Author: Shenchao TechFlow
On October 20, the on-chain high-leverage perpetual contracts protocol Papertrade officially released a statement regarding mechanism adjustments, clearly stating that there are currently no plans to allow external transfers of the PAPER token.
The team also announced a comprehensive overhaul of the short-term trading fee structure and the token dynamic minting curve, aimed at eliminating potential attack vectors targeting pool solvency and fully curbing the pumping behavior of high-frequency arbitrage bots.
Insolvency short-selling vulnerability and token transferability lock
In the official mechanism analysis, the team revealed that prematurely enabling free transfers of PAPER could trigger critical risks. Since the token is tightly linked to the protocol’s solvency and rebate mechanisms, the introduction of perpetual short contracts for this token on external markets would financialize the liquidity risk of the reserve pool.
In an extreme scenario, if the protocol’s liquidity pool accumulates $10 million, a hacker would need to spend $15 million to manipulate the price of major cryptocurrencies—making it economically unfeasible. However, if the attacker can establish a $10 million short position externally, the entire malicious manipulation could instantly create a profitable闭环.
To prevent speculative short sellers from exploiting external derivatives to precisely target the liquidity pool’s solvency, Papertrade strictly limits token circulation outside the contract under the current architecture, prioritizing the long-term sustainability of the underlying liquidity pool.
Short-term fee tiering and precise targeting of high-frequency bots
In response to the high-frequency arbitrage friction since launch, the team has implemented a time-based micro-fee defense strategy. This adjustment strictly applies only to ultra-short-term orders where the closing price is within 0.06% (during regular hours) or 0.1% (during inactive hours) of the opening price.
Backtesting based on historical data shows that this fee filtering mechanism suppresses the profitability of automated bot strategies by approximately 15 times more than it does for regular traders, effectively eliminating the disorderly drain on system liquidity caused by scalp algorithms.
With high-frequency noise trading effectively compressed, the protocol will be able to create a healthier operating environment by freeing up greater risk buffer margins, enabling the relaxation of open interest limits for subsequent major trading pairs.
Dynamic minting curve reshaping and early holder dilution
At the core of the token issuance, Papertrade has completely abandoned the previous linear model of minting 100 PAPER for every $1 lost, replacing it with a micro-minting logic that dynamically adjusts based on real-time supply.
Under the new rules, whenever a user incurs a net loss of $1 million, the system will mint only approximately 0.1% of the total token supply at that time; when the liquidity pool approaches or enters a solvency alert, it switches to a dynamic weighted multiplier mechanism that evolves over time.
This restructuring technically eliminates the attack vector of maliciously inflating minting volume through hedged double-opening, but in the long term, the new mechanism will gradually dilute the token share of early holders, substantially shifting protocol rebates toward recent genuine transaction users.