PaperTrade Responds to Fairness and Manipulation Concerns: Queueing Mechanism Ensures Fairness, Some Users Manipulating BBO Cannot Sustain Profits

PANews October 11 news: PaperTrade issued a response to the community discussion following its launch, stating that its fair launch mechanism, priority for small orders, and BTC/ETH market volatility issues were all considered during the design phase, and that trading volume in the first 6 hours after launch exceeded that of the stock market during the same period. One day after launch, the platform has already operated as an exchange supporting 1000x leverage, with liquidity pool (LP) size reaching $5 million, and has distributed $25 million in rewards to staking users.

Regarding the controversy over the fair launch mechanism, PaperTrade said that under technical constraints, it is impossible to give small orders exactly the same priority as large orders, otherwise the front end could face a large number of spam requests causing congestion and affecting the overall trading experience. The team said that the existing queuing mechanism is the fairest solution possible under these constraints. As for the abnormal trading and manipulation allegations in the BTC/ETH market during the launch period, PaperTrade said that this was not an omission in a mechanism designed over 6 months, but rather due to a relatively loose open interest cap (OI cap) set in the early launch period to cope with large demand. The team said that during periods of heavy queuing pressure, tightening position limits too early could further worsen the user experience.

PaperTrade said that as early launch traffic declined, the team has begun tightening OI limits on-chain and at the relay layer to reduce room for market manipulation. The team said that in such systems, manipulation can always occur, and the key is to use parameter adjustments to make manipulation difficult to profit from economically and to make related attempts carry higher costs. Some users who attempted to manipulate Hyperliquid BBO (best bid and offer) ultimately did not continue to profit, and one relevant user continued trying to operate after making a profit, ultimately returning most of the profit to the platform through subsequent operations. Some users also chose to cancel affected trades in exchange for corresponding Paper points rewards. The team hopes to establish a trading mechanism that operates at scale in an adversarial environment and to continuously optimize market parameters to avoid either the platform or traders gaining an unreasonable advantage.