Author | Mario Chow @IOSG
Data as of October 19, 2026, 10:00 UTC, 212 hours after open.
Papertrade is a synthetic perpetual contract on HyperEVM, launched on October 10, offering only BTC and ETH with leverage up to 1000x. The team is Jez (Colin Hong, former risk partner at Standard Crypto) and anonymous developer Blurr. No funding, no pre-mine, and the team retained no allocation. There is only one way to get the PAPER token: lose money on the platform.
Headline volume now stands at $1,361 billion, all notional amplified by leverage of up to 1000x; over the same period, Hyperliquid's 24-hour perpetual volume was $5.2 billion. Real money is far smaller: about 23,000 addresses deposited $335 million, losses on liquidations totaled $249 million, and traders are net down $63.2 million.
The core of this article is here. Of the $63.2 million traders are net down, **$54.1 million (86%) went to PAPER stakers.** LPs hold another $4.7 million, and developers received about $4.5 million (7%). Those receiving the distributions are the ones losing money: the top 1,000 wallets hold 88% of PAPER, bore 81% of all losses, and took 91% of the distributions. Put plainly, this is a casino that rebates the rake to the gamblers.
Staking revenue arrives in waves, tracking mining rewards. In the first ten hours of day one, stakers received $24 million; a second wave of volume farming from the 12th to the 16th distributed another $24.9 million; on the 17th it dropped to $800,000. Separately, PAPER now has a price. Paragon launched the HIP-3 perpetual para:PAPER on Hyperliquid on October 18, opening at $0.012, surging to $0.035 within two hours, and since then hovering around $0.024. Based on 8.69 billion tokens, the market cap is $211 million, roughly twice the cost of wash-mining one PAPER. PAPER itself still cannot be transferred.
Key Findings
A rebate loop. 86% of net losses went to stakers, and the stakers are the very wallets losing money: the top 1,000 wallets hold 88% of PAPER, bore 81% of losses, and took 91% of the distributions.
**Revenue arrives in waves tied to volume farming.** $24 million in the first ten hours, $24.9 million from the 12th to the 16th, only $800,000 on the 17th when the mining rate fell to about 12 tokens per dollar, and $2.1 million on the 18th after the perpetual launched.
PAPER has a price now, but it is thin. para:PAPER trades at $0.024, roughly twice the wash-mining cost; it is a 3x-leveraged pre-market perpetual with about $5 million in open interest, on an underlying token that no one can settle.
**Solvency has held throughout.** Winners have never had to queue; BTC and ETH would now both need to rise 3.7% together to drain the pool, versus only 0.7% on day one.
Where the Price Comes From
Price is read once on open and once on close: the contract takes the midpoint of the Hyperliquid order book bid-ask via a HyperCore precompile. The orders themselves are not executed on Hyperliquid. There is no order book, single positions are capped at $10 million, and there is no slippage or funding rate regardless of size. You are betting against a pool.
The Pool Is a Water Tank
This pool (the LP) is the sole counterparty, with no backstop behind it. It starts from zero, outsiders cannot deposit into it, and you can think of it as a water tank with an overflow spout:
Losers pour in. On a losing close or liquidation, 98% of the loss goes into the pool.
Winners draw out. A profitable close is paid in full regardless of how much remains in the pool, after deducting the discount described below. If the pool runs dry, unpaid profits (margin is unaffected) enter a first-in-first-out queue, to be filled by later losers. There is no other guarantee.
Overflow goes to stakers. Anything in the pool above $5 million is pushed to PAPER stakers. The team announced on October 17 that this threshold would be raised to $10 million, but as of October 19 it was still $5 million on-chain, and we found no explanation for the delay.
Every close, win or lose, charges a 2% fee on PnL, with 1% each to stakers and developers. On a loss it is deducted from the loss, so 98% enters the pool; on a gain it is deducted from the proceeds. Fees are waived while a queue exists.
Those are the rules. The money in the pool is not promised to anyone; how much ultimately reaches winners versus stakers depends entirely on how trading unfolds.
▲ How funds flow: the LP pool is a water tank
The most important point is this: this casino does not guarantee that winners get paid. On an ordinary exchange, winners' money is always paid by someone with capital—a market maker, an insurance fund, or the house's own balance sheet. Papertrade has none of these. The pool contains only what losers have left behind, and its cap is deliberately set; once the excess is swept to stakers it cannot be recovered. The portion of a winner's payout that exceeds the pool amounts to a claim on "people who have not yet lost money," and nothing in the contract can force those people to show up.
