How it Works


Below is a basic walkthrough of the interaction between traders and Strike:


  • A ETHUSDC perpetual swap contract trading on Strike.

  • Mark Price: 1 ETH = 100 USDC.

  • Trader Alice is interested in getting exposure to the price movement of Ethereum.


1. Deposit

Alice deposits 20 USDC to her balance first.

2. Open a long position

Alice uses 10 USDC out of her balance as the initial margin to go long on 1 ETHUSDC with 10x leverage.

The prices from AMMs are calculated using constant-product curve, the same formula used by Uniswap to determine the market price.

Every trade is charged a transaction fee, which is (0.1% of the position's notional value) (could be updated by governance). 50% of the fee is put into the Insurance Fund, and the remaining transaction fee is deposited into the Transaction Fees Pool and shared with stakers later. In the case of Alice, she is charged 0.1 USDC from her balance when opening a new long position. As a result, her balance becomes 9.9 USDC.

3. Funding payment

Funding payment is paid/received every hour to keep the market price as close to the index price as possible. Assuming at the first funding time, the funding rate is 0.02777777778%. Alice has 1 long position in her account, so her margin would be deducted by 0.0416666667 USDC for the funding payment.

Please see: Perpetual Swap Spec for more details about funding payments.

4. Close position - Profit

Right after the first funding payment, the price of 1 ETHUSDC on the market skyrockets to 110 USDC. Alice happily closes her long position and pays 0.11 USDC as a transaction fee from her balance. After this, she gets 10 USDC as profit along with 9.95833333 USDC from her remaining margin, and her total balance becomes 29.74833333 USDC.

5. Close position - Loss

In an alternate universe, after the first funding payment for Alice, the price of ETHUSDC suddenly drops to 98 USDC on the market. "Non-believer of Vitalik" Alice panics and wants to close her position at a loss. In this situation, she can get 9.95833333 USDC (margin) - 2 USDC (loss) = 7.95833333 USDC back after paying 0.098 USDC from her balance as a transaction fee to close her position.

6. Liquidation

Plot twist! It turns out that Alice from another alternate universe passes out and doesn't learn of the price drop at the time. Later she awakes, only to find that her position has been liquidated. During her sleep, the price of ETHUSDC dropped further to 92.4 USDC, and that brings her margin ratio down to 2.4%, which is below the margin requirement ratio (2.5%).

A Keeper seizes the opportunity and liquidates Alice's position, and consequently earns (1.25% of the 100 USDC) (open position notional size) as the liquidation fee. Specifically, this Keeper earns 1.25 USDC as the liquidation fee, and the rest of the margin (1.15 USDC) is deposited into the Insurance Fund.

Please see: Perpetual Swap Spec for more details.


SKE holders can stake the SKE to Liquidity Reserve, which is used as the last line of defense to cover the unexpected losses from Strike. In return, stakers are rewarded with a portion of the transaction fees plus the staking rewards.

Stakers can stake SKEs to the Liquidity Reserve before the staking period has started. During a staking period, which is known as "an epoch" on Strike, stakers cannot withdraw their tokens from the Liquidity Reserve. At the end of an epoch, stakers who stake in that epoch are rewarded with transaction fees in USDC and staking rewards in SKE.

One thing to note here is that transaction fees are claimable right after the epoch, but staking rewards are locked until the first day of the same month in the subsequent year.

For instance, Token holder Bob could become a staker by:

  1. Staking in the Liquidity Reserve

    Suppose on 4/24/2020, which is before the start of the next new epoch starting from 4/26/2020, Bob stakes 10,000 SKEs to the Liquidity Reserve, and that amount accounts for 10% of the staking pool for the next epoch.

  2. SKE locked in the Liquidity Reserve

    The epoch starts and SKEs are locked in Liquidity Reserve for 7 days. Assume there are no stakers contributing liquidity after Bob.

    Suppose at the end of the epoch there are 1,000 USDC accumulated in the Transaction Fees Pool. In light of Bob's 10% ownership of Liquidity Reserve, he is eligible to claim 10% of transaction fees generated in this epoch, which is 100 USDC.

    Besides the transaction fees, there are staking rewards in SKE issued from the Staking Rewards Pool as a way to incentivize SKE holders to secure the network. Assuming that the staking rewards for this epoch is 10,000 SKEs, then Bob is eligible for 1,000 SKEs, which is not claimable until 4/1/2021.

  3. Unstaking from the Liquidity Reserve

    Bob can request unstaking from the Liquidity Reserve within the epoch, and he would be able to withdraw SKEs he staked in the next epoch.

Staking Risks

Please see: SKE Tokens for more details.