Perpetual Pools: The Future of Derivatives! Bankless edition

Authored by Ryan Sean Adams and David Hoffman from BanklessPerpetual Pools: The Future of Derivatives! Bankless edition

David and I (RSA) decided to join Mycelium as long-term Advisors last September and have been working with the team since then. We believe Mycelium represents the future of derivatives. Not just derivatives for DeFi. Derivatives for everything.

This is why.

Crypto is chaotic. Things change all the time, sometimes violently so! Even Bitcoin, the industry's largest and most liquid asset, is prone to rapid 10% moves, and the magnitude of this volatility increases as you move down the risk curve of crypto assets.

Volatility is necessary to make crypto-systems adaptive and anti-fragile, but it also makes life difficult for those who are seeking long-term stability. The metaverse won’t be ready for the masses until every asset and every participant has access to stability.

Stability is how we onboard the world to the Metaverse.

We also can’t forget about the physical world. While our financial primitives can make crypto more stable, the ‘real’ world is becoming more chaotic. Silicon Valley tech companies swinging elections. Climate change uprooting populations. Experimental monetary policies. Political instability. Employment uncertainty.

The world needs stability more than ever.

What if crypto can export stability to the real world?

Financial products like derivatives have helped humanity achieve stability for centuries. Futures and options contracts let traders hedge their risk to commodities markets everywhere and encourage businesses to think long term. But the coverage of these derivatives hasn’t reached the long-tail of assets–yet.

Risk management has been the luxury of the few.

We can bring it to the many.

With DeFi, we can collapse the cost of financial contracts. Access to derivatives can be easy, cheap, and plentiful even for the long-tail of assets both inside the metaverse and in real life. This means free markets and low cost risk management products for all.

This is Mycelium's vision of the future.

Wherever there is demand for stability, Mycelium is there.

What is Mycelium?

Mycelium is a meta-protocol for derivatives. It gives unhindered access to financial derivatives by making them deployable as new tokens.

Go 3x Long on BTC by minting a token.

Go 3x Short on the EUR by minting a token.

Using Mycelium's factory contracts, any price or data feed can be turned into an option, swap, or future product. Plug in the oracle → generate a derivative.

Mycelium is permissionless

This is a major improvement on existing derivative designs. Anyone can create a derivative on Mycelium. To compare it to DeFi lending protocols, Mycelium is more like Rari than like Compound.

To illustrate: Rari is a superset of Compound. Compound has only one instance of its borrowing & lending application, and services just 7 assets for approved collateral. Rari, on the other hand, allows for the permissionless deployment of ‘fuse pools’. Fuse pools are also lending markets, but the deployer of a pool can input any parameters for the supplied & borrowed assets and interest rates. You could reconstruct Compound’s lending market using a Rari Fuse pool and it’d be one of the infinite parameter sets that are possible.

The Uniswap of derivatives

One of Uniswap’s keys to success was enabling the long-tail of assets to access immediate, day-1 liquidity. Where previously, tokens needed to be approved by centralized exchange operators, Uniswap's factory contracts enabled anyone to exchange any token.

Mycelium incorporates a similar design pattern as described above. Where Rari is a superset of Compound, Mycelium uses factory contracts to become a superset of any derivative contract. You could build a perpetual swaps exchange like dYdX on Mycelium. You could build an options protocol like Opyn on Mycelium.

Factory contracts offer permissionless deployment for perpetual markets of any asset. If there is any demand for a derivatives market, it will be created using Mycelium.

Democratized stability—that is what DeFi has unlocked for the world. Open and free financial markets for any asset, built by any user. As the number of assets in the metaverse goes from thousands to millions, to billions, removing all gatekeeping on the deployment of new markets becomes crucial. This is how finance scales to meet the demands of the metaverse.

All this is made possible by factory contracts. Let’s discuss those next.

Factory contract magic

Factory contracts are the primary product of Mycelium. They contain standardized templates for derivatives markets. A user can input custom parameters for their market and deploy it on-chain straight from the factory.

As with Uniswap’s factory contracts, Mycelium's contracts are permissionless and are why anyone can spin up any market around any asset. Rather than governing over which individual markets should be approved, Mycelium governs over which factory contracts to approve. Changes to existing factory contracts, or adding new ones, is governed by Mycelium, to ensure the maximum security and quality of the market templates people can deploy from.

What about oracle security?

Even though Mycelium makes it possible to create a market for any oracle supplied data feed, those contracts may not be safe. It’s previously been difficult to review oracle performance and security, so price manipulation has caused big problems for DeFi.

Mycelium has also introduced its first killer app which is about to be enhanced with the launch of v2.

