Perpetuals

If you have only ever bought spot, the mental model is simple: you paid money, you received a token, and it sat in your wallet. You could send it, hold it for years, or sell it. Your upside came from the price going up, and that was the only direction that paid.

A perpetual future is a different object. You are not buying the asset. You are opening a position in a contract whose value is derived from the price of that asset. You post collateral, the contract tracks the price, and your profit or loss is settled in collateral. Nothing is delivered to you. If you trade an NVDA perpetual on KestrelPerps, you will never receive an NVDA share, and there is no point at which shares change hands. You are trading the price, not the instrument.

What you actually own

You own a position. A position is a record with a side, a size, an entry price, and an amount of collateral backing it. It exists inside the trading system. It is not a token in your wallet, it cannot be transferred to a friend, and it has no existence outside the market it was opened in. When you close it, the position stops existing and the collateral plus or minus the profit or loss returns to your balance.

Because the position is collateralised rather than owned outright, it works in both directions. Going long profits when the price rises. Going short profits when the price falls. Short is not borrowing and selling anything, it is simply opening the position on the other side. There is nothing to locate and nothing to give back.

Perpetual versus spot versus dated futures

A dated future has a built in anchor. On the settlement date the contract must settle against the underlying, so as the date approaches the two prices are pulled together. That is why a dated future cannot drift far from reality for long: the deadline enforces it.

A perpetual removes the deadline. That is convenient, you can hold a position for as long as your collateral survives, but it also removes the thing that kept the contract honest. Nothing forces the contract price back to the underlying, because there is no date on which anything is forced. The anchor has to be rebuilt some other way, and that is funding.

Why funding exists

Funding is a periodic payment between the two sides of the market. When the contract trades above the underlying, longs pay shorts. When it trades below, shorts pay longs. The payment makes the expensive side expensive to hold, which pushes the contract back toward the underlying without anyone needing to settle anything.

On real trades, funding is charged and received periodically between traders. It does not go to us. In the demo, funding is not charged at all, so a demo position held for a long time will not match what the same position would have cost with real money. The mechanics, the rate, and how to read the cost of carry are covered in Funding.

Mark price versus the price you see

There are two prices involved and they are not the same thing. The last traded price is whatever the most recent trade printed at. It moves on every fill, including a single small aggressive order, and it can be pushed around by thin depth. The mark price is the reference the system uses to value your position: it is what unrealised profit and loss is calculated from, and it is what liquidation is measured against.

Marking against a reference rather than the last print is a protection, not a technicality. If liquidations were triggered by the last trade, a single order sweeping a shallow book could liquidate positions that were never actually wrong. Marking against a broader reference means a brief wick does not, by itself, close you out.

On KestrelPerps, demo prices come from live on chain pool data and refresh roughly every 20 seconds. There are no seeded or hardcoded prices. Fills in the demo are instant, complete, and modelled without slippage, because order book depth is not simulated. Real orders go into a real book, where depth is finite and a large order will pay for it.

Collateral, not ownership

Collateral is what makes the whole arrangement work. You post an amount, and that amount is what is at risk. Because your position is larger than your collateral when you use leverage, the loss that wipes out the collateral is a much smaller move in the underlying than a move that would wipe out a spot holding.

In the demo, a position is liquidated when the loss reaches 90% of the posted margin. The remaining 10% is returned to your balance.

Real liquidation is set by the venue's risk engine, using a maintenance margin that varies by asset and by position size. The formula above is an approximation there, not a guarantee. The live liquidation price is always shown on the position, and that number is the one to trust.

What it costs to open

Fees are charged on notional, meaning margin multiplied by leverage, not on the margin alone. This is the industry convention and it surprises people the first time they see it. The demo taker fee is 0.0006, which is 0.06%, charged when you open and again when you close.

A 100 USD margin at 10x is 1,000 USD of notional, so the open fee is 0.60 USD and the close fee is another 0.60 USD. On real trades, our fee on routed volume is 1 basis point, 0.01%.

Before you open one

1. Decide the side. Long profits if the price rises, short if it falls.
2. Decide the margin. That amount is what you can lose.
3. Decide the leverage. Higher leverage means a smaller adverse move liquidates you. See Leverage and margin.
4. Read the liquidation price before confirming, not after.

In the demo, all of the economics are computed server side from the live price. The client sends only the market, the side, the margin and the leverage. It cannot assert an entry price, a size, a collateral amount or a liquidation price. You are not being shown a number your own browser invented.

• Start in the demo. It uses live prices and costs nothing.
• A perpetual position can lose the whole margin, and leverage decides how fast.
• No expiry means no deadline forcing you out, and no deadline forcing you to be right.
• You never take delivery. Not of NVDA, not of anything.