Strictly speaking this is not a Ponzi: no returns were promised, and the house edge is real. But from the perspective of a queued winner, it is indistinguishable from one: new money must keep coming in for them to get paid.
The real risk is long-tail winners. A single position cannot drain the pool: with a $10 million notional cap, even a 1000x long with extraordinary luck would need a rise of about 57% to owe $5 million. The problem is that no rule prevents one wallet from opening dozens of positions. 0x2025 at one point held about 30 ETH shorts of $9.9 million each, totaling $297 million; at that size, a 2% adverse move would owe more than all the money in the pool. On the night of day one, 0x2025 was moving the Hyperliquid midpoint; over 35 minutes winners withdrew $2.4 million from the pool, with $4.91 million remaining at 21:45 UTC and only $2.48 million at 22:20. It has not happened since.
How PAPER Is Issued
When the LP is below $2 million, losing $1 mines 100 PAPER. Above $2 million, the mining rate is 100 × (120M / (120M + H))², where H is a ratchet high-water mark, effectively the LP's cumulative inflows above $2 million. H is now $243 million, so losing $1 mines only 10.9 PAPER, versus 100 at launch.
Total supply will ultimately approach about 12.7 billion: 12 billion on the curve (100 × $120 million), plus 660 million mined at 100 tokens per dollar during the first hour after launch before the pool reached $2 million. 8.69 billion have been issued so far, 69% of the cap.
▲ PAPER mining rate and supply
Staking
Staking does not produce new tokens. The threshold is 1,000 PAPER, with no lock-up and deposit or withdrawal at any time. PAPER still cannot be transferred, and 99.3% of it is staked. Distributions are paid in USDC, pro rata to staked amount each time, with no boost and no tiers.
As for when stakers actually get paid, the documentation sets out three rules:
Queued winners always come first. When the pool cannot pay a winner, the shortfall enters a FIFO queue, the pool's available cash for everyone else becomes zero, and both fee shares stop. New losses are recorded in a separate bucket dedicated to repaying the queue. Until the queue is cleared, stakers receive nothing. This has not yet occurred.
Overflow is swept in batches, not streamed in real time. A keeper calls pushStakerFees() to transfer the portion above $5 million into the staking contract. Swept funds leave the pool and cannot be recovered by later winners.
Between sweeps, first come, first served. A winner is paid in the transaction that closes the position; overflow waits for the next sweep.
Where the Rake Is Hidden
Apart from the 2% fee, the platform charges nothing on notional. The rake is hidden in the liquidation rules and on the profit side:
The liquidation line is 5bp early. At 1000x leverage, margin can withstand a 0.1% move, but forced liquidation occurs at roughly 0.052%, with the entire margin seized.Profits first have a 0.2bp dead zone, after which an "asymmetric impact" discount is applied—the smaller the move, the harsher the discount. Under the launch parameters, a BTC winner gets at most 90% of the raw profit: a 1% move yields about 88%, and a 0.1% move yields only about 74%.
The remaining profit is then charged a 2% fee.
The discounted money goes to no one; it stays in the pool, and once the pool fills up it overflows to stakers. A quick calculation: 100U, BTC, 1000x. A 5.2bp adverse move wipes out the 100U. A 5bp favorable move should earn 50U at fair value, but the actual payout is 30.4U. No parameter changes have been announced since launch.
▲ P&L and profit retention ratio at 1000x
Who can flip the switches
Opening positions, closing positions, and staking all go through Papertrade's relayers; withdrawals do not, and users can withdraw their money directly at any time. A 2/3 multisig can pause opening positions, delist markets, change position limits, minimum margin, and minimum order size, and can also adjust the impact curve and fee parameters. Contract upgrades have a 7-day timelock. Relayer ordering is "adaptive," with large orders prioritized.
Unless otherwise noted, all data is as of October 19, 10:00 UTC, i.e., 212 hours after open.
How much of the $1.361 trillion in volume is real money
▲ Headline volume vs. actual USDC
Peeling it back layer by layer:
$1.361 trillion, headline volume. It appears to count opens and closes each once.
