Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
Looping is commonly known as the OG way of levering up on-chain. Whenever DeFi traders loop up on Aave or other borrowing/vault markets like Maker, the net result is creating a perp position. Now there is a new way to go long or short on-chain with a product called cPerps by Contango, built on top of Aave, on Arbitrum and Optimism.
The mechanism used under the hood to build cPerps is similar to the automated looping strategies of Instadapp and DefiSaver, aka recursive lending, via flash loans. There are a number of benefits to this cPerps (Contango Perps) design.
- Contango does not have liquidity providers (LPs) because cPerps will leverage the +$20B liquidity of spot and variable money markets, currently limited to the $258M of liquidity on Aave v3 on Arbitrum and $107M on Optimism.
- The funding rate of ETH/USD on Contango is 20x less volatile than dYdX.
- Traders can compare APRs (the equivalent of funding rates) across chains before opening a position (ie Aave V3 on Arbitrum vs Optimism).
- Unlike other perps AMM designs, trader profits are not offset by LP losses. Contango never takes the other side of cPerps trades.
- Contango builds across multiple chains, on top of proven DeFi giants, like Uniswap, Aave, Compound, Maker.
With Contango, perps traders (aka loopers) will find a familiar professional trading interface to open, modify, monitor and close their leveraged position, including