This guide provides a technical walkthrough on how to provide liquidity to Perennial LP Vaults, the core engine of the Perennial Protocol Official. This is how you can earn Perennial real yield by acting as the counterparty to traders.
Step 1: Understanding the Peer-to-Pool Model
Unlike AMMs, Perennial uses a Peer-to-Pool model. Traders are betting on an asset's price movement. Liquidity Providers (LPs) deposit collateral into a vault that takes the opposite side of those trades. If traders lose, the LP vault wins, and vice-versa. LPs also earn fees from trading volume.
Step 2: Connecting to the dApp on Arbitrum
Navigate to the official platform. Ensure your wallet is on the Arbitrum network, as this is a Perennial Arbitrum guide.
Step 3: Supplying Liquidity to a Vault
Browse the available Perennial Leverage Markets. Each market has two vaults: a "long" vault and a "short" vault.
Choose a vault. If you deposit into the "long" vault for ETH, you are taking the counterparty position to traders who are shorting ETH.
Specify the amount of collateral (e.g., USDC) you wish to deposit.
Execute the transaction to supply liquidity.
Your capital is now actively earning fees. Developers can also use the Perennial developer SDK to programmatically manage LP positions. For a full breakdown of the risk mechanisms, consult the Full Official Documentation.
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