A perpetual contract is an innovative futures contract. Unlike traditional futures contracts, perpetual contracts have no fixed maturity delivery date, so they can hold the position until the user chooses to close the position. The biggest characteristic of this contract is that there is no delivery date, so it is called a perpetual contract (Perpetual Contract). The settlement period of the perpetual contract is once every 8 hours, usually at 00:00,08:00 and 16:00 (UTC time).
JuCoin There are two perpetual contract trading modes provided:
- U standard contract (forward contract): settled with USDT.
- Currency standard contract (reverse contract): settled in cryptocurrency.
Characteristics and advantages of the U-standard contract
Characteristics of the U-standard contract:
- Settlement with USDT: The settlement unit of the U-standard contract is USDT. USDT is used as a stablecoin anchored with the US dollar, which has small volatility and is easy for investors to calculate returns.
- The pricing rules are clear: each U-based contract specifies the delivery amount of the underlying assets of the contract, which is called the "contract unit". For example, one contract corresponds to the trading volume of one underlying asset (such as BTC or ETH).
Advantages of the U-standard contract:
- Intuitive return calculation: Because the USDT is worth nearly $1, with 500 USDT profits, investors can easily calculate a return of about $500.
- Flexible trading: U-standard contracts use the USDT as the settlement currency, which can avoid frequent currency exchange and reduce transaction costs. Different futures contracts (such as BTC, ETH, etc.) can be settled with USDT, which improves the convenience of trading.
- Reduce the risk of price fluctuation: U standard contracts are settled with stablecoin USDT, which avoids the risk of drastic fluctuations possibly caused by traditional currency standard contracts and enables investors to better control the risk.
The characteristics and advantages of the currency standard contract
Characteristics of a currency-standard contract:
- Settlement with the underlying cryptocurrency: currency standard contracts use cryptocurrencies (such as BTC, ETH, etc.) as the settlement unit, and investors do not need to hold a stablecoin (such as USDT) as margin.
- Derivatives form: A currency-based perpetual contract is a digital asset derivative product, where investors can judge the rise and fall of the market price and choose to make long or short contracts.
- Capital expense mechanism: Since the perpetual contract has no maturity date, its price closely follows the spot market price of the underlying asset (such as BTC, ETH, etc.), while the capital expense mechanism (Funding Rate) plays a role in balancing the difference between the contract and the spot price. The profit and loss shall be settled every 8 hours, and the realized and unrealized profit and loss shall be transferred to the users account balance.
Advantages of a currency-standard contract:
- Suitable for miners and holders: Coin-based contracts are settled based on the underlying cryptocurrency, suitable for miners or long-term investors who hold large digital assets, as their profits and losses are settled directly in the cryptocurrency, which facilitates the long-term accumulation of assets.
- No need to convert stablecoin: investors trade with their own underlying cryptocurrency (such as BTC) in currency standard contracts, without the need to buy additional stablecoin as margin, reducing exchange costs.
The difference between a currency-based perpetuity contract and a U-standard perpetuity contract:
| characteristic | Currency-based perpetuity contract | A U-standard perpetuity contract |
| Price pricing / settlement currency | Cryptocurrency (such as BTC, ETH, etc.) | Stablecoin (such as USDT) |
| bail | Cryptocurrencies (such as BTC, ETH) are used as margin | USDT as margin |
| undulatory property | Volatility, influenced by the price of cryptocurrencies | Less volatile and affected by the USDT stablecoin |
| suitable object | Suitable for users who want to calculate and settle in the currency standard | Suitable for users who want to stablecoin pricing and settlement |
| Funding Rate (Funding Rate) | There may be volatility, dependent on the market and the contract supply and demand relationship | Similarly, it is usually settled in 8 hours |
sum up
- U-standard contract: USDT, suitable for investors who want to reduce the risk of market volatility and trade in stablecoin. Its biggest advantage is that it simplifies the return calculation and improves the flexibility in trading.
- Currency standard contract: settled in cryptocurrencies (such as BTC, ETH, etc.), suitable for investors who want to hold digital assets for a long time and conduct long-term capital accumulation. As it closely follows the spot market prices, it is particularly suitable for miners or holders of large digital assets.