$529 million in open positions, backed by $10.7 million in margin, averaging about 50x. The first-day average was about 160x.
$335 million actually deposited, from about 23,000 addresses; $271 million withdrawn. Locked margin peaked at $58 million on the first day.
$249 million in losing closes—the money that actually changed hands.
$63.2 million in net trader losses—the only layer that can be distributed to stakers.
Net losses are about 0.46bp of headline volume. The team earned about $4.5 million in fees.
Where did the $249 million in losses go
Losing orders cumulatively poured about $249 million into the pool. This is gross—all losing closes count, including the losing leg of wash trades, and PAPER is mined based on this number. It went four ways:
$185 million (75%) paid to winning orders, mostly the other leg of the same wash trades.
$54.1 million (22%) distributed to stakers.
$4.7 million still in the pool, just short of the cap.
About $4.5 million (2%) to the developers.
Net of the winners' share, traders lost $63.2 million net, 86% of which went to stakers.
▲ Where the $249 million in losses went
Who holds PAPER
16,198 wallets hold PAPER, of which 13,291 meet the 1,000-token staking threshold. Holdings are highly concentrated, and holders are the customers: the top 10 wallets hold 15%, the top 100 hold 52%, and the top 1,000 hold 88%. These same 1,000 wallets account for 81% of all losses among losing wallets and received 91% of the distributions.
Holders lost an average of $0.0073 per PAPER, or just $0.0016 after distributions. At the perpetual price of $0.0243, 97% of the supply is in profit after distributions. Overall, traders lost $63.2 million, got back $54.1 million in cash, and hold PAPER worth $211 million at perpetual value. That valuation only becomes money if someone buys, and right now no one can buy PAPER itself.
▲ Who holds PAPER
The vault and the LP are not the same thing
The money in the vault is not the house's. It is all the USDC held by the Exchange contract, $63.1 million in total: about $47.6 million in trader available balances, $10.7 million in margin locked by open positions, $4.7 million in the LP, and $100,000 in developer fees not yet swept. Only the LP belongs to the house, about 7% of the vault. The vault fell from $138 million to around $60 million in the first two days, and has since stayed between $58 million and $69 million. Since October 12, the LP has stayed between $4.3 million and $5.2 million, with daily deposits and withdrawals roughly offsetting each other, $5 million to $26 million in each direction.
▲ Daily USDC deposits and withdrawals
▲ Vault, locked margin, and LP
How much is lost each day
First day: $75 million in losing closes, $28.4 million net loss. On the 11th and 12th: about $20 million gross and about $4 million net per day. Then the second wave: gross losses rose to $27 million on the 14th and $41 million on the 15th, with net losses of $4.5 million to $7.4 million per day from the 13th to the 16th. On the 17th it fell off a cliff: $6 million gross, $700,000 net. On the 18th it recovered to $11.9 million gross and $2.2 million net, mostly after the perpetual opened.
▲ Gross vs net trader losses by hour
How overflows are distributed
The pool first hit its $5 million cap about 70 minutes after open. After the October 11 15:45 overflow, the pool stayed below the cap for most of a day, crossed back above on the 12th, and net losses kept it pinned there through the 16th. Stakers received $3.6 million on the 12th, $4.2 million on the 13th, $5.4 million on the 14th, $6.7 million on the 15th, and $5 million on the 16th. After that: $800,000 on the 17th, $2.1 million on the 18th, and $70,000 in the first ten hours of the 19th.
The cap is an open question. The team announced it would double to $10 million on October 17. The tracker reads stakerCap from the contract every five minutes, and every read returned $5 million, including at 09:30 on the 19th. If it were actually raised, the pool would need about $5.3 million in net losses before overflowing again—at the 17th-to-19th pace, four or five days without an overflow.
Yields, now with a price to compare against
Mining 1,000 PAPER by directly losing money now costs $91, versus $10 at open. Wash traders lose only about 13.7% of their booked losses per position pair, a cost of about $12.5. The perpetual prices 1,000 PAPER at $24.3.
The last 24 hours' distributions annualize to $0.086 per token: 352% at the perpetual price, 94% at the direct-loss cost. The last 7 days (including the tail of the second wave) annualize to $0.197 per token, 812% at the perpetual price. In other words, the perpetual price equals about 100 days of the last day's distributions, or 45 days of last week's. That gap is the market's judgment on how fast revenue decays.
