Papertrade Keeps PAPER Token Non-Transferable Over Perpetual Futures Attack Risks
Papertrade has no current plans to make its PAPER token transferable, citing concerns that attackers could exploit external perpetual futures markets to profit from attacks on the platform's trading bankroll. The decision maintains restrictions on moving PAPER between wallets or selling token balances, even as third-party platforms introduce derivatives tied to the token.
In a statement published on its verified X account at 6:30 p.m. ET on Oct. 19, the Papertrade team said it had no plans to permit transfers outside the platform's contract at this stage. The position marks a change in expectations set out in the project's initial rollout plan, which had identified token transfers as a later development phase.
Why Papertrade Is Restricting PAPER Transfers
Papertrade operates on HyperEVM, the smart-contract network associated with Hyperliquid. According to the project's documentation, trades settle against a liquidity pool funded by users' cumulative trading losses. The platform uses prices from Hyperliquid's order books to determine trade outcomes rather than executing those trades directly on Hyperliquid itself.
The team warned that allowing PAPER to trade through perpetual futures could create an additional financial incentive for attacks. It described a PAPER perpetual contract as "a leveraged bet on bankroll solvency," arguing that an attacker could potentially combine gains from manipulating the prices used by Papertrade with profits from shorting PAPER.
Such a strategy could increase the potential payoff beyond the funds available in the platform's trading bankroll. Papertrade said it could limit the size of its own bankroll but could not control the amount of exposure accumulated through external derivatives markets.
Papertrade Illustrates a Potential Attack Scenario
To explain the concern, the team presented a hypothetical example involving a $10 million bankroll. An attacker spending $15 million to target that bankroll would lose money under the scenario described by Papertrade. However, adding $10 million in short exposure to PAPER could potentially turn the same attack into a profitable strategy.
The figures were presented to illustrate the team's risk assessment and do not indicate that such an attack has occurred.
Third-Party Platforms Launch PAPER Derivatives
Despite Papertrade's transfer restrictions, derivatives tied to PAPER are already being offered elsewhere. Aster announced on Monday that it had launched PAPER pre-launch perpetual contracts with leverage of up to three times.
MNX also announced PAPER pre-market futures with three times leverage on Oct. 18. These products are separate from transferring or selling the PAPER balances held by Papertrade users, meaning the token's transfer restrictions do not prevent third-party platforms from offering derivatives linked to it.
PAPER Holders Face Changes to Token Economics
Users who earned PAPER through trading losses remain unable to move the tokens between wallets or sell them as transferable assets. Under Papertrade's existing documentation, the token's current economic benefit comes from staking, which provides access to USDC distributions funded by trading fees and liquidity-pool surplus.
Staking and unstaking remain available. However, unstaking returns PAPER to the holder's wallet without making the token transferable or tradable.
The restrictions also differ from the project's Oct. 1 rollout plan, which placed token transfers in a fourth phase after launch. That plan said transfers would be enabled "after a sufficient period of time has passed," without providing a specific date. The initial explanation focused on encouraging trading participation and reducing on-chain congestion.
Papertrade's latest statement also outlined a planned change to token issuance. The team said the adjustment would gradually dilute older PAPER holders in favor of more recent users, moving the token closer to a trading-rebate mechanism.
The team said it would publish full documentation over the following day and announce when the contract upgrades entered a timelock. Activation was scheduled for 24 hours after that point, subject to final security checks.
source: thedefiant
Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.
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