How to efficiently cultivate $PAPER on Paper Trade

Author: @degentradingLSD

The token emission mechanism of Paper Trade is very unique—only losses will create $PAPER tokens, and these tokens will be directly credited to your account.

The current emission rate is 16.6 PAPER minted for every $1 lost.

Positions themselves do not incur any fees, nor is there a funding fee. Instead, fees are charged on profitable positions.

These fees flow in a tiered manner. First, any profit below 2bps will be considered zero, protecting the protocol from manipulation of the mid-price in Hyperliquid (HL).

After that, a graduated haircut will be applied to profits, with the haircut based on the difference between entry and exit prices—the greater the difference, the smaller the haircut.

Therefore, the best way to farm $PAPER currently is to ensure you have the lowest net cost basis. In other words, minimize the haircut on your profits as much as possible.

However, there is a trade-off, which is time. Waiting for significant volatility means longer intervals between cycles. Especially when trading manually—after all, do you really want to sit in front of your computer all day watching the market?

Additionally, as more PAPER is minted, the minting rate of $PAPER will also decay—this means that at some point, you might prefer to pay a higher initial cost (plus staking rewards).

To implement this Delta neutral farming strategy, what you should do is: simultaneously open long and short positions at 100x or 200x (maximum). When the losses are significant enough, first record (close) the losses, then also record (close) the profits. Repeat this cycle.

If you get liquidated even once, the farming cost will increase significantly. This is because you will be hit with liquidation fees. At the same time, you will need to immediately close profitable positions.

Since liquidation takes priority over closing positions, this means your trades (long and short) may ultimately close at very different prices, as they do not fall within the same block.

Market congestion is also more likely to occur during significant upward movements—therefore, I do not recommend leverage exceeding 100.

You can trade manually. Or you can use an automated farming bot. The fee for using this bot is only 10% of the farming cost, much lower than the slippage costs you would incur when trading manually.