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# Power Derivatives

Before we get into how *Potentia* works, we must understand how Power Derivatives work.

## Definition

A power derivative is a

perpetual derivativeindexed to a powerof the price of an underlying instrument.

Given a price

Consider the following examples

is an example of a power derivative that tracks the price of BTC. is another example of a power derivative that tracks the price of USDT

The following shows the

Upon calculation, it can be derived that, if BTC increases by 4X, the price of power perp

## Why Power Perps?

Look at the following percentage returns of different power derivatives of an underlying asset.

From the above chart, it can be deduced that for all the powers,

- Traders can take leveraged positions on underlying assets.
- By design, the power perp value
always remain positive, ensuring traders are protected from liquidations even during market volatility.

A detailed explanation of Power Derivatives is provided in our whitepaper.