and the ability to sling more size in the crypto casino.

Dexterity Order Book

The HXRO Network’s Dexterity Order Book is an asset-agnostic limit order book with aggregated liquidity. But what on earth is that?

In simple terms, this means that any asset with a constant oracle price feed can be supported on the platform, and thanks to the use of the Pyth and Switchboard oracles, PepperDEX will be able to provide a wide variety of assets ready to be traded with deep liquidity.

This deep liquidity comes from aggregating liquidity between other platforms built on the HXRO Network. In other words, platforms share their liquidity, meaning if one platform grows the other platforms on the network directly benefit in a symbiotic fashion. This solves the problem of liquidity fragmentation caused by split order books that hinder other perps trading platforms, and once again, allows you to ape with more size and exit with that wife-changing money you have always dreamed of.

Trading Vaults

Another exciting feature that will debut on the PepperDEX platform is their use of trading vaults. The first of these vault types will be protocol-ran vaults, allowing users to add funds to various complex trading strategies like market making, arbitrage, and liquidation strategies.

Essentially, this will allow users to “be the house” and profit from the liquidation of trading accounts and favorable slippage conditions.

Even more exciting than this is the ability for users to run their own vaults and become the big-brained, crypto hedge fund managers they always knew they were by outperforming the likes of Dalio and Buffet themselves. We believe in you, anon.

To create a vault of your own, you must set up a Trader Risk Group account on the platform, maintain a minimum of 10% overall liquidity in the vault, and then implement any strategy you wish.

Obviously, the most profitable strategies will attract the most liquidity allowing users to grow their trading fund empires and teach those suckers at Vanguard a lesson for fading the future of finance.

For a deeper dive into the platform's trading vaults check out their Medium article on the subject here.

Value Flywheel and Tokenomics

PepperDEX implements an interesting take on tokenomics that is designed around the use of three different token types. Their primary ecosystem token $PEP; their options token $oPEP. And their vote-escrow token, used in governance proposals, $vePEP.

The $PEP token is a multi-faceted utility token that can be traded on the open market or staked to earn protocol revenue rewards paid out in $USDC. Staking $PEP will also offer a discount on trading fees and allow users to be paid out on a stake-weighted basis. These rewards are paid in $USDC. It is worth noting that $oPEP trading rewards will still be paid to those who aren’t staking $PEP, however, to get maximum rewards and have them compound over time, you will need to have $PEP staked.

$vePEP tokens will also be earned by staking the $PEP token, which will be used for participation in protocol governance proposals. Once again, the longer a user stakes the $PEP token, the more $vePEP they will receive, giving them more power to participate in voting.

The formula for calculating $vePEP rewards is the amount of $PEP staked multiplied by the staking duration. This ensures long-term believers in the protocol's future have a larger say in any governance proposals, which seems pretty fair to me!

$oPEP tokens can be converted into $PEP tokens at a market discount. This means more $PEP tokens to stake, compounding the stake weight, resulting in more $oPEP tokens and more protocol ownership as a reward for using the platform.

It doesn’t take a genius to see how this flywheel spins and ensures that major contributors to the platform are increasingly rewarded over time. Because the conversion of $oPEP to $PEP can only be done using $USDC, the PepperDEX platform can use this redemption mechanism to build out their treasury simultaneously, creating a win-win situation for all.

Staking the $PEP token allows users to level up through the different tiers, each bringing a greater reward in $oPEP. These tiers can be seen in the table below.

The discount on redeeming $oPEP for $PEP is also based on a tiered system that correlates to the time the underlying staked $PEP is locked up. A user who decides to lock their $PEP for the maximum three-year period would receive an impressive 85% discount on future $oPEP to $PEP conversion.

Any redemption on earnt $oPEP will need to be done within a 14-day period, or the $oPEP will be burnt, and the correlating $PEP will be made available for future incentives.

The market price of the $PEP token itself is determined based on a 14-day TWAP over the duration of the epoch, which occurs biweekly, beginning and ending every other Friday.

In the following table, we can see the distribution of fees that the platform will adhere to.

The $PEP token distribution can be seen below.

Another interesting factor of PepperDEX’s tokenomics and revenue model is the strong emphasis on accumulating the $HXRO token. This adds yet another source of income for $PEP stakers in the form of 100% share in staked $HXRO revenue. At the same time, this helps the HXRO Network grow.

Not only this, but by accumulating the $HXRO token, PepperDEX will have a stronger position in HXRO Network governance proposals allowing it to push forward proposals that will be of the most benefit to the platform itself. Bit of alpha there if you can see the forest and not just the trees!

LST and Spread Trading

Liquid staking token perpetuals are one of the spiciest features to be found on the PepperDEX platform. The fact that these tokens represent staked Solana, meaning they have a strong correlation to $SOL, lower volatility, and therefore a lower portfolio risk factor, allows for much lower margin requirements than other traditional perpetual pairs.

Having the ability to trade these LSD pairs will open the door to many interesting arbitrage strategies that can all be implemented in the previously mentioned trading vaults and add to a user's ability to become a crypto fund manager extraordinaire.

The opportunity for some pretty impressive spread trading is also made possible thanks to the HXRO Network’s Dexterity Central Limit Order Book (CLOB). The CLOB allows the trade of separate markets quoted on the spread between the two traded assets.

This creates the chance to trade, for example, the $SOL perp and any other LST perp, plus a $SOL LST spread simultaneously but in separate order books. This is yet again another novel feature that other perps platforms have never been able to offer due to problems created by capital efficiency.

All these hot features are certainly enough to get any degen excited, but the question remains… How do I get involved in all the action?

Closed Beta Testing

PepperDEX is currently running a closed beta testing round that allows top contributors to check out the platform and sling bets and be rewarded for doing so. Within this closed beta will be many opportunities to get your hands on some precious $oPEP tokens that will allow you to get the flywheel spinning once the official launch and TGE takes place.

Closed beta rewards are distributed through trading volume incentives, platform feedback incentives, and weekly lotteries. This means that even if you are not a sizable trader, you can still earn your fair share of rewards by finding bugs and providing solid feedback on potential platform improvements.

When looking closer at the reward streams, it is clear that the volume of incentives really stands out. In the first epoch alone, there are 1 million $oPEP tokens up for grabs which represents 1% of total supply; this would be $100k worth of $oPEP at a $10 million FDV. Seems like a great reason to get involved and trade away!

To solidify your place in the closed beta testing, you’ll need to earn the highest rank in the PepperDEX community by becoming the spiciest pepper of them all, the Carolina Reaper. This can be achieved via the official PepperDEX Discord channel, so jump in there and check it all out!

Final thoughts

The sheer amount of new and novel trading features that PepperDEX is bringing to the table makes it a project worth your attention. It could very well shape the way that other perps platforms build out products in the future. Anyone who has spent time trying to chase beta plays on first movers knows how this normally works out in the crypto space.

Once the closed beta testing round has been completed, feedback has been considered, and changes made, the rollout of the open beta testing will take place and allow everyone to get a taste of the action. It will be around this same time that the token generation event goes down, and the aforementioned flywheel will be put into motion.

The obscene amount of degeneracy seen so far on the Solana chain has been unmatched. This thirst for profits will surely make the upcoming V1 launch of what may become the premier perps trading platform in the Solana ecosystem one to keep a very close eye on.

For a full overview of the PepperDEX platform and everything they are cooking up, check out the documentation here.

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