Perpetual Pools are the first killer app!

Mycelium is the first DeFi protocol to introduce tokenized Perpetual Pools. Perpetual Pools are a simple way to generate leveraged ERC20’s–these are leveraged tokens that don't expire and can't be liquidated.

Add a 3x long ETH token to your wallet...and hold.

Tokenization means a leveraged position can be used as a money lego in DeFi. This gives perpetual pool users more freedom and optionality with their capital, and also empowers other builders to create products on top of tokenized perpetual pools.

More on Mycelium's Perpetual Pools here.

Upcoming Mycelium Products

  • Perp Swaps – on-chain swaps market with permissionless deployment of new markets.
  • Options – on-chain options market to remove downside risk for digital assets. Locking up an in-game asset to fight an epic weeks long battle; manage downside price risks to continue to have a good time
  • Interest Rates Swaps – lock in interest rates across lending protocols to become even more bankless.
  • Futures – cash and physically deliverable markets for producers to manage risk of on-chain and off-chain assets.
  • Structured Products - earn yield by executing professional trading strategies through easy to access vaults.

How might people use Mycelium?

Add utility to your tokens

Are you holding a bag of governance tokens and looking to add utility to your holdings? Use your ERC20’s to take a position on the performance of any other token, or even non-crypto assets.

Bet on Cryptopunks without buying one

Want a cryptopunk, but can’t afford one? Lock in your savings to a market that [tracks the value of cryptopunks overtime so cryptopunk value doesn’t run away from you.

These are just a few ways people will use Mycelium. We expect the most interesting ways Mycelium will be used in the future haven’t yet been imagined.

Derisk gas prices

Oracle Networks (like Chainlink) providing data feeds to smart contracts require ETH to pay gas fees to facilitate the DeFi economy. Hedge gas price risk with Mycelium.

Go long like an ETH Maxi

Do you believe that Ethereum will maintain dominance and alt L1’s won't survive the modular blockchain thesis? If you want to hold a long term leveraged exposure with no liquidation risk to maximize your ETH Maxi views, Mycelium is there.

Hedge Real Estate markets

Tokenized real estate is not going to be a thing for a really long time. It’s far easier to create synthetic markets using price oracles to go:

  • Long Manhattan, short Brooklyn.
  • Long 2 bedroom apartments, short studios.
  • Long west coast, short east coast.

Metaverse taxi medallions

Did you spend years saving up enough money to buy a super powerful in-game item, that now generates revenue for yourself in the metaverse? With Mycelium, you could hedge your risk of that item losing value over time. Let your in-game asset be productive, while ensuring the time it took to get the item isn’t wasted by the asset losing value.

How big is the opportunity?

Absolutely massive. The derivatives market is estimated at over $1 quadrillion. Some analysts suggest it is at least 10 times the size of global GDP.

This will migrate to DeFi in time.

But first DeFi will capture the fast growing Metaverse derivatives market.

Metaverse potential is so huge that preliminary estimates are being given by some of the largest players in traditional finance. Morgan Stanley and Goldman Sachs forecast a 10-15% expansion in digital TAM as the metaverse develops over the next 20 years, pinning the metaverse opportunity in the realm of $8 trillion. We expect derivatives assets to be valued at least 10 times the size of total metaverse assets.

Stabilize the Metaverse, stabilize the world!

Mycelium's mission is to provide robust and safe financial contracts to all of the world’s commodities.

Wherever there is a demand for stability, Mycelium is there.

The metaverse is going to bring about a Cambrian explosion in the number of market-relevant commodities. Not only that, but the commodities that emerge from the metaverse are likely going to be orders of magnitude more chaotic than the commodities found in real-world markets.

The metaverse is the perfect proving-ground for Mycelium to sharpen and harden its contracts. The extreme volatility of many low liquidity digital assets is the perfect stress-test needed to create robust markets for commodities of global real-world significance.

First, Mycelium stabilizes the metaverse.

Then the world.

All aboard the Mycelium rocket. 🚀

  • RSA and David

Note: This blog post was originally posted by Tracer DAO. The DAO voted to transition to Mycelium in August 2021. As a result, we have updated all of our documentation and content including this post to reflect the change to Mycelium.

For more information about Mycelium visit:



This blog post was originally posted by Tracer DAO.

The DAO voted to transition to Mycelium in August 2022.
As a result, we have updated all of our documentation and content including this post to reflect the change to Mycelium.

Posted on Tracer
Mycelium Docs
The home of Mycelium’s documentation


All of Mycelium’s products are hosted on Ethereum Layer 2, Arbitrum. Users will need to bridge their assets to Arbitrum in order to trade Perpetual Swaps, Perpetual Pools, or Lend via MYC Lending.

