Mechanism Explainer
No-Loss, No-Liquidation
Timelock Perps payoff is a No-Loss, No-Liquidation perp payoff. Imagine trading perps where you make the entire profit, but don't make any loss and do not suffer from liquidation, just continue paying funding fees till you want to keep your position open.
Understanding the Payoff: Alice's Example
To intuitively understand this payoff, consider Alice trading a "No Loss Perp":
Alice longs $100 worth of token.
She pays $0.04 funding every hour
She keeps the entire upside if the token goes up
And loses nothing if the token goes down
She continues to pay the $0.04 funding till she wants to keep her position open.
Options as Perps
For the accoustomed, you can see that the payoff closely resembles a ATM Cash Settled European Everlasting Option.
Timelock Perps wraps an ATM cash-settled everlasting option into a retail friendly layer offering a simple, perps-like UX, so traders get familiar CLOB(Hyperliquid) like perps, but without liquidations.
Timelock abstracts away all of the options related complexity(strike price, premium, expiry etc) so the retail trades it like they trade perps on Hyperliquid or Lighter, but dont get liquidated.
Trade Example
Let's take the example of Alice making a 120x return on her 10USDC capital.
Alice's trade shows how No-Loss Perps can turn a tiny balance into large upside without liquidations, using a familiar perp-like UX.
Scenario Overview
Alice wants to long 1 ETH at 2400 USDC but has only 10 USDC in her wallet.
On a CLOB perps DEX (Hyperliquid, Lighter, Aster), this would require higher margin and have liquidation risk.
On Timelock, Alice opens a 1 ETH No-Loss Perps long directly from her wallet with no liquidations, even with just 10 USDC.
Funding And Effective Leverage
Assume ETH = 2400, IV = 50% the calculated funding for this trade is 1 USDC per hour.
Paying 1 USDC for 1 hour of exposure to 2400 USDC notional ≈ 2400x effective leverage.
Paying 10 USDC for 10 hours on the same notional ≈ 240x effective leverage.
Alice can always top up USDC in her wallet to extend the trade duration.
How it works:
To initiate 1 ETH long position at time=t, price =2400
Timelock borrows 1 ETH and escrows it
Timelock deducts 1 USDC per hour from Alice's Metamask
After 1 hour, Alice has paid only 1 USDC, equating to a 2400x leverage. She did not deposit any margin for the trade
Now:
If price goes up, Alice captures all of the upside
If price goes down, Alice does not lose anything more than the 1 USDC she has paid till now
Downside Scenario: Price Drops To 2000
At t + 3h, ETH trades at 2000:
Alice has paid 3 USDC in funding so far.
Hyperliquid she would have lost 400 USDC or have gotten liquidated.
On Timelock, her max cost/loss is just the 3 USDC she already paid. The position remains open with no liquidation.
Why?
Positions on Timelock are fully collateralized and backed by spot ETH borrowed from Uniswap.
On Hyperliquid, she holds a P2P derivative contract against a market maker, not real ETH.
Debt is denominated in ETH, which is held in Timelock Escrow
Escrow owns >= repay amount, so there is no concept of a forced closure or liquidation
To close position, Timelock simply repays back 1 ETH to the LP, and makes them whole
Upside Scenario: Price Rallies To 3000
At t + 5h, ETH trades at 3000 and Alice decides to close:
She has paid a total of 5 USDC funding over 5 hours.
Timelock Escrow holds 1 ETH now worth 3000 USDC.
Protocol flow:
Swap 1 ETH back into USDC on Timelock Swap for 3000 USDC equivalent.
Repay 2400 USDC to the LP to make them whole.
Remaining 600 USDC goes to Alice as profit.
Result:
Alice paid 5 USDC in total funding.
Alice receives 600 USDC profit → 120x return on the 5 USDC she actually spent.
At all times, her downside was capped at the funding paid; no margin deposit, no liquidation risk.
At no point of time was her position ever at a loss, or at risk of being closed, even when the loss exceeded her wallet balance or funding paid.
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