Papertrade Traders Show $18.2 Million in Losses on Launch Day, Stakers Credited $12.6 Million

Papertrade opened for trading on HyperEVM today, Oct. 10, with up to 1000x leverage on BTC and ETH perpetual contracts. Within hours, its public data feed showed traders deep in the red and token stakers collecting.

At 1:34 p.m. ET, the venue reported about $18.2 million in net realized trader losses and cumulative staking rewards of about $12.6 million. That works out to roughly 69% of net losses. Later figures cited for the same launch day put losses near $18.6 million and rewards near $12.57 million.

The 69% number is easy to misread. It is an aggregate comparison, not a recovery rate. The rewards go to people who hold and stake the PAPER token, not to the traders who lost the money, though the two groups can overlap.

How the money moves

Papertrade does not match buyers with sellers. It settles synthetic BTC and ETH positions against a single pool called Martingaler LP, which started at $0 and is funded by trader losses. Winning trades draw from the pool. Losing trades refill it.

Traders deposit USDC, with a $10 minimum and a one-time $1 activation fee. A trader who loses or gets liquidated has the loss go into the pool and is minted PAPER in return. While the pool is below $2 million, that is up to 100 PAPER per $1 of eligible loss. The rate falls as the pool grows.

Stakers earn a share of trading fees in USDC. Once the pool passes $5 million, the surplus goes to them too. The venue's snapshot showed about $5.01 million in the pool and no queued payout debt, meaning no winning trader was waiting on money the pool could not cover.

If the pool runs short, unpaid profits queue first-come, first-served, according to the protocol's rules as described in a pre-launch analysis.

The launch-day numbers

Papertrade recorded more than $300 billion in notional volume in its first day, with nearly $13.89 billion in liquidations, according to figures cited at launch. Josh Ong reported about $3 billion in open interest within the first hour.

About 3.17 billion PAPER had been issued by the 1:34 p.m. snapshot, with 3.09 billion of it staked. Almost every token in circulation was already earning from the losses.

The rewards figure is the venue's cumulative staking total, not cash claimed by each wallet. The Defiant noted that PaperDash's methodology likewise cautions against inferring individual wallet income from protocol fee totals. The loss figure also covers all traders collectively, not just people deliberately losing to farm tokens, and it excludes any value assigned to PAPER.

Who is behind it

The exchange is co-founded by the semi-anonymous traders Jez and Blurr. Pre-deposits opened ahead of launch and stayed open until trading began. The Oct. 10 launch date falls on the anniversary of last year's crypto crash. Frontend trading was scheduled to open at 10 a.m. ET following a HyperEVM network upgrade, with the rollout phased to manage network congestion.

The protocol's defenders have a straightforward argument, and it is built into the design. Every rule is public. Users opt in. A loser who stakes the PAPER they receive can earn a share of future losses from other traders. Shenchao TechFlow's analysis described the model as turning losing traders into "market makers" and liquidations into ownership.

The same analysis called the project "an extreme stress test of incentive design and risk boundaries." Its description of the product, "essentially a casino, where losing traders gradually become the owners of the casino's future profits," is the plainest summary of the structure.

What the numbers do not show

The compensation for losing traders is indirect. It depends on what PAPER is worth and on losses from other traders continuing to arrive. A trader who loses $1,000 gets tokens, not dollars.

Staker income is tied to losses and realized profit-and-loss flowing through the system. Heavy activity and frequent liquidations fill the pool past its $5 million threshold, and the overflow becomes staker yield. If trading slows, or if winners start draining the pool, that yield shrinks and a payout queue could form.

The reported figures come from the venue's own dashboard and cover one session on launch day. The data feed was last cited at the 1:34 p.m. ET snapshot.

The next test is the payout queue. The pool sat at roughly its $5 million cap with no queued debt at the snapshot, and the protocol's rules decide who gets paid first if that changes.