Arbitrum is a secure, low-cost scaling solution that ensures our users can access low-cost derivatives in a safe, simple, and speedy environment.

If you need assistance bridging your assets, our team has prepared a guide here.

Mycelium Perpetual Swaps is a decentralised derivative platform, which allows users to open leveraged long and/or short positions on crypto-assets.

Perpetual Swaps are similar to a Future where traders can take a position based on the future price of an asset, the key difference being Perpetual Swaps mechanisms allows traders to take this position at an unspecified point in the future, making it ‘perpetual’ or unable to expire. Mycelium Perpetual Swaps allows traders to take a position on digital assets such as Bitcoin and Ethereum.

Mycelium Perpetual Swaps doesn’t use an order book model for leveraged trading. Rather, all traders trade against the Mycelium Liquidity Pool (MLP). The MLP is a basket of blue-chip assets and stablecoins pooled together (ETH, BTC, LINK, UNI, BAL, CRV, FXS, FRAX, USDT, DAI, USDC) which acts as a global AMM for leveraged trading. Liquidity providers can deposit any whitelisted asset into the MLP pool in return for MLP tokens, which represent the LPs share in the diversified liquidity pool. By acting as a universal counterparty (AMM) to traders, meaning that it agrees to be the counterparty to any long or short trade at the given price, for an asset it holds, until it runs out of said asset.

In exchange for providing liquidity to the Mycelium Liquidity Pool (MLP), liquidity providers earn rewards. Primarily, MLP holders earn 70% of fees generated on the platform, which is distributed fortnightly in ETH and or esMYC.

  • ETH Rewards: The MLP pool earns 70% of fees generated from swaps and leveraged trading. These fees are converted to ETH, before being continuously distributed to MLP stakers.
  • Escrowed MYC Rewards: These are rewards in the form of a token which has the right to vest into $MYC when staked in the esMYC vesting vault.

The trading fees that make up this revenue are entry/exit fees, borrowing fees, and or a spot trading fees. For a full overview of the trading fees, visit this page.

Additionally, LPs earn rewards from a small bid/ask spread that is charged on long-tail assets (there is no spread on BTC or ETH). These rewards accrue as MLP, shown on our front-end as Market Making APR. These rewards can be redeemed at any time, in any asset form within the MLP basket of assets.

Yes. Perpetual Pools are a marketplace for leveraged tokens, while perpetual swaps simulate spot trading with margin. They are both derivatives, but Perpetual Pool tokens act most like a leveraged ETF, where positions are transferable.

Mycelium Staking is a program established by Mycelium to give utility to our governance token. MYC holders can stake their $MYC to earn ETH rewards. MYC Stakers effectively enter a loan agreement with the Mycelium Treasury to lend their MYC. The Loan Cycles occur fortnightly, meaning deposits and withdrawals are processed at the beginning/end of each cycle. Stakers can request withdrawals throughout the cycle, noting the withdrawal will be processed and distributed at the end of the cycle.

Don’t worry, you are earning rewards! The rewards only show at the end of the 14 day loan cycle.

The way the Perpetual Pool market calculates how much money to move from the losers to the winners prevents the loser from ever losing 100% of their money. The pool does this by, in extreme scenarios, sacrificing some of the gains of the winners in order to protect the losers from losing everything. This is why we say Perpetual Pool positions cannot be liquidated.

However; this does not mean you cannot lose money by trading with Perpetual Pools.

In August 2022, TracerDAO voted to transition and rebrand to core service provider Mycelium, and $MYC as the native token. All TCR holders are entitled to change their token 1:1 to MYC via this site:

The majority of TCR holders have migrated to MYC, but the site will remain active for approx. 3 years to ensure all TCR holders have the opportunity to migrate.

When a trader enters a short position, the liquidity pool will fully collateralise the position with stablecoins. For short positions, the liquidity pool is essentially a market maker that takes the opposite side of the position, increasing the long exposure of the pool. If the price of the base asset depreciates, the trader receives stablecoins from the liquidity pool. If the price of the base asset appreciates, the liquidity pool receives a portion of the user’s margin as compensation.

At close, the trader will only have to return the USD value of the initial notional value to the liquidity pool. Thus, the trader is effectively entitled to the inverse of the future “PnL” (Profit and Loss) of an asset.

With Perpetual Pools v2, users can deposit any sort of collateral for maximal optionality. Additionally, there is no minimum-commit size.

On Mycelium Perpetual Swaps traders can access up to 30x Leverage. On Mycelium Perpetual Pools traders can access up to 10x Leverage.

Swaps logo

More Leverage. Less Overhead