# pear (🍐) protocol; on-chain pairs trading? By [mcsplashington](https://paragraph.com/@masterzainwouldyoulikeabagel) · 2023-04-10 --- intro ----- i know what you’re thinking – another perp dex, really? from gmx to gains network to level finance, we’ve seen a multitude of protocols burst onto the scene. it almost seems **_a little tired_** by now… for the most part, these protocols serve the same function; degens can lever up, directly from their wallets. the type of trading is quite vanilla in this sense, shorting and longing the more popular crypto assets in isolation. in some cases, such as gains network, you can also trade forex too (but who really cares about that, not as fun lol). moats are hard to build without a real point of difference, and every other week we see a new shiny perp dex protocol come and go. pairs trading? -------------- pear protocol is a novel perp dex that i’ve come across, which allows for pairs trading i.e. long one asset, short another. this allows traders to profit regardless of the overall market direction, and is a neutral strategy. why is this useful? we’ll we usually identify such opportunities quite regularly; btc dominance rising against alts, one protocol gaining market share of another etc. as of late, it looks like eth may rally against btc too! it’s a well established method of trading in traditional markets, and translates well over to crypto – yet, we still haven’t seen a protocol that has cornered this end of the market. 🍐 -- all sounds good in practice right? but how does it **_actually_** work? at genesis, the protocol will leverage other perp dexs and market makers, making it **_liquidity agnostic_**. while this increases third party risk, it also means that users will benefit from tighter pricing and **deeeeep** liquidity – we can avoid the initial phase that bootstrapped protocols have. also means the protocol avoids mercenary liquidity! partners are being announced soon 👀 here’s some copypasta from the guys over at pear themselves, on the flow of placing a trade (you can tell it’s not my writing because it has uppercase letters): ### OPEN 1. User opens a trade by depositing collateral and receives an ERC-721 receipt 2. Pear takes a fee which is routed to the treasury and \_\_\_\_\_\_\_ 👀🤐 3. Trading Engine routes collateral into the deepest market and opens the long & short leg 4. Pear Contract acts as a ‘wallet’ that opens up trade(s) on the external liquidity platform 5. External liquidity provider executes the position 6. The user’s NFT receipt of the position is updated in real-time to reflect the live position ### CLOSE 1. The user closes a position on Pear Protocol 2. Pear smart contract closes the position on the external platform 3. Collateral and profit/losses routed back to Pear 4. NFT is burned, and funds return to the user pretty cool stuff! the erc-721 representation of the trade is pretty huge imo – akin to uniswap v3. this opens up a lot of doors; another piece of \*\*\*defi lego:\*\*\*1. positions can be traded on the secondary market 2. positions can be used on money markets for lending and borrowing 3. more complex derivative products can be built ontop of these nfts greater composability is always a good thing, **_right?_** conclusion ---------- overall, a well polished project; the team are clearly talented, and were previously behind the ReFi project. still in it’s very early stages, looking forward to mainnet launch, and it looks like they’ll also launch a $pear token too (probably rev share model, will ape if so) concerned about how the team will build a moat here though; what’s stopping gmx, synthetix, gains network etc just releasing the same product? doesn’t seem very likely now though i guess, those protocols are fixated on improving their core offering, **_for now._** --- *Originally published on [mcsplashington](https://paragraph.com/@masterzainwouldyoulikeabagel/pear-protocol-on-chain-pairs-trading)*