Papertrade, a perpetual futures exchange built on HyperEVM, is about to open live trading after starting pre-deposits yesterday. The project was co-founded by semi-anonymous traders Jez and Blurr, and live trading is scheduled for tomorrow, Oct. 10, a date the article describes as the anniversary of last year’s epic crypto market crash.
The exchange has drawn attention for combining perpetuals, a shared liquidity pool and token incentives in an unusual way. It offers up to 1,000x leverage, no slippage, no funding fees, and a token called PAPER that traders can earn by losing money. For traders and DeFi builders, the setup is being framed as a stress test for incentive design and risk limits.
How the shared pool replaces the usual counterparty
According to the article, Papertrade does not match traders through an order book and does not rely on outside market makers. Instead, every trade faces a shared USDC pool called Martingaler LP. The pool starts at $0 and is filled over time by trader losses.
The piece sums up the model this way: losing traders gradually become owners of the casino’s future revenue.
To place a trade, users deposit USDC with a $10 minimum and pay a one-time $1 activation fee. They can then take BTC or ETH positions with leverage of up to 1,000x.
Winners are paid from the pool, losers receive PAPER
If a trader makes money, the trader can withdraw the original margin and claim profits from the pool. If the pool does not have enough funds, unpaid profits are placed in a first-come, first-served queue. The article gives an example: if a trader is owed $100 and the next losing trader adds only $60 to the pool, the winner receives $60 first and waits for the remaining $40.
If a position loses money or gets liquidated, the loss is sent into the pool and PAPER tokens are minted to the trader. When the pool is below $2 million, each $1 of eligible losses can mint as many as 100 PAPER. That conversion rate falls as the pool grows.
Users can also stake PAPER. Stakers receive a pro rata share of the exchange’s USDC fee revenue. Once the pool exceeds $5 million, additional pool revenue can also be distributed to PAPER stakers.
Launch will happen in stages
Because HyperEVM could become congested if activity spikes, Papertrade expects a phased rollout instead of letting everyone trade at once.
Phase 0 began on Thursday with pre-deposits and will continue until launch. Depositing early does not improve trading priority, but the article says deposits made after launch could face delays if the chain becomes congested.
Phase 1 is planned for Saturday, when trading will begin through the Papertrade website. Signed onchain trades will be submitted by approved service providers, a design meant to limit queue-jumping by bots. Liquidations will take priority over new positions, and smaller trades may wait longer.
In later phases, bots and AI agents will be allowed to trade directly. Third-party apps will also be able to earn fees by referring traders. PAPER is expected to become transferable later, but it will not be sellable at launch.
Trading is expected to begin around one hour after Saturday’s HyperEVM upgrade, although no exact time has been announced. The article adds that there is a small chance the start slips to Sunday.
An ecosystem is already forming around the launch
Even for people who do not plan to trade directly, a wider ecosystem has started to form around Papertrade, offering other ways to take part.
- DX Research Group / DXAP: The team behind DX Terminal runs DXAP, an invite-only app that lets AI agents trade users’ Hyperliquid accounts. Founder poof said the Superclip agent plans to trade with funds from DXAP users, though the exact method has not been made clear.
- PaperStrategy: This anonymous project uses 90% of the 10% trading tax on its PSTR token to fund a strategy that accumulates and stakes PAPER. Of the USDC staking income generated, 90% is used to buy back and burn PSTR, while 10% goes to the team.
- PaperDAO: PaperDAO completed fundraising through daos.world on Oct. 7. It pools user funds into a vault and plans to mine PAPER at launch, then stake it for USDC income. Its PULP token represents a proportional share of the vault and is intended to be redeemable once PAPER transfers are enabled.
Risks highlighted before trading begins
The article says the excitement around Papertrade does not remove several major risks.
One is delayed payouts. If too many traders are profitable, the pool may run short of funds and winning traders could be left waiting indefinitely for payment.
Another is price manipulation. If Hyperliquid prices are manipulated, and those prices effectively serve as the oracle for Papertrade positions, traders could extract funds from the pool unfairly.
A third issue is PAPER mining and dilution. Delphi Digital’s tempest said paired long and short positions could let traders mint PAPER at relatively low cost, diluting existing holders while adding little cash to the pool. The article also notes that PAPER itself may never be worth what traders spend to obtain it.
The fourth risk is the leverage itself. At 1,000x leverage, an adverse move of roughly 0.1% can wipe out a position’s margin.
An extreme experiment in incentive design
The article argues that the protocol is striking in its imagination even if the design is aggressive. The attention around the launch, it says, makes the release hard to ignore. Whether Papertrade succeeds remains to be seen, but the piece closes by saying that genuinely different experiments like this are rare in DeFi.
Its final view is simple: DeFi needs more experiments like this.