Papertrade Plans to Double Pool-Surplus Payout Threshold to $10 Million

Papertrade scheduled a doubling of the threshold for pool-surplus payouts to $10 million, a change that would require more liquidity to stay in its shared pool before surplus can be distributed to stakers.

The threshold was scheduled to rise from $5 million shortly after 2:45 p.m. ET (18:45 UTC) Saturday, Oct. 17. The change sets the balance that must remain in the pool before surplus is available for distribution; separate reward rules govern payments tied to settled trades.

Papertrade’s synthetic perpetual positions use the midpoint of Hyperliquid’s best bid and offer for pricing, with the protocol’s pool taking the other side of each trade. Trader losses add to the pool, while profits are paid from it. If the pool cannot cover a full profit, the unpaid amount can wait in a queue for later inflows. USDC distributions tied to settled-trade PnL require the pool to cover payouts and have no payouts queued.

Under Papertrade’s loss-linked reward model, each $1 of eligible losses could mint 100 PAPER under launch rules while tracked pool liquidity was below $2 million. The issuance rate declines as the pool grows. Staked PAPER can earn USDC from eligible settled-trade PnL when payout conditions are met, as well as from pool surplus above the threshold. PAPER minted after a loss is a separate asset; it does not return the lost cash, and any recovery depends on later USDC distributions.

The design can make a hedge lose money even when it limits exposure to an asset’s direction. In an equal-sized long and short pair, one position may profit while the other loses. Papertrade reduces payouts on profitable positions without applying a matching reduction to losses, so the combined trades can leave a net cash loss.

Papertrade lists leverage of up to 1,000×. At that level, a 0.1% adverse move on a $100,000 position represents $100 in gross losses, equal to $100 of initial margin before liquidation rules and other costs. Any PAPER minted after that loss remains separate from the cash loss.

If implemented, the higher threshold would leave more tracked liquidity in the pool before surplus could be distributed, delaying that source of USDC for stakers. The pool would also retain more liquidity before surplus payouts, while rewards tied to settled-trade PnL remain subject to their own payout conditions.