Papertrade, an onchain derivatives venue launched on HyperEVM, recorded $42.24 million in protocol revenue over seven days, placing it third behind Tether and Circle in DefiLlama’s revenue rankings. The figure exceeded the $16.06 million reported for Pump.fun and $14.56 million for Hyperliquid over the same period, but Papertrade’s early revenue was driven chiefly by losses flowing through its liquidity-pool settlement system and being distributed to PAPER token stakers.
DefiLlama recorded $39.37 million of the seven-day total as holder revenue, equal to roughly 93% of protocol revenue. That unusually high share reflects Papertrade’s mechanics: traders take positions against a protocol liquidity pool, and funds remaining in the pool after trading outcomes can be distributed to token stakers once specified thresholds are reached.
The venue began trading on Oct. 10 with BTC and ETH markets offering leverage of up to 1,000x. Rather than operating its own order book, Papertrade references Hyperliquid’s best bid-and-ask midpoint for price data while settling positions internally against its liquidity pool.
That structure gives traders exposure without requiring every Papertrade position to be matched by a corresponding perpetual-futures trade on Hyperliquid. It can remove the order-book slippage associated with filling a large leveraged trade and avoids conventional perpetual funding payments. The trade-off is a settlement model in which the pool becomes the direct counterparty to users.
When traders lose, those losses add to the pool. When traders win, payouts come from it. Papertrade’s early revenue ranking therefore measures a model that has converted a substantial amount of net trading losses into pool excess and staking distributions, rather than one supported primarily by predictable transaction charges.
Staking payouts dominated early revenue
A breakdown of approximately $48.04 million in cumulative protocol revenue attributed about $41.33 million, or 86%, to excess liquidity-pool yield distributed to PAPER stakers. Trading-settlement fees accounted for roughly $5.69 million, while liquidation fees contributed about $1.02 million.
Papertrade charges a 2% fee on eligible realized profit and loss as well as liquidations. Half is allocated to PAPER stakers and half goes to a development-fee recipient under the launch parameters. A separate payout channel distributes excess pool funds after the pool clears a defined threshold.
The project said it planned to raise that excess-distribution threshold from $5 million to $10 million on Oct. 17. Raising the threshold would leave more funds in the pool before further excess is allocated to stakers, potentially increasing the buffer available to meet profitable traders’ withdrawals.
Early payout data shows how strongly rewards were concentrated near the launch. PAPER stakers received approximately $23.90 million during the first eight hours, followed by about $2.40 million over the next 37 hours. That works out to roughly $2.99 million an hour initially, compared with about $65,000 an hour afterward.
During the same review period, traders recorded net losses of about $32.40 million. Approximately $26.30 million was routed to PAPER stakers, while $4.30 million remained in the LP pool, with the remainder allocated to items including development fees.
The pace of those initial distributions places particular weight on whether future trading activity generates comparable pool excess. A staking system funded substantially by losing positions can produce large rewards during periods of high leverage and liquidations, while distributions would decline if trader outcomes become less negative or the pool needs to retain more capital.
Asymmetric payouts alter trading economics
Papertrade’s “Asymmetric PnL” design further shapes the relationship between trader outcomes and pool balances. Winning trades receive reduced payouts, while losing trades remain fully borne by the trader.
Under BTC launch parameters cited in the platform materials, a theoretical $100 profit could result in about $72.40 after the asymmetric adjustment and the 2% profit-settlement fee. A $100 loss on an offsetting position remains a full $100 loss. In a simplified long-and-short pair, that produces an estimated net loss of $27.60 even before considering additional execution conditions.
The mechanism gives the pool a structural advantage in aggregate trading outcomes, particularly when users attempt to hedge or repeatedly trade short-term price moves. It also distinguishes Papertrade from an order-book derivatives exchange, where profitable and unprofitable traders generally settle directly against one another and venue revenue relies more heavily on explicit fees.
The platform’s 1,000x leverage ceiling has amplified those dynamics. With $100 in margin, a trader can control $100,000 in notional exposure. In simplified examples provided for the platform, a price move of roughly 0.05% against a position can trigger liquidation, while a 0.1% adverse move can consume the full initial margin.
TradingBeats’ early onchain tally found that 5,836 addresses used 1,000x leverage, and 4,395 of them experienced at least one liquidation, a rate of 75.3%. The tally identified 12,657 liquidations tied to about $20.08 million in isolated-margin losses.
An Oct. 11 chain analysis also described an early incident involving movements in Hyperliquid’s ETH reference prices. The analysis said a trader combined the pricing mechanism with high-leverage synthetic exposure and at one point had net-withdrawn about $1.28 million from the platform. The episode illustrated the dependence created by using an external reference market while keeping settlement inside Papertrade’s own pool.
PAPER supply grows with eligible losses
PAPER launched with zero initial supply, according to the project’s distribution design. It did not include a team pre-mint, venture allocation, or fixed airdrop tranche. New tokens are principally minted when users realize eligible trading losses.
Below a protocol-tracked LP size of $2 million, each $1 of eligible loss mints 100 PAPER. Once that threshold is exceeded, the mint rate declines according to the formula: 100 × [120,000,000 / (120,000,000 + H)]², where H is a cumulative protocol growth metric rather than the current LP balance.
At H of $120 million, the formula produces 25 PAPER per $1 of eligible loss. A $10,000 eligible loss would generate 1 million PAPER at the initial rate, compared with 250,000 PAPER at 25 tokens per dollar.
This model directly links token issuance to loss-making activity. It can reward users who absorb trading losses with a claim on future staking distributions, but it also expands the supply available to share those distributions. If the daily USDC payout stayed at $100,000, a holder with 1 million staked PAPER would receive $20 with 5 billion tokens staked, but $10 if staked supply rose to 10 billion.
Large accounts captured substantial early rewards
Lookonchain tracked one trader on Oct. 13 who generated $2.84 billion in notional volume and incurred about $1.71 million in trading losses. The account received about $1.07 million in USDC staking rewards, including roughly $943,000 claimed and $130,000 unclaimed, along with 136 million PAPER. After staking rewards, the trader’s reported cash loss was about $637,000.
At that token balance, recovering the remaining cash loss would require an average PAPER realization price of around $0.00468, excluding fees and market impact.
A separate Lookonchain update on Oct. 12 followed an address beginning 0x35b2 that completed 1,012 trades and generated about $10.1 billion in notional volume. It recorded approximately $979,000 in losses, received 252 million PAPER, and accumulated roughly $997,000 in USDC staking income. Comparing only those losses and rewards, the account showed a net cash gain of about $17,800 before assigning any value to PAPER.
Papertrade’s early figures show a derivatives platform where trading losses, token issuance and staking rewards are tightly connected. The model has produced exceptional initial revenue and holder distributions, while leaving the durability of those payouts tied to pool conditions, token dilution and the behavior of highly leveraged traders.
To understand how loss-driven yields work versus fees, explore crypto derivatives tokenomics and risk dynamics in more detail.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
