Perpetual Demand Lending Pools
Despite achieving daily trading volumes in the billions of dollars, decentralized perpetual contract protocols remain outcompeted by centralized exchanges due to prohibitively high funding costs for market makers and professional traders. Method: This paper focuses on Perpetual Demand Lending Pools (PDLPs)—a capital-efficiency optimization mechanism employed by protocols such as Jupiter, Hyperliquid, and GMX. We formally define PDLPs, propose a general target-weight framework, identify their intrinsic nature as delta-hedging instruments, and develop an arbitrage equilibrium model alongside a liquidity provider (LP) return model. Leveraging game-theoretic analysis, derivative hedging theory, and dynamic parameterization, we rigorously analyze PDLP behavior. Contribution/Results: We prove that PDLPs possess inherent delta-hedgeability under general conditions—explaining their widespread practical adoption—and establish a theoretically grounded pathway for dynamic parameter optimization to enhance capital efficiency.