PaperTrade responds to fairness and manipulation concerns: queue mechanism ensures fairness, some users manipulating BBO could not sustain profits

PANews reported on October 11 that PaperTrade issued a statement responding to community discussions following its launch, saying that issues such as its fair launch mechanism, small-order priority, and BTC/ETH market volatility were all considered during the design phase, and that trading volume in the first six hours after launch already exceeded the stock market's trading volume over the same period. One day after launch, the platform was operating as an exchange supporting 1000x leverage, with its liquidity pool (LP) reaching $5 million, and it had distributed $25 million in rewards to staking users.

Regarding the controversy over the fair launch mechanism, PaperTrade said that under technical constraints it cannot give small orders and large orders exactly the same priority, otherwise the frontend could face a flood of spam requests causing congestion and affecting the overall trading experience. The team said the existing queue mechanism is the fairest possible design under these constraints. As for the abnormal trading and manipulation concerns that emerged in the BTC/ETH markets during the launch period, PaperTrade said this was not an oversight in a mechanism that took six months to design, but rather because, in order to cope with heavy demand during the initial launch phase, it set a relatively loose open interest cap (OI cap). The team said that during phases of heavy queue pressure, tightening position limits too early could further worsen the user experience.

PaperTrade said that as traffic declined after the initial launch phase, the team has begun tightening OI limits at both the on-chain and relay levels to reduce the room for market manipulation. The team said that in such systems, manipulation can always occur, and the key is to adjust parameters so that manipulation becomes difficult to profit from economically and so that related attempts incur high costs. Some users who attempted to manipulate Hyperliquid's BBO (best bid and offer) ultimately did not sustain profits; one of the users involved continued attempting operations after making a profit, and ultimately returned 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 build a trading mechanism that can operate at scale in an adversarial environment and to continuously optimize market parameters, avoiding unreasonable advantages for either the platform or traders.