01 Project Overview

Pika Protocol is a perpetual contract DEX running on the Optimism chain. It has no VC involvement and supports cryptocurrency and foreign exchange trading. It is currently in version V3. The protocol's native token PIKA was launched at the end of May 2023, and PIKA token staking and V4 version will be launched in June.

Official website: https://www.pikaprotocol.com

Twitter: https://twitter.com/PikaProtocol

02 Product Design

2.1 Historical Versions

Pika Protocol released its product introduction in April 2021 and launched the V1 testnet in September. The V1 version was designed as a stablecoin protocol supported by derivatives. Simply put, it mints PIKA stablecoins through non-linear reverse contracts. To mint $1 of stablecoins, users need to open a short position worth $1 in the market. The design of the V1 version was quickly abandoned and will not be introduced here.

In October 2021, the Pika V2 beta version was launched, and in January 2022, it was launched on the Optimism mainnet. V2 completely overturned the previous design and no longer developed stablecoins, but completely turned to perpetual contract DEX. In July 2022, the V3 version was launched, which was an incremental upgrade of V2. V3 is also the current version.

2.2 V3 Design

2.2.1 Treasury

The design of Pika V3 is similar to GMX on Arbitrum. There are two user roles in the platform: traders and LPs. LPs can deposit USDC into the platform's treasury (the Pika team will also deposit funds into the treasury) as a source of liquidity for the platform. When traders open leveraged positions, they will call on funds in the treasury. If the trader loses, the treasury will make a profit, and vice versa. In essence, it is a bet between the trader and the treasury. In addition, part of the transaction fees and forced liquidation income charged by the platform to traders will also be allocated to LPs.

Contract DEXs that adopt this type of model generally see traders lose money and vaults make profits in the long run. In Pika, these profits are currently rewarded to LPs in the form of USDC+OP tokens, and the current comprehensive APY is approximately 5.81%.

2.2.2 Transactions

The Pika platform currently supports up to 50 times leverage contracts for multiple cryptocurrencies and up to 200 times leverage contracts for multiple foreign currencies. Traders can open positions directly using USDC in their wallets without having to deposit into the platform. The opening price is related to the asset's mark price, slippage, and funding rate, as shown in the following formula:

Transaction Price = Mark Price * Slippage + Funding Rate

  • Mark price: the current market price of the asset. The mark price of the asset comes from the oracle, which includes the Chainlink oracle feed price and the internal fast oracle. The latter price comes from the median asset price of multiple CEXs such as Binance.

  • Slippage: It is determined by liquidity, transaction amount, and transaction direction. In simple terms, the worse the depth of the traded asset and the larger the transaction amount, the greater the slippage. On the Pika platform, the liquidity of each trading pair is concentrated near the current oracle price to achieve higher capital efficiency and lower transaction slippage. There is zero slippage for trading BTC, ETH, and foreign exchange.

  • Funding rate: In order to reduce the risk of LP, Pika uses the funding rate to balance long and short positions. When there are more longs than shorts on a trading pair in the platform, the cost of opening a long position will increase slightly.

2.2.3 Handling Fees

There are two types of fees for contract trading in Pika:

  • Execution fee: An execution fee of approximately 0.0002 ETH will be charged when opening a position and paid to the oracle.

  • Transaction Fee: A 0.1% transaction fee is charged for cryptocurrency transactions and a 0.03% transaction fee is charged for foreign exchange transactions. 50% of the transaction fee is allocated to the treasury LP, 20% is allocated to the LP owned by the team, and 30% is used as protocol income.

2.3 Business Data

The Pika platform currently has a TVL (total treasury balance) of approximately $14.76 million, with a cumulative trading volume of approximately $1.56 billion and a fee income of approximately $1.684 million. The 24-hour trading volume is approximately $840,000 and the 24-hour fee is approximately $817.

2.4 Recent routes

2.4.1 Pika V4

Pika Protocol launched the PIKA token at the end of May and is expected to launch PIKA token staking in June and release V4 at the same time. V4 is an incremental upgrade compared to V3, mainly including:

  • Use decentralized low-latency Pyth oracles to replace the original internal fast oracles.

  • Expanded to 40+ trading pairs.

  • Supports take profit/stop loss orders within the same transaction when opening/closing a position.

  • Supports adding or withdrawing margin from existing positions.

2.4.2 NFT Contract Transaction

Pika will launch NFT perpetual contract trading, which will make it easier for users to participate in the blue-chip NFT market with small amounts, and NFT holders can also hedge risks by short selling. The product is expected to be launched at the end of 2023.

2.4.3 Pika Chain / Pika V5

Pika plans to build a Layer3 application chain through OP Stack, and the PIKA token will become the native Gas token. Through the customized modular settings of Pika Chain, it can be more adapted to the application scenarios of the Pika protocol, and Pika V5 will also be released on this chain. In addition, combined with EIP-4844, which will be launched in the Cancun upgrade, the Gas wear in transactions will be greatly reduced. Pika Chain is expected to be launched in 2024.

03 Economic Model

3.1 Token Utility

There are two types of tokens in the Pika protocol: PIKA and esPIKA. PIKA tokens can be used for staking (locked for 14 days) to obtain a 30% share of the platform transaction fees and a transaction fee discount. They can also be used for protocol governance in the future. After Pika Chain goes online, it will be used as the native Gas token.

esPIKA is a locked version of PIKA, which is non-transferable and unlocked linearly into PIKA tokens over one year. It can be redeemed for PIKA tokens at a 1:1 ratio upon maturity.

The above token utilities will take effect after the V4 version is launched in June.

3.2 Token Allocation

The total amount of PIKA tokens is 100 million, which are distributed as follows:

  • 19%: Initial circulation, used for whitelist pre-sale and public sale.

  • 30%: Community rewards, awarded to platform LPs, traders and other stakeholders. All rewards will be distributed in the form of esPIKA in the next three years.

  • 20%: Development Fund: used for exchange liquidity, operations, grants, marketing, etc., of which 6% will be used for initial liquidity in DEX and CEX after TGE, and the rest will be released linearly over the next three years.

  • 20%: Core contributors and team, released linearly over the next two years.

  • 11%: Retroactive airdrops and future airdrops, issued in the form of esPIKA, which have not yet been issued.

3.3 Pre-sale/Public Sale/Market Value

The whitelist pre-sale was held on May 23, 2023. About 19,000 addresses (about 7%) were screened from more than 280,000 Pika users and given whitelist status. Each address had a whitelist quota ranging from 1-5 ETH. The whitelist pre-sale sold 6 million PIKA tokens at a fixed price of 0.0002 ETH (about US$0.36).

In the 72-hour public sale after the presale, a total of 13 million PIKA tokens were sold, oversubscribed by about 3,500 ETH, with a final price of 0.0002689 ETH (about $0.48).

A total of 19 million PIKA tokens were sold in two rounds, raising approximately 4,700 ETH, or approximately $8.5 million.

According to the current price of 0.4 USD, the public sale has broken the issue price and is very close to the pre-sale price. The current circulation of PIKA is 19 million, with a market value of approximately 7.65 million USD, and the FDV is approximately 40.28 million USD.

04 Project Summary

The Pika protocol performs poorly in the entire contract DEX track, with low platform transaction volume. Even in the Optimism chain, it has a large gap with its competitor Perpetual Protocol, and the LP income is low. The product design of the Pika protocol is at a standard level. Future plans include NFT contract transactions and Layer3 application chains, but it will take a long time to go online. What is worth looking forward to now is the performance after the launch of the V4 version in June and token incentives.