Papertrade, a new onchain derivatives platform, went live on HyperEVM, Hyperliquid's smart contract layer, on October 10. Just four days later, its revenue had reached $37.03 million, according to DefiLlama. Over the same seven-day window, Pump.fun generated $16.06 million in revenue, while Hyperliquid recorded $14.56 million. Taken together, the two prominent protocols produced less than Papertrade has in its first days of operation.

On a 24-hour basis, Papertrade ranks third among the more than 2,600 protocols tracked by DefiLlama, behind only Tether and Circle, the issuers of USDT and USDC.

Every Trade Runs Against a Shared Pool

On most exchanges, one trader buys while another sells, and the venue charges a small fee for matching the two sides. Papertrade operates differently: there is no second trader to be matched. Users bet on whether the price of BTC or ETH will rise or fall, and a shared pool of USDC takes the opposite side of every position.

When a trader wins, the pool pays out. When a trader is on the losing side, the funds flow into the pool, and the trader receives newly minted PAPER tokens, starting at 100 PAPER per $1 lost. Papertrade's official documentation states that the token has no team, venture capital, or airdrop allocation, which means losing is the only way new tokens come into existence. Once the pool tops $5 million, everything above that threshold goes to users staking PAPER. At present, the tokens cannot be sold or transferred between wallets.

The platform offers leverage of up to 1,000x, which is why losses can pile up very quickly. At that level, a $100 deposit becomes a $100,000 position, and an adverse move of just 0.1% can wipe out the trade.

Most of Papertrade's revenue consists of this overflow of trader losses. The $37 million figure is largely a record of how much users have lost since the platform's Saturday launch.

One Wallet Moved the ETH Price and Took $1.28 Million

Papertrade does not run an order book. Instead, it takes its BTC and ETH prices from Hyperliquid, using the midpoint between the best price buyers offer and the best price sellers ask. When Hyperliquid's price moves, Papertrade's moves with it. Because the platform's shared pool, not another trader, sits on the opposite side of every position, whoever moves the price source moves the pool's payouts with it.

Wallet 0x2025…840e worked this out in less than a day. Between 6:01 and 6:02 PM ET on October 10, the wallet bought around 6,060 ETH on Hyperliquid while simultaneously holding massive leveraged long positions on Papertrade. ETH rose by roughly $3, and while a 0.12% move barely registers for most traders, a position at 1,000x leverage makes it sizable. The wallet then sold, and later flipped to shorts and executed the maneuver in reverse.

The bill on Hyperliquid came to roughly $52,000 in fees on $231 million of ETH. The payout on Papertrade was $1.28 million. Papertrade has since cut its open position limits.

New Losses Pay Out to Earlier Losers

PAPER changes who acts as the house. Stakers collect the pool's surplus, and every staker obtained their tokens by taking a losing trade. Once the pool tops $5 million, new losses flow back to traders who lost earlier.

This is not a refund. A trader who loses $1,000 receives PAPER that cannot yet be sold, though staking it does pay out in USDC. The mint rate also drops once the pool passes $2 million, so later losers receive less PAPER per dollar than early ones.

The design depends on a steady flow of new losses. When the pool cannot cover a winning trade, Papertrade queues the unpaid profit and settles it from future traders' losses. If losses slow, winners wait longer to be paid and stakers earn less. Where the pool stands relative to the two published thresholds — the $2 million point where the mint rate drops and the $5 million point where staking payouts begin — therefore determines how the model behaves from here.