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Introduction to Overlay

What is Overlay?​

Overlay is a decentralized perpetuals exchange built for long-tail crypto assets — tokens that trade on-chain but lack the liquidity depth to be listed on major derivatives venues. Any project can launch a perps market on Overlay without needing market makers or liquidity providers.

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For a deep dive into Overlay Protocol, please refer to our white paper here.

Who is Overlay for?​

  • Traders — access leveraged exposure to tokens you couldn't trade as perps anywhere else. Long or short, stablecoin-settled, no expiry.
  • Projects — launch your own perps market in days. No market maker required. Your community trades, you earn a share of the fees — permanently.
  • Communities — pool capital to fund a perps market for your favorite token. Earn 50% of trading fees proportional to your contribution, permanently.

How does Overlay offer markets without counterparties?​

Users build positions against the protocol itself — effectively against every OVL holder simultaneously. This eliminates the need for liquidity providers or market makers, which is what makes thin-liquidity token markets possible in the first place.

How Trading Works​

Traders open positions using stablecoins as collateral. All PnL is settled in stablecoins — no exposure to OVL required to trade.

Behind the scenes, OVL handles the protocol's internal accounting and balance mechanics. When traders profit, the protocol mints OVL accordingly; when traders lose, OVL is burned. This keeps the trading experience clean and stable for users while OVL token economics operate at the protocol level.

Pricing​

Prices on Overlay are derived from oracle feeds rather than an order book. The protocol fetches values from non-manipulable, non-predictable data sources and applies built-in adjustment mechanisms on top. For more detail, see Pricing and Price Impact.

OVL​

OVL is the native token of Overlay Protocol — a BEP-20 used for protocol-level accounting and DAO governance. It acts as the liquidity backbone of the system, enabling markets to exist without traditional counterparties. For more on OVL, see our OVL section.

Nature of Contracts​

Positions on Overlay are perpetual — no expiry, no settlement date, continuously rolling. They share structural similarities with conventional perps but differ in key ways given the absence of a traditional counterparty. For a full breakdown, see How Overlay is Different.