What is a perp DEX?

A perp DEX is an exchange for perpetual futures that uses blockchain infrastructure for functions such as holding collateral, recording positions, or settling trades. A perpetual lets traders take long or short price exposure without owning the underlying asset and without a scheduled expiry date.

The “decentralized” label does not tell you how every part works. Matching orders, producing price references, holding collateral, and settling trades can use different systems. Understanding those choices is part of understanding the exchange.

What does a perpetual position represent?

A long position gains from a rise between its entry and closing prices, before costs. A short gains from a fall. Both can lose money when the market moves the other way.

For a simple linear example, suppose a trader buys exposure to 0.1 BTC at $100,000. The entry notional is $10,000. Closing at $105,000 produces a $500 price gain; closing at $95,000 produces a $500 price loss. Fees and funding change the final result.

The trader does not receive 0.1 BTC from opening that perpetual. Collateral supports the position instead. If $2,000 supports the $10,000 exposure, the starting exposure is five times the collateral. The price gain or loss is calculated on the position size, not just the collateral deposited. See spot vs perpetual futures.

What makes the exchange decentralized?

Look at the functions separately rather than assuming everything happens in one place.

• Custody: where is collateral held, and who or what can move it?
• Matching: how do orders or quotes meet, and who operates that process?
• Settlement: how are completed trades, balances, and positions recorded?
• Pricing: where do index and other reference prices come from?
• Control: who can change parameters, upgrade software, or restrict a market?

Some exchanges put their order book and matching inside a blockchain network. Others combine offchain matching with onchain settlement. Aevo's documentation, for example, describes the latter model. The category includes different architectures; the label alone is not a guarantee about custody, availability, or risk.

How trades execute

In a central limit order book, resting bids and asks show orders available at particular prices and quantities. An incoming order can trade against them. A limit controls the acceptable price but may remain partly or entirely unfilled.

In a request-for-quote market, a trader requests terms for a particular trade and liquidity providers respond with quotes. A quote has conditions such as size and validity; it is different from an index value on a chart. Other exchange designs may use liquidity pools rather than a shared order book.

Whichever model a venue uses, the price available for your full order matters. Market liquidity explains why a displayed price may be available for only a small quantity.

Funding, margin, and liquidation

Funding is a payment between sides of a perpetual market under the venue's rules. It creates incentives for traded prices to stay near a reference. Rates and payment intervals vary, and a position can pay or receive funding over time.

Margin is the collateral supporting the exposure. Initial requirements govern opening or increasing risk; maintenance requirements govern whether existing risk can remain. If the account falls below the relevant threshold, positions can be reduced or liquidated before all collateral is exhausted.

These mechanics make a perpetual different from holding a fully paid asset. Funding rates and liquidation explain the two obligations in more detail.

N1 as an example

N1 provides perpetual trading through native order-book and RFQ execution modes. Its execution documentation explains the distinction; check the mode for the market you are using.

Trading accounts use cross margin, so positions in one account share collateral support. Separate subaccounts have independent balances and risk. N1's rules also specify which prices drive margin, funding, and conditional orders; those roles should not be assumed to match another venue's terminology.

For a particular market, check the contract specifications, current fees and funding, collateral requirements, and executable prices. A maximum leverage figure describes a limit, not a suggested position size.

Can a perpetual stay open indefinitely?

There is no scheduled expiry, but the position still needs margin and an active market. A trader can close it, the risk system can liquidate it, and a venue can terminate or delist a market under its rules. “Perpetual” describes the contract's expiry structure, not a promise of uninterrupted trading.

Sources

• N1: execution modes
• N1: margin
• Aevo: exchange architecture overview