▲ PAPER staking yields: against mining cost and perpetual price
How long to break even
Cash only, no cohort has broken even: first-day losers got back 0.58x, and every cohort after the 11th is at 0.15x or below. Counting PAPER at the perpetual price changes the picture: the first-day cohort is at 2.2x, and the 11th cohort at 1.0x. Direct-loss miners from the 12th onward have not broken even, sliding from 0.83x down to 0.27x. Wash traders' break-even line is about 0.14x, and every cohort is above it. At $0.024, the cheapest mining method is profitable again—which is what Part Four covers.
▲ Break-even multiple by loss date
Emissions cuts and activity
Activity follows mining returns. Hourly volume: $56 billion in the first ten hours, $7.5 billion on the 11th–12th, $3.6 billion on the 13th–16th, $2.3 billion on the 17th. Every turn lines up with a change in mining returns: the second wave came as the mining rate fell from about 26 to 13, just before the cap was due to rise; the 17th drop landed exactly on the day the cap was supposed to double; and on the 18th, volume picked up as soon as the perpetual price rose above mining cost.The take left behind per dollar of volume moved with it too: 0.50bp on day one, 0.21 to 0.34bp on the 11th to 12th, 0.61 to 0.76bp on the 13th to 15th, 0.13bp on the 17th, 0.37bp on the 18th. This matches the wash-trading mechanism: in a wash-trade pair one leg always loses everything and the other leg gets discounted, so the harder they wash, the higher the take left per dollar.
▲ Net loss per unit of volume
What is listed
para:PAPER is Paragon's perpetual contract. Paragon is a HIP-3 deployer on Hyperliquid (dex name para); this market was not opened by Papertrade, nor by Hyperliquid officially. Paragon spent 570.98 HYPE (about $45,000) in the HIP-3 auction to secure the PAPER ticker.
This is a pre-market: max 3x leverage, isolated margin only, and it will later convert to a standard perpetual.
The oracle is its own mark price 8-hour EMA, with an initial value of $0.012 set by Paragon as the listing reference price.
It has no connection whatsoever to Papertrade. PAPER cannot be transferred, no one can deliver it, and there is no spot to arbitrage against.
It opened on October 18 at 11:00 UTC, with open interest of about $30,000 at the time.
Price action
For an hour after the open it sat at the $0.012 reference price, right around the wash-mining cost ($0.0125). Then it started to run: $0.023 by 13:00, a high of $0.0352 in the 13:00 hour, a low of $0.0198 at 19:00, then around $0.0243. 24-hour volume was $13.9 million, 70% of all Paragon volume. Open interest was 203.5 million tokens, about $5 million. Funding was near zero.
At $0.0243, 8.69 billion tokens implies a market cap of $211 million, and the 12.7 billion cap implies $308 million.
▲ para:PAPER price and volume
The price's effect on mining
At $0.024, PAPER that washers mined for $0.0125 is priced at roughly double by the perpetual, so mining pays again. Gross loss was $300,000 per hour in the 24 hours before listing, rising to $800,000 per hour in the 11 hours after. Stakers received $800,000 on the 17th and $2.1 million on the 18th. By the 19th the heat had fallen back to $350,000 per hour.
This arbitrage cannot be closed. You can mine PAPER cheaply and short the perpetual, but the perpetual has only about $5 million of open interest, max 3x, and can never be delivered. Holders aren't hedging with it either, at least not with the same wallet. Of the top 300 holders (71% of supply combined), only 6 have opened shorts on para:PAPER, totaling 20 million tokens, or 0.3% of their holdings; another 5 are long.
▲ Gross loss and staking distributions before and after the perpetual listing
What this price means
This is the first number that can price PAPER, and it says PAPER is worth about 2x the wash cost.
It is thin, and self-referential: the oracle is the market's own EMA, leverage is 3x, and $5 million of open interest is pricing a $211 million token.
It adds a feedback loop: the higher the perpetual price, the more profitable mining is; the more mining, the more losses and staking distributions; the distributions in turn support the price. This loop weakens on its own, because as H rises, each dollar lost mines fewer PAPER.
