Beyond Aster's Boom: Navigating the Next On-Chain Perp Gem Safely

In the past few days, Aster, a perpetual contract exchange on BNB Chain, has been flooding Twitter timelines due to its token's surge. "Whale profit screenshots" and "early holder millionaire stories" continue to attract attention, igniting the imagination of "getting rich overnight." More and more users are turning their attention to the "on-chain perpetual contracts" track.

However, price is just the spotlight; mechanism and security are the foundation.

We shouldn't just focus on token price, but also prepare thoroughly for the next entry.

This "Risk Map" will break down the core components in plain language: before FOMO into the next on-chain perpetual DEX, it will teach you how to choose, how to use, and how to avoid pitfalls. After reading, you'll be able to make informed safety judgments about any perpetual DEX.

Risk Map for On-chain Perpetual DEX

1/ Price Feeds and Oracles

Oracles and external prices are the common foundation for all forms of on-chain perpetual exchanges: liquidation thresholds, funding rates, risk limits, and abnormal protection almost all rely on the "real" prices from off-chain spot markets for calibration.

In on-chain Perps, three types of prices usually need to be distinguished:

• Execution Price: The actual price matched on the order book.
• Index Price: An aggregated reference spot price from multiple exchanges/pools, mainly used to anchor funding rates and reasonable spreads.
• Oracle Price: An "authoritative price" signed on-chain by Chainlink, Pyth, etc., often used for calculating mark price/liquidation and risk control.

Many protocols use the oracle price to generate the mark price, the index price to calculate funding fees, and the execution price is only used for actual trade settlement. These three have different logical divisions and cannot be viewed interchangeably.

The XPL token hedging attack on HyperLiquid last month is a typical case. The attacker made huge profits through two known pieces of information: "a large number of hedging short positions existed on HL" and "liquidation prices were based on execution price." In this incident, if a "hedger" did not consider how the liquidation price was calculated, they could very likely suffer losses.

However, if an exchange's documentation cannot clearly explain the relationship between various prices, it's not a user operational issue; you might need to re-evaluate the product quality of that exchange.

2/ Insurance Fund

In on-chain perpetual contract exchanges, the role of the insurance fund is very direct: when liquidation is too slow, someone's position goes underwater, and a deficit appears in the fund pool, it acts as a first line of defense, trying to maintain continuous trading and pushing back extreme measures like auto-deleveraging (ADL) and market halts.

This money usually comes from three sources: a portion of trading fees from the platform, forfeiture income from forced liquidations, and the protocol treasury or a dedicated insurance pool that users can participate in (e.g., HLP).

When a deficit occurs, the system processes it in order: prioritize using the insurance fund to cover the gap; if insufficient, then trigger ADL for shared losses; and only if still insufficient, consider halting the market. Some protocols also allow the fund to temporarily act as a counterparty through liquidation auctions.

For users, the insurance fund is like a "Deposit & Earn pool" – with clear sources of return, it appears low-risk. However, it's important to be wary that professional traders might exploit mechanism loopholes for "targeted attacks," draining the pool; in extreme market conditions, the fund could also be rapidly depleted, amplifying systemic risk.

3/ ADL Auto-Deleveraging

ADL is the "last line of defense" for perpetual contract exchanges: when liquidation orders cannot be executed near the mark price/index price, or the insurance fund cannot sustain it, the system forcibly reduces the profitable positions of counterparties to quickly de-leverage and restore liquidatability. It protects the system and LPs but shifts the cost to the deleveraged profitable accounts, affecting strategy continuity.

For ADL, you only need to understand a few things:

• When triggered: Excessive liquidation slippage/no takers, insurance fund below threshold, extreme volatility causing liquidation cascades.
• Trigger order: Usually queued by PnL% × leverage, with higher floating profits and higher leverage being deleveraged first.

When the market crashes, liquidation orders can't be sold, and the insurance fund is insufficient. Without ADL, everyone either shares the burden, or the platform is forced to hit the pause button. The ADL mechanism is a common risk control method that demonstrates the exchange's fundamental risk infrastructure is complete.

