Introducing The Deribit Perpetual

Deribit perpetual betaToday Deribit launched a blazing fast version of the extremely popular Perpetual Swap. We are launching this product in Beta, but it is fully tradable. We expect to come out of Beta and add some additional features soon.

The Perpetual is responsible for between 40 and 50 percent of all global trading in Bitcoin. It allows traders to take positions without any bitcoin actually changing any hands. It features low fees and traders can take very high levels of leverage. This means traders can take very large positions with only a small capital outlay.

A Perpetual is a complex product for an exchange to implement. Up till now the only exchange offering it was BitMEX. Thanks to the Perpetual, this exchange is currently the dominant one globally.

Deribit now offers a version that has a number of large advantages over the conventional product.

Blazing fast execution

Deribit already had one of the most advanced platforms in the market. Over the last half year Deribit’s developers worked flat out to make sure that our order execution speed will remain blazing fast even under extremely high volumes. This means Deribit can handle thousands of order requests per second. Even then, order delays wil be at most a couple of milliseconds per order.

The Deribit Perpetual executes orders 20x to 40x faster than the conventional Perpetual on average, and in fast moving markets the difference can be significantly larger. Fast execution can have a significant positive effect on profits, especially in the case of large price moves. It also provides our customers with comfort that there are no preferred parties that are allowed to front run the market.

Continuous pricing

In order to keep its price close to the Bitcoin price, a Perpetual uses so called ‘funding payments’ that occur between the buyers and sellers of the contract. The conventional Perpetual transfers the funding payment every 8 hours and this can cause bumps in the contract price around the moment of payment. The Deribit Perpetual makes tiny payments on a microsecond basis. This completely avoids price disturbances and will serve to keep the Perpetual price very close to the Bitcoin level.

Fair Liquidations

Perpetuals and related products like futures enable traders to take large ‘leveraged’ positions on the basis of only a very limited amount of capital. The capital backing a leveraged trade is called ‘margin’. At the moment Deribit offers 50x leverage so with 1 Bitcoin of margin you can take a 50 Bitcoin position. If the price moves against a leveraged position, eventually the exchange has to close out (liquidate) the position in the market to ensure there is always enough capital to cover the potential losses of the trade.

A number of high profile liquidation related incidents at other exchanges have resulted in large losses for traders. Deribit has designed a fairer liquidation mechanism that executes liquidations on an incremental basis while continuously trying to bring the position back into compliance. If a position is eventually closed out Deribit customers retain any capital that is left over instead of automatically losing their entire margin.

In most cases Deribit is able to stop the entire position from being liquidated or return some of the margin to the customer. Deribit has never had to ‘socialise’ liquidation losses by recouping them from other traders.

Another important advantage of Deribit over other exchanges is that they allow unrealized profits to be used as capital. This means that if a position is profitable, the unrealised profits can be used immediately as capital to open new positions, without waiting for a settlement.

Perpetual Improvement!

The Deribit Perpetual will be in beta initially. We expect it to come out of beta soon with some interesting new features. Other crypto currencies like ETH and BCH will follow pretty soon.

If you have any questions don’t hesitate to contact us on support@deribit.com or join our conversation on twitter or Telegram

For a more technical explanation about the Deribit Perpetual, see our documentation

About Deribit

Deribit was founded by John Jansen, an early crypto investor with a background in options trading on the Amsterdam Options Exchange. In 2014, after a period trading cryptos on different exchanges, he developed a vision of an exchange where it would be possible to trade Futures, Options and other ‘derivative’ products in a secure – high performance – environment. John then proceeded to team up with a group of technical experts to turn this vision into a reality.

After two years of intensive development Deribit went live on June of 2016. Currently Deribit is a top 3 crypto futures exchange and the number one crypto options exchanges globally. We run our business from our office in Amsterdam (The Netherlands) and our development team is located in Poland.

About Perpetuals

A Perpetual on (for example) Bitcoin is a product that aims to closely track the Bitcoin price. It is based on the underlying price of Bitcoin without any real Bitcoins being involved. This makes the product a so called ‘derivative’ product. This means that traders enter into ‘contracts’ with the exchange instead of doing an actual Bitcoin transaction.

In these contracts Perpetual traders pay or receive the difference between the price when they entered into the position and the price when they unwind it. So if the price level of the Perpetual was USD 7500 when someone bought a position and USD 8000 when they sold it the payout is USD 500 worth of Bitcoin for every Bitcoin of exposure.

Traders can buy contracts – called long positions – that benefit from a rise in the price. Conversely, traders can sell contracts – called short positions – that benefit from a price decline. There are always as many long as short positions outstanding, so the exchange has no position itself.

The product is makes it very easy to quickly trade in and out of both long and short positions and features low trading fees. Perpetuals also allow for high leverage. This means that for every single Dollar of collateral in the account a trader can take up to 100 Dollar of Bitcoin exposure.

The product is related to the futures contract but unlike a futures contract a Perpetual does not have a finite term and that is where its name comes from. The price of the Perpetual is kept close to the Bitcoin price by funding payments between the longs and the shorts.

If the Perpetual trades higher than the Index, traders that are long the perpetual need to make funding payments to the shorts. This will make the product less attractive to longs and more attractive to shorts and this will serve to push the Perpetual price back down to the level of the Index. If the Perpetual trades lower than the index the shorts will have to pay the longs.

Deribit Introduces Sub Accounts

After our big upgrade last Thursday we promised you a lot of new features and products in the coming period. Today we would like to present the first new feature: Sub Accounts.

Sub accounts allow for the separation of a portion of a trading account, both administratively and from a margining perspective. Every account can generate a maximum of 4 sub accounts that allow for the implementation of managed accounts and dedicated margin for certain trades or strategies.

Managed Accounts Possible

The sub accounts allow for the creation of separate login data but the sub account login does not give any right to withdraw funds. This means a manager or adviser could get access to a sub account and execute trades on behalf of the client without being able to withdraw funds or access the main account.

Isolated Margining of Trades and Strategies

Normally all positions in a Deribit account are cross-margined, this means that there is one pool of available margin for all positions and one sufficiently large liquidation could have a big impact. Sub accounts are individually margined so they can be used to allocate a certain amount of margin to a given trade or strategy.

Say for example that a trader wants to put on a risky trade or a new bot-based strategy; both of them should not impact the total amount of margin if they go wrong. These risky trades or strategies could be assigned to separate sub-accounts protecting the margin in the rest of the account.

Users can instantly transfer funds between the main account and sub accounts. This means margin can be increased and decreased at a moment’s notice.

Here is a video from our co-founder Marius made in order to explain this new functionality:

Stay tuned for even more upcoming products and features that the market has been asking for.

Deribit Finishes Massive Infrastructure Upgrade

For more than half a year our development team has been working to drastically change the architecture of our trading platform. The goal was create a platform that is really built to scale, potentially to millions of users. This project was the reason our customers have been waiting for the introduction of new trading products for some time. Yesterday we have executed a massive upgrade, completing our work on scalability. After this upgrade we will start adding new products and features at high speed.
Like with any large upgrade it is possible that the system encounters some problems over the next few days. If this happens we want you to know that we will try our best to ensure any degraded service will be kept to a minimum. If you encounter any issues, please don’t hesitate to contact support.

Background of the upgrade

Deribit used to have quite a traditional architecture where all activities related to a trading book were dealt with on the same server. As we have seen with a number of other exchanges, not properly taking scalability into account can lead to a lot of performance problems down the line. As Deribit intends to drastically increase its scale and does not want to make any concession to its blazing fast execution we needed to solve this problem first.
After this upgrade our exchange runs on a large cluster of dedicated servers, where the matching engines are running on servers isolated from the rest of the internet. The matching engine servers do all the matching and order handling for the trading books. They continuously send out order state updates to the webservers to which all users connect. The webservers do all the work needed to inform the customers about the status of their orders.

The new architecture is extremely flexible. For each matching engine server we can quickly launch an almost unlimited amount of webservers to which traders can connect. At the same time the webservers are kept completely in the loop of the state of the matching engine. This happens in such a way that if a problem would appear on the matching engine server, a web server can easily be converted to become a matching engine server.

This means that we do not even need specific backup servers anymore, as all our webservers are effectively stand-by replacements. Thanks to this new setup, we can now handle a virtually unlimited amount of messages and requests. The matching engine is now also extremely efficient and only has to deal with trade matching, and adding or removing orders from the order books.

Now our platform is ready to deal with any volume, stay tuned because over the next few days we intend to release a number of products and features that the market has been loudly asking for.