Avantis Launches Perpetual Swaps Decentralized Exchange on Base Network for Crypto Trading

The perpetual swaps platform Avantis commenced operations on the Base mainnet this past Friday, introducing an innovative solution for the traditional challenges of stabilizing crypto futures markets, which its inventor believes will attract individual investors.

As a pioneer in the trading protocol space, Avantis has launched directly on Base, a platform supported by Coinbase at layer 2. The project’s advocates are optimistic that its integration with a major centralized exchange could drive millions of new DeFi users into the ecosystem of blockchain technology.

Despite Avantis offering high-risk trading options up to 75x leverage, the likelihood of a massive surge of new users might seem slim. Nevertheless, Avantis witnessed significant activity during its two-month testnet period, boasting over $5 billion in trades from a base of 50,000 wallet users, as stated in a company press release.

Perpetual swaps represent an innovative financial instrument within the crypto world, operating similar to perpetual futures contracts without an end date. Participants taking long positions (predicting price increases) and those with short positions (anticipating declines) can sustain their positions indefinitely, provided they maintain adequate collateral.

Nonetheless, these markets require consistent regulation to ensure that the pricing of the futures contract remains aligned with the underlying asset’s actual value. Funding rates are the mechanism by which buyers and sellers exchange fees to control open interest within these markets.

Avantis CEO Harsehaj Singh explains, “DeFi and CeFi have both become highly professionalized, and this results in many market makers simply arbitraging away any variations in funding rates, which leaves little room for individual traders to participate in the open interest dynamics.”

Avantis adopts a slightly different strategy. Rather than using funding rates to balance the market, the protocol incentivizes traders to adopt positions against the market consensus by guaranteeing a rebate, a move that carries substantial risk but is balanced by the protocol’s assurance to compensate part of any potential loss, as highlighted by Singh.

“This system is tailored for those who are strictly focused on directional trading,” Singh remarked during an interview.