4/ Funding Rate

The role of the funding rate is to transfer funds between long and short positions to bring the perpetual contract price back to the spot/index price: when the price is high, longs pay shorts; when the price is low, shorts pay longs.

It's important to emphasize that there is no uniform standard for funding rates – different exchanges and different products vary in details such as reference prices, settlement frequency, upper and lower limits, and exemption rules. The same "funding rate" name might have completely different underlying mechanisms.

If you want to engage in funding rate arbitrage, first clarify a few fundamentals: how long is the settlement window, and at what specific time does it settle; whether the mark price or index price is used for calculation; and whether there are single-time limits or temporary suspension mechanisms. Without clarifying these details, your estimated funding rate and the final amount received may deviate.

At the same time, to make this area stable in the long term, you also need to understand the differences between various tokens and pay attention to whether the project team actively adjusts parameters. At a minimum, the documentation and frontend should display the funding rate source and timestamp, historical curve, countdown to the next settlement, and parameter change records. Confirming this information will give you confidence when calculating space and arranging positions.

5/ Structured Products

Today's on-chain perps are increasingly resembling CEXs, with products not only offering contract trading but also many teams layering a wealth management entry point on top of trading: pooling user funds into vaults, where administrators perform market making, basis/funding rate capture, or even cross-exchange hedging, with earned profits distributed back to contributors based on their shares.

For the platform, this stabilizes depth and liquidity; for users, it packages complex strategies into "one-click participation."

But the biggest problem is the black box: not clearly explaining how it works, whether leverage is used, or where hedging occurs.

When the market changes, "neutral" is no longer neutral, and what seemed like stable returns can immediately turn sour; in extreme cases, there might even be liquidations, passive deleveraging, or even redemption queues or discounts. Don't blindly believe in high APYs and beautiful curves; they only describe the past, not promise the future.

To decide whether to participate, self-check these things:

• Does it clearly explain the strategy logic, such as what it does, where it does it, and whether there are risk exposures?
• Are positions and net asset value verifiable on-chain?
• Are the redemption rules clear, and are lock-up periods, queue exit mechanisms, and fees clearly defined?
• Who is the vault administrator, and what permissions do they have?

Only vaults that can clearly explain these fundamentals are worth trying with real money.

6/ "Smoothness" of the Web Frontend

In perps, "smoothness" isn't about looking good, but about stability, speed, and comprehensive information: no frame drops on the page, no packet loss in pushes, and key data aligning at a glance. This usually means robust underlying infrastructure and risk control, and often corresponds to stronger resources and execution; it doesn't guarantee a "major profit opportunity" , but it is a strong signal.

Especially the presentation of some key information can reveal how professional an exchange is. For example, the funding rate settlement countdown, real-time changes in positions and margin, estimated liquidation price, and fee impact.

Conversely, if the frontend frequently lags, quotes and order statuses don't match, or key information is omitted or even deliberately hidden, then it's not just a poor experience issue: when you're engaging in volume trading or activities, you can easily bear additional risks due to delays and information asymmetry.

End

Aster's story shows that emotions can ignite overnight. But how long they burn depends on the product itself.

What's truly useful is to develop a "check-up mindset": first, determine whether the perp clearly explains its pricing system, cost rhythm, and extreme event handling – how prices are set, how fees flow, how it closes out in extreme situations, whether the interface allows you to understand at a glance, and whether you can verify it afterward; then, see if it clearly explains the rules of its "wealth management entry point" and exit rules, so that high returns don't lead you into a black box.

Next time you encounter a "wealth generation myth," do a check-up first, then decide whether to get on board.

Disclaimer: This content is for educational purposes only and does not constitute financial advice. DeFi protocols carry significant market and technical risks. Token prices and yields are highly volatile, and participating in DeFi may result in the loss of all invested capital. Always do your own research, understand the legal requirements in your jurisdiction, and evaluate risks carefully before getting involved.