Hubble Exchange is a trustless and composable trading system for perpetuals. Engineered at the intersection of derivatives and application-specific VMs. Hubblenet is a perp-specific chain; customized to embed a fully Decentralized Limit Order Book and its Matching Engine.

These perp-specific customizations enable Hubblenet to be the foundation of a next generation on-chain trading system.

Overview of Perps

Perps are just agreements and they are not backed by the asset (example ETH-PERP is not backed by ETH) they are supposed to follow the price of Ethereum. In order to start trading perps on Hubble Exchange, you need to provide some form of deposit (“initial margin”). You could deposit $100 of USDC and buy $500 worth of Ethereum. Once you've started trading, you need to maintain a certain amount of value in your account. This is your "maintenance margin". If the value in your account falls below this level, your positions are closed, which is a bit like needing to repay a loan.

If things don't go as planned - the loan isn’t closed by the system on time - could you end up owing more than your deposit? This is where the "Insurance Fund" comes in. It's a communal pool of extra money that can cover the losses if your account’s value doesn’t cover your debt even after being liquidated. Although this is rare, it can happen if prices of the assets move very sharply.

Lastly, there's something called a "funding rate". This is a mechanism that helps ensure that the price of the contract you're trading aligns with the real-world price of the asset. If the contract price and the asset price start to drift apart, the funding rate adjusts, acting as a tether to bring them back together. This is the incentive mechanism through which ETH-PERP mirrors the price of ETH despite not being backed by ETH.

Perpetual Contracts

They are similar to traditional futures contracts in that they allow traders to speculate on the future price of an asset, but they have no expiry date, hence the name "perpetual". To expand on this, traditional futures are contracts that allow you to buy an asset at a predetermined price and point in time, usually at the end of the month or quarter - this is their expiry.

These traditional futures expire, and holders are contractually obligated to settle when they expire.

A perpetual futures contract, on the other hand, is simply one that never expires. The contract can be held indefinitely.

Pricing

Perpetual Futures prices are based on the index price (average across all markets), the trading very closely matches the spot price of the asset, though the price may differ in certain volatile market conditions.

It’s important to note that futures contracts are just that: contracts. They’re cash settled, without any exchange of the asset itself.

Core Components to Perpetuals

There are four components to perpetual futures contracts: