# Temporal Exchange

> Temporal Exchange is a DeFi protocol that reduces liquidation risk for perpetual futures traders. Instead of closing a position or relying on stop losses, traders use Temporal to reshape their P&L curve to push the liquidation floor further away while keeping their position open. Built on Hyperliquid.

Temporal introduces a "bands" mechanism: traders swap bounded slices of their perp position's payoff (equivalent to American-style perpetual options or vertical spreads) in exchange for a lower liquidation floor. All band swaps are premium-neutral at the time of trade. The AMM prices bands based on available reserves at each strike. An auto-protect feature can push a trader's liquidation floor ~10% lower in a single click, delivering ~50% more margin efficiency.

Temporal is backed by Outlier Ventures, Wormhole, and Borderless Capital.

## Docs

- [Documentation](https://docs.temporal.exchange): Full technical documentation including architecture, band mechanics, pricing logic, and liquidity structure.

## Product

- [App](https://app.temporal.exchange): The Temporal trading interface for swapping bands on Hyperliquid perp positions.

## Social & Contact

- [X / Twitter](https://x.com/TemporalFinance): @TemporalFinance
- [LinkedIn](https://www.linkedin.com/company/temporal-exchange): Temporal Exchange on LinkedIn
- [YouTube](https://www.youtube.com/@TemporalFinance): @TemporalFinance
- [Email](mailto:hello@temporal.exchange): hello@temporal.exchange

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## Product Detail

### What Temporal Does

Temporal reduces traders' liquidation risk on perpetual futures. Instead of closing positions or relying on stop losses, traders use Temporal to reshape where profits and losses occur to push the liquidation floor further from the current price.

**Illustrative example (auto-protect):**
- Trader deposits $10 margin, 10x leverage, $100 notional long BTC perp at $70k entry; auto-protect selected.
- Auto-protect exchanges gains on ~15% of notional above $77k in return for pushing the liquidation floor ~10% lower.
- If closed at $77k: ~$7.8 profit (78% return on margin), net of ~$2.2 premium charged only when profitable.
- Result: gains equivalent to ~8x effective leverage with liquidation risk of only ~5.4x leverage, yielding ~50% more margin efficiency.

### Bands

Bands are bounded slices of a perpetual futures position's payoff. They are equivalent to:
- **American-style perpetual options** (when no outer bound is specified)
- **Vertical spreads** (when an outer bound is specified)

All sold bands are fully backed by the trader's perp notional. Traders swap one band for another of equal value at the time of trade; all trades are **premium-neutral**.

**Valid swap structures:**
- Option ↔ Opposite-direction option
- Option ↔ Opposite-direction vertical spread
- Vertical spread ↔ Opposite-direction vertical spread

Positions are closed by simultaneously buying back the residual (out-of-money) portion of a sold band and selling the residual (out-of-money) portion of a bought band.

### Settlement

Settlement is mark-to-market. Net Bands Payout = Intrinsic Value + Residual (Extrinsic) Value.

- **Intrinsic Value:** payout from the in-the-money portion of the option / vertical spread
- **Extrinsic Value:** value of the out-of-money portion of the option / vertical spread

**Liquidation:** A position is liquidated if account leverage reaches 40x (i.e., margin falls to 2.5% of notional). At liquidation, the protocol closes the position and the pool absorbs any remaining equity. Temporal's band structure reduces the probability of reaching this threshold.

### Pricing Logic

Band pricing is determined by the AMM. The price of a band at any given strike is a function of the reserves available at that strike:

**P_s = F(R_s)**

- **s**: strike expressed in relative (%) terms vs. perp mark price at entry (not absolute dollar terms). E.g., a call with strike +25% means the strike is 25% above the prevailing perp mark price at position open.
- **P_s**: price at strike s, expressed as a fraction of the perp. E.g., a call at +30% might be priced at 0.6, meaning its value is 60% of the whole long perp.
- **R_s**: reserves available at that strike
- **F**: the AMM's pricing function

Price impact: trades at strike s affect the reserves, and therefore pricing, at strikes further out of the money than s.

### Liquidity Structure

LP-deposited reserves serve band trades across a range of strikes. The protocol maintains two pools:

- **Long pool:** strikes ranging from 0% to +100% from the prevailing perp mark price. Reserves at strike s = base LP reserves + cumulative value of all trades at or below s.
- **Short pool:** strikes ranging from 0% to –100% from the prevailing perp mark price. Reserves at strike s = base LP reserves + cumulative value of all trades at or above s.

LPs deposit capital into pools, providing the base reserves that underpin band pricing and trading capacity. LPs can take on leverage synthetically, amplifying both yield and exposure to pool P&L. LP returns are composed of transaction fees. Pool's intrinsic and extrinsic exposure are hedged on Hyperliquid. Pool NAV is tracked continuously; LP entry and exit follow the current NAV per share.

### Architecture

Temporal opens traders' long positions in a "Long Perp Wallet" and short positions in a "Short Perp Wallet" on Hyperliquid to avoid netting. Margin from liquidity providers is transferred across wallets frequently to equalise leverage. Hedging uses scale orders on Hyperliquid to manage pool risk when bands are opened.

### Fees

Users pay three fees:
1. **Perp DEX fee:** Hyperliquid transaction fee on position notional, as per the trader's HL fee tier
2. **LP transaction fee:** 0.5% on sold bands notional (paid to Temporal LPs)
3. **Platform fee:** 0.01% on sold bands notional (paid to Temporal)

### Backers / Investors

- **Outlier Ventures**: Web3 accelerator and venture fund
- **Wormhole**: Cross-chain interoperability protocol
- **Borderless Capital**: