Proposal: Unlocking Perp Tokens to Sunset V1 users


We ask for the community to allocate 27.6m PERP to be used to fully compensate all users who lost funds in Perp V1.


In light of sunsetting Perp V1, the team has brought up five options for the community to choose from:

  • Proposal 1: Distribute remaining funds proportionally according to users’ remaining margin and unrealised PnL at the time of V1 being paused
  • Proposal 2: Distribute remaining funds and first cover 99% of our users starting from lowest margin and PnL up (this covers most retail users; excludes negative PnL). The remaining users then receive pro rata according to their margin and unrealised PnL.
  • Proposal 3: Distribute remaining funds to small position holders first ($100,000 unrealised PnL and margin or less; excludes negative PnL), and any remainder to larger position holders, proportionally according to users’ remaining margin and unrealised PnL.
  • Proposal 4: We will sort wallets from small to large according to the position size and then close positions sequentially by 1%. Once the largest account has had its 1% closed then we still start again at the bottom of the list. This simulates actual AMM function in a scenario where all traders gradually reduce their positions.
  • Community proposals : Fully evaluate and vote on community proposals in a separate vote, in favor of the four options presented by the team (above).

Each option distributes the funds asymmetrically. One option would give more to smaller margin accounts, the other to larger traders and some a combination of both. Naturally, this has brought a lot of questions around fairness and even disharmony within the community.

A user commented in the Community Forum that ‘The Perp V1 litepaper clearly states: “Should the Insurance Fund be depleted, the Insurance Fund will trigger the Perpetual Protocol smart contract to mint new PERP and subsequently sell them at market to ensure the system’s solvency.”’ where a Perp team member responded with “This minting mechanism was abandoned in favor of using Perpetual DAO funds instead. Any mint would be subject to a vote. We can add this option to the vote if there is support for it.”

Hence, we are calling for the community to mint 27.6m PERP to refund all of the remaining margin and unrealised PNL of each V1 trader. We propose for the PERP to start vesting linearly over 12 months after a 4 month lockup.

At the current time of writing, PERP is trading at $1.41 so 27.6m PERP is worth roughly $38.9m, which is the total value of remaining margin and unrealised PNL that is enough to compensate and make each user whole. (The value of all user obligations is $44.6m, and the current proposals offer $5.7m in compensation, so $38.9m is the remaining outstanding obligation.)


  • Perp V1 is the first iteration of Perpetual Protocol. Users of V1 are early supporters which reveals that there is long term alignment in the growth of the platform which is why it is crucial to come up with a solution to this shortfall that benefits loyal users. This proposal paves a clear path for that.
  • Protecting the safety of user funds should take priority over anything else. Failure to do so reduces the trust and predictability in the Perp team. The team writes ‘no funds in Perp V2 are presently at risk,’ but this current situation is a reflection on how the team would react in similar situations in the future.

Risks & Mitations

An understandable concern to this proposal would be that offering out PERP tokens as a form of compensation can be a disservice to current PERP holders as tokens distributed may be instantly sold off once received.

This is why we propose a long vesting schedule that is designed to minimize selling impact and optimize for positive behavior that is inline with the community.

2.3m tokens will be released into circulation each month which is only 3.3% of the circulating supply. A previous proposal published by a PERP team member called for the community to mint 13m PERP to be used for strategic partnerships (titled “Unlocking perp Tokens for Growth”). A 4m USDC weekly cap was set on the mint to ensure limited selling pressure. With our current model, less than 4m USDC is released into circulation monthly.


All in all, the safety of users’ funds is at the forefront of this proposal. In order to maintain goodwill of both the platform’s early users, current supporters and the team, we will ensure to work closely with the relevant Perp core members in setting up smart contracts for the token vesting and maintaining transparency by announcing any developments on key platforms (i.e. Twitter, Discord, etc).

Relevant Link

  1. Snapshot
  2. Proposal: Unlocking Perp Tokens for Growth

This would kill perpetual protocol. Compensating 25 large traders who were earning funding and being slow enough to leave early, at the expense of perp holders is unacceptable.

agree with this proposal! users should be refunded, doing anything else would be unfair and a big reputation hit for Perp


I think proposal is good. Team said that there were no plans to close out Perp V1, because it is “decentralized” smart contract on blockchain. Team said they would mint PERP if this happened. Then when vAMM is exposed, team likes to pretend they didn’t say those things. V1 traders are earliest users, and fairest solution involves minting coins for them. We like the coin



PERP only needs to allocate an additional $2.5MM of PERP to deliver what Option 4 offered to the users who didn’t get it in the end of this latest vote result.

That’s not perfect, but would be good enough for me.

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To strike a deal with large traders and liquidity providers (whales), and recognize this category of users is important to the future of Perpetual protocol.

Negotiate with whales on a combination of 1) haircut; and 2) lockups for minted Perp tokens. For example a 60% haircut; 3 year lockup 2 year linear release.

Option 2
Create a compensation fund which accumulates a shares of fees/insurance pool of V2 until a target compensation amount is reached. This can be a multi-year forecasted accumulation. It will also incentivize the whales to make Perp v2 a success as more trading will make accumulation period shorter.

For Option 1 and 2, there should be some combination of parameters that are agreeable, versus the current default of giving them nothing. If no deal is done, this can result in poor signaling for future whales, and result in them being hesitant to use the platform.

Let’s be giving the community the choice between this proposal and the max(op2,op4) thread that’s also going. I personally prefer the max(op2,op4). But this should be up to a vote.

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there’s been a ton of discussion on these related proposals here and on the discord at this point

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I would definitely like to see a vote on this take place. It seems like the Perp team and community can do more to make people whole than has happened so far.

It would be a shame to see a bunch of early supporters/traders lose faith in the protocol whether or not they had a very small amount of money or a lot of money on the platform.

The plans for keeping the system solvent on V1 did not execute as expected because of changes to the system by the team. Completely understand shutting V1 down because of insane market issues but the right thing to do is to figure out a way to compensate users further.

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