Protocol Rules

# Leverage

S&F uses power exposure, not borrowed linear leverage.

For the high-level mechanism, read Power Perpetuals.

# Linear leverage

Traditional perp leverage usually means borrowing exposure against margin.

That model requires liquidation logic. If losses approach the margin threshold, the venue must close the position to protect the system.

S&F does not use that model for trader exposure.

# Power exposure

S&F embeds exposure in the tracked price.

For each asset price P, S&F can create:

• P: standard exposure;
• P^2: squared exposure;
• P^3: cubed exposure.

Squared exposure is not "2x leverage". Cubed exposure is not "3x leverage".

They are power perpetuals. Their effective leverage changes with the price path.

# Example

If the tracked price moves from 10 to 30:

• standard exposure moves from 10 to 30;
• squared exposure moves from 10^2 to 30^2, or 100 to 900;
• cubed exposure moves from 10^3 to 30^3, or 1,000 to 27,000.

The payoff is nonlinear.

# Why this avoids trader liquidations

The trader does not borrow extra collateral from the protocol.

If the powered exposure loses value, the position token loses value. There is no trader margin account that must be forcibly closed before it falls below a maintenance threshold.

This does not eliminate risk. It changes where risk lives: in token value, pool accounting, funding rate, and black swan mechanics.