First, credit where it's due. The design is new, and nine days in it is still running as advertised. The house raised not a single dollar and absorbed a $2.5 million drain on day one. The queue everyone feared would trap winners never appeared once across the five-minute snapshots, and the fair launch is verifiable on-chain.
The strongest bull case is structural. Every rule tilts the same way: losses are total, gains are discounted, and liquidations come early. The more trading there is, the more traders as a group must lose, and the pool fills itself. The data bears this out: over the 212 hours since launch, traders as a group were net profitable in only 41 hours, totaling $3.7 million, and lost in the other 171.
Looked at another way, this is liquidity grown out of trading. Every other way of launching a perpetual costs money up front: order books need market makers; oracle-priced pools like GMX's GLP or Jupiter's JLP need depositors to take every counterparty, and those depositors want yield; opening a HIP-3 market on Hyperliquid requires staking 500,000 HYPE, and you still have to find market makers yourself. Papertrade's pool started from zero, hit its $5 million cap about 70 minutes after the open, and has never been more than $800,000 from the cap since the 12th, with no seed capital and no LP incentives.
One step further, it could become a template for permissionless perpetual launches. A market needs only two things: a readable price, plus a pool. The docs already say any Hyperliquid perpetual can be listed, HIP-3 included. Once there are deployment tools and a separate pool per market, anyone can launch a perpetual the way anyone can launch a token on pump.fun.
The ceiling is the price source. 0x2025 moved ETH 0.12% for about $52,000 in fees, and thinner HIP-3 markets are cheaper still. For a permissionless version, each market's open-interest cap would have to be tied to the depth of its oracle's order book.
The token is a claim on future losses, and losses come in waves that follow mining returns. Stakers received $24.9 million from the 12th to the 16th, and only $800,000 on the 17th. The 17th was the one day we had no reason to mine, and stakers got about one-sixth of the prior day.
The later you come in, the more expensive it is. Losing $1 now buys only 10.9 PAPER, versus 100 at the open, and 69% of the cap has already been distributed. Wash trading is increasing supply without bringing cash to LPs. Once PAPER can be transferred, buying it directly will be cheaper than losing money to mine it for everyone except the washers.
The oracle looks at a single number: a single bid-ask midpoint, no TWAP, no deviation circuit breaker, and on Hyperliquid a few million dollars can move ETH 10 to 20bp. Limxn6 also notes that a two-legged wash trade hitting a price gap is effectively a free straddle, and that tail is borne by LPs.
The relay can censor. It orders by order size, cannot be audited externally, and both the relay and the liquidation keeper are run by the team.
The main price signal has no anchor. para:PAPER can change mining incentives and the market narrative without any change at Papertrade. The cap adjustment the team itself announced was never executed, and stakers cannot use announcements to predict their income.
The pool is safer than before. With $529 million of open interest, $64 million net long, and a $4.7 million pool, BTC and ETH would both have to rise about 3.7% from the entry prices of these positions before the money owed to winners exceeds the pool plus losers' margin. On day one that number was 0.7%. The closest it came in the past week was 2.2% on the 15th, when the largest one-hour move in BTC/ETH was 4.3%.
▲ Price move required to drain the pool
Mechanically, it delivered on its promises. The house raised no money, has been able to pay for nine days straight, no winner has ever queued, and 86% of net losses went back to stakers, who are basically the same wallets that are losing.
As a yield product, PAPER is a claim on an overflow that surges whenever mining pays, plus a 1% fee share. It now has a price: $0.024 on a thin perpetual, about twice the wash-mining cost.
As long as that spread persists, the perpetual is paying people to lose, and the losses feed the stakers. Once the spread disappears, revenue falls back to what a pure 1000x gamble can leave behind: the 17th was the only calm day, and stakers got $800,000 that day.
What to watch next:PAPER opens transfers. This is the fourth phase of the roadmap, with no timeline. With spot in place, perpetuals have an anchor, and wash traders can sell too.
$10 million cap. If it actually gets filled, overflow will stall for several days.
New market listings. The docs say any Hyperliquid perpetual can be listed. New markets bring new losers—this is the only thing that can add water to the tank.
Perpetual open interest. $5 million can't support real hedging. If it rises, expect holders to open shorts.
Mining rate. It's currently 10.9. For every additional $100 million in gross losses, the mining rate drops by more than another third; for mining to be worthwhile, the price of PAPER has to keep rising.