This article was compiled and organized by BlockWeeks
Papertrade opened trading on HyperEVM on October 10. This date carries an ominous commemorative meaning for the crypto industry, but the protocol's launch has been nothing short of impressive—at least for now.
It is a fully on-chain application that allows users to open up to 1000x leverage on BTC and ETH perpetual contracts, with no funding rates and no slippage. Its trades are essentially swaps against a single protocol-owned USDC pool called "Martingaler LP," which started at $0 and whose only source of funds is traders' losses. Quotes are taken from the midpoint of Hyperliquid's BBO (best bid and offer), read on-chain via precompiles—a capability unique to HyperEVM.
Losing Is Mining: The Minting Mechanism of PAPER
Losing trades mint PAPER. The token is currently non-transferable but can be staked. Stakers share proportionally in realized PnL and fees—during the LP's fill toward a soft cap of about $5 million, and nearly all surplus above the soft cap.
Being able to open 1000x leveraged positions is naturally attractive to crypto's "gamblers"; and the design of "getting rewards for losing" is even more intoxicating—losing money can earn you PAPER tokens. Many traders deliberately get themselves liquidated to farm PAPER, hoping these tokens will earn back the money they lost.
This launch had been hyped for quite a long time beforehand, partly due to the backgrounds of the founding team: Jez (@izebel_eth) and Blurr.
Data from the First Five Days
As of October 15, the platform had processed cumulative trading volume of approximately $1.11 trillion, with traders' total PnL at -$54.1 million. Total PAPER staking rewards were $45.6 million, and the total PAPER supply was 8.07 billion tokens.
A "Manipulator" Appeared on the Very First Day
One notable episode: on the day Papertrade launched, a "manipulator" appeared. This address (0x2025137a136bea7446deba681cbfc7cf1970840e), while holding a Papertrade synthetic position, pushed the underlying Hyperliquid ETH reference price. This trader exploited a design weakness already explicitly disclosed in the project documentation's risk section. The strategy was roughly as follows: build a large synthetic exposure on Papertrade, push HL's mid price by a few basis points, close the Papertrade position, open a position in the opposite direction, then push HL's mid price in the other direction, and repeat.
The team's response was to tighten open interest caps at both the on-chain level and the relayer level simultaneously.
"Revenue" Equals Traders' Losses, and the Losers Are the Shareholders
This protocol's revenue is absurdly high. DefiLlama data shows cumulative revenue of $43 million after five days of launch, roughly $8 million to $9 million per day. This puts Papertrade's revenue level second only to the major stablecoin issuers, and surpassing Hyperliquid and Pump.fun.
But here "revenue" is traders' losses, and the losers are precisely this protocol's shareholders. Every staker must necessarily be a former loser—because there is no other way to obtain PAPER besides losing money to mint it.
This makes PAPER's valuation particularly tricky. Many traders have given extremely high target prices for the token, but the protocol has only just started, and it is hard to judge how things will evolve. Many of the calculations circulating on X only hold if trading volume can be sustained; and a large portion of that volume is wash farming, which only makes sense if PAPER's value exceeds the losses incurred to mint it.
Once PAPER becomes transferable, the market price will determine how much farming occurs; and that in turn will determine the protocol's long-term revenue. Currently more than 99% of the supply is staked, because there is nowhere else for these tokens to go besides staking.
