If you are new to $PAPER Here is probably the easiest way to understand what Papertrade is: The project was created by Jez and Blurr, and it allows users to trade BTC and ETH with up to 1,000x leverage Yes, 1,000x But what makes Papertrade different from other perpetual exchanges is how the entire system works: - there’s no traditional order book - you don’t have funding payments - forget about conventional slippage A liquidity pool acting as your counterparty $PAPER rewards when you lose money USDC rewards for PAPER stakers Let’s start with the trading mechanism. You deposit 1,000 USDC into Papertrade. With 1,000x leverage, you could open a position worth $1,000,000. A 0.1% movement in your favor would generate approximately $1,000 in gross unrealized profit. But a 0.1% movement against you could wipe out your entire margin. And unlike traditional perpetual exchanges, you’re not trading against another trader. You’re trading directly against Papertrade’s liquidity pool. This pool is called Martingaler LP. The easiest way to understand it is: Traders lose money = LP gains money Traders make money = LP pays their profits Instead, the system is designed to grow its pool through trading losses. But what happens if too many traders win? Their profits can enter a payment queue until the pool has enough capital to cover them. Now let’s talk about $PAPER. Papertrade literally rewards you for losing money. Every time a trader closes a position at a loss or gets liquidated, the protocol can mint PAPER based on the eligible loss. Instead of distributing tokens to investors, Papertrade distributes them to losing traders. During the initial emission phase, while the recorded LP is below $2M: $1 of eligible losses = 100 PAPER As the pool grows beyond that threshold, the emission rate decreases. So early losing traders receive more PAPER per dollar lost than later participants. And this creates a pretty unusual incentive. You’re effectively farming a token by losing money. Of course, there’s no guarantee that the PAPER you receive will ever compensate for those losses. Especially considering that PAPER was initially non-transferable. But the token has another function. You can stake PAPER to receive USDC rewards. Papertrade advertises trading without conventional slippage. At 1,000x leverage, even a small delay can become a serious problem. Imagine opening a position and watching your unrealized profit reach $10,000. You press close. But the transaction doesn’t execute immediately. The market reverses while you’re waiting. And by the time the transaction is processed, your position has already been liquidated. That $10,000 was never realized. Papertrade calculates its execution price using Hyperliquid’s best bid and ask: Execution price = (Best Bid + Best Ask) / 2 This means the protocol depends on Hyperliquid’s order book to determine the value of its synthetic positions. Personally, I think Papertrade is one of the strangest experiments we’ve seen in DeFi recently. The entire model depends on trading activity, the solvency of the pool and the economic value of PAPER. And with 1,000x leverage, the difference between making money and losing everything can be a movement of just 0.1%. Interesting to see whether this model can survive beyond its initial wave of speculation. (NFA and DYOR always)