Yenwen Feng said that if the initial trial succeeds, Perpetual Protocol and True plan to raise the asset cap for protocol-to-protocol lending portfolios from $5 million to $20 million.
Perpetual Protocol (PERP), an Ethereum-based decentralized derivatives exchange, and TrustToken—the company behind the digital lending platform TrueFi and the stablecoin TrueUSD (TUSD)—recently signed an agreement to launch a $100 million liquidity pool for market makers.
As part of the partnership, TrueFi announced a protocol-to-protocol lending portfolio on Perpetual Protocol. The pool starts with $5 million as an initial tranche toward the year-end target of $100 million. This funding will enable PERP platform market makers to provide deeper liquidity, helping the platform become more sophisticated and better suited to institutional participation.
Commenting on the vital role liquidity providers play, Perpetual Protocol co-founder Yenwen Feng said:
“Committed market makers are essential to a user-driven decentralized exchange — they are the engine that keeps it running. By partnering with TrustToken, market makers gain more liquidity to support their trading pairs. That additional liquidity boosts market stability and reduces slippage, which increases confidence among liquidity providers and ultimately improves the trading experience for all users.”
Yenwen Feng on the TrueFi Partnership and Outlook for 2022
After Perpetual and TrustToken announced their partnership, the teams outlined the $100 million liquidity pool and PERP’s priorities for 2022. Feng provided further detail on several points, including plans to expand the LP fund from $5 million to $20 million after the initial trial. He emphasized the importance of offering dedicated lending support to market makers and explained why this matters for the derivatives market.
Feng also expressed strong confidence that layer-2 solutions will play an important role in the future of on-chain derivatives beginning in the second half of 2022.
The Perpetual Protocol co-founder expanded on several topics during the conversation.
CJ: When will Perpetual Protocol (PERP) ecosystem market makers begin to access this large liquidity?
Feng: After the first trial we should be able to fine-tune the program’s parameters before opening it up to additional market makers.
CJ: Quickly explain the $5 million lending cap. Why start with only 5% of the $100 million year-end target?
Feng: We wanted to start with an amount large enough to test the waters and see how it affects Perp’s market-making activity. This approach creates an additional route to bring liquidity onto the platform. If it works well, we plan to increase it to $20 million for the next round and potentially expand further over time.
CJ: Given the possibility of a crypto winter in 2022, what is your outlook for the crypto derivatives market and what advice do you have for investors?
Feng: New L1/L2 developments: rollup technologies and new L1 chains are launching this year. They must increase throughput and reduce gas fees. The L2 landscape will likely be highly competitive in the second half of 2022.
For example, zkSync recently launched its public testnet and the Optimism team is working to reduce fees by an order of magnitude. Lower on-chain costs and broader access to derivatives trading could drive increased volume.
Institutional awareness: more institutions are experimenting with crypto trading, expanding market participation.
CJ: What is your outlook for the crypto market in 2022?
Feng: I expect any bear market to be relatively short-lived. During the 2018 bear market many people left crypto and never returned; about half the projects in programs like the Binance Accelerator stopped operating. The current environment is different: even if market capitalization declines, most participants remain in the space, and there are many builders and fresh innovations.
Like Silicon Valley, interest in crypto remains strong, so I expect the market to be in a much better position by the latter half of the year.
CJ: Has the partnership with TrustToken attracted new projects or protocols that plan to build on Perpetual Protocol?
Feng: Market makers and online strategy providers have shown strong interest in this partnership.
CJ: Did the partnership with TrustToken create compliance issues the platform had to address?
Feng: TrueFi provides an excellent framework to navigate regulatory complexity. TrueFi functions like a fund manager: Perpetual Protocol acts as the lender and market makers are the borrowers. We use their platform and rely on TrueFi to handle those issues, so we don’t need to focus heavily on regulatory details ourselves.
As we grow, we may also use their platform to become borrowers ourselves.