The Price Mechanism and Trading Philosophy Behind Perpetual Futures

In March 2025, the JELLYJELLY contract caused market turmoil on a decentralized trading platform. The contract price skyrocketed by 429% in a short period, triggering a large-scale liquidation risk. Ultimately, the platform validators intervened urgently, forcing the delisting and liquidation, which raised questions about "decentralized" exchanges.

This event exposed the core issues of Perptual Futures trading: What determines the price? Who bears the risk? Is the algorithm really neutral?

This article will analyze the differences in the core mechanisms of Perptual Futures among the three major trading platforms, exploring the financial philosophies and risk transmission mechanisms behind them.

Three Key Elements of Perpetual Futures Trading

• Index Price: Tracks changes in the spot market price and serves as the "theoretical anchor".

• Mark Price: The decisive price used to calculate unrealized profits and losses, liquidation, and other key events.

• Funding Rate: An economic mechanism that connects the spot and futures markets, guiding the contract price to revert to the spot.

Comparison of Three Major Platform Algorithms

Index Price/Oracle Price

A certain decentralized platform uses oracle prices that are independent of its own market, constructed by validator nodes, employing a weighted median method to resist extreme fluctuations, with a slower update frequency of once every 3 seconds. This mechanism is more resistant to manipulation, but the price changes are relatively lagging.

( Mark Price

The mark price algorithm of a centralized platform A is based on the median of the contract market's buy/sell one price, transaction price, and impact price, combined with EMA processing, which smooths price changes and resists spikes.

A certain centralized platform B only uses the mid-price of the buy and sell orders, making the price extremely sensitive to small trades and resulting in higher volatility.

A certain decentralized platform integrates multiple price sources: the platform's own price, the weighted median of several centralized platforms, and oracle prices. Validators are required to perform consistency verification on the input sources, enhancing resistance to manipulation.

) Funding Rate

A certain decentralized platform introduces a premium index based on traditional models, using oracle prices instead of mark prices for calculations, with an extremely high funding rate cap of ###4%/hour###, charged at a frequency of 1/8 per hour.

A certain centralized platform A combines order book depth and lending rates, with a longer funding fee settlement cycle of 018 hours.

The algorithm of a certain centralized platform B is relatively simple, based solely on the price deviation of the order book, resulting in significant fluctuations.

Trading Philosophy of Different Platforms

( Centralized Platform A: Design of Rational Institutionalizers

• Core Concept: "Make the market predictable"
• Mechanism: Smooth mark price, refined funding rate model, risk buffer mechanism
• Suitable for: institutional investors and medium to long-term traders seeking stable returns with controllable risks.

) A centralized platform B: The design of trading instinct

• Core Concept: "The market is a reflection of human nature"
• Mechanism: Sensitive mark price, highly volatile funding rate, fast liquidation
• Suitable for: high-frequency traders, short-term traders, skilled at capturing instantaneous price deviations

( A certain decentralized platform: Design of on-chain structuralists

• Core Concept: "Algorithmic Order Setting"
• Mechanism: Validator consensus price, liquidity treasury support, high-frequency funding rates, on-chain transparency
• Suitable for: Traders seeking to rebuild trust through verifiable code and decentralized governance.

![Who controls your liquidation line? Revealing the price wars and human dilemmas behind the three major platforms' Perptual Futures])https://img-cdn.gateio.im/webp-social/moments-dbd36e75c2ce0e3684568bb5d27a4d69.webp###

Conclusion

The algorithm designs of different platforms reflect different understandings of the essence of the market. Whether it is institutional buffering, market behavior supremacy, or on-chain consensus, all attempt to answer the core question of how to trust the market.

However, in extreme cases, algorithms still need to face human intervention. Ultimately, the price is determined by whom we choose to believe. In the future financial world, algorithms will continue to expand, but every algorithm projects value judgments behind it.

Let us always hold a sense of awe for the market and be responsible for our values.

![Who is controlling your liquidation line? Unveiling the price wars and human dilemmas behind the three major platforms' Perptual Futures]###https://img-cdn.gateio.im/webp-social/moments-21c5ff107a7d13bf18a55899ab9194ed.webp###