# Perpetuals-Based

Some Toros leveraged tokens achieve their target leverage by opening positions on perpetual futures protocols. This is one of two mechanisms Toros uses to build leveraged tokens.

Toros uses two perpetual futures venues depending on the chain:

* **GMX on Arbitrum** — used for crypto leveraged tokens such as altcoin majors and bear positions
* **Hyperliquid on HyperEVM** — used for assets that Hyperliquid lists as perps, including commodities (Gold, Silver) and equity indices (Nvidia, Nasdaq 100, S\&P 500) alongside crypto

## How It Works

1. Deposit collateral into the perpetual futures venue (GMX or Hyperliquid)
2. Open a leveraged perpetual futures position at the target leverage ratio
3. The protocol manages the position automatically, including rollovers and adjustments

This approach is more capital-efficient than the money market method because a single transaction establishes the full leveraged position.

## Rebalancing

Like all Toros leveraged tokens, perpetuals-based tokens are rebalanced to maintain their target leverage. The protocol adjusts position sizes when the underlying asset price moves significantly.

This automated rebalancing reduces the risk of liquidation by scaling down exposure as prices move against the position.

## Advantages

* Capital-efficient: full leverage in a single position
* Supports a wider range of assets, including altcoins with limited lending market liquidity and non-crypto exposures (commodities, equity indices) accessible via Hyperliquid
* No need to manage borrow positions across lending protocols

## Costs

* Funding rate payments: perpetual futures positions pay or receive a funding rate depending on market conditions. In bullish markets, long positions typically pay funding to shorts.
* Trading fees on position adjustments
* [Volatility decay](/leveraged-tokens/volatility-decay.md) from rebalancing in choppy markets

## Which Tokens Use This Mechanism

Perpetuals-based tokens are commonly used for altcoin leveraged tokens, bear (short) tokens, and HyperEVM-deployed tokens for commodities and equity indices. 1x Tokens also use this mechanism. For the full token list, see [Available Tokens](/leveraged-tokens/available-tokens.md).

## Comparison

For an alternative mechanism using lending and borrowing, see [Money Market-Based](/leveraged-tokens/money-market-based.md).


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