Overlay Protocol is a decentralized derivatives exchange that enables perps markets on a wide range of underlying data sources without relying on traditional order books or MM's. Prices on Overlay are derived from oracle-based data feeds rather than from internal liquidity or order matching. Traders open and close positions directly against the protocol, with payouts determined by price movements of the underlying reference data. The protocol manages risk through configurable parameters, including open interest caps, funding rates, and dynamic spreads. These mechanisms are designed to balance long and short exposure and limit systemic risk within each market. Overlay supports the creation of markets on all type of assets, including long-tail crypto assets and data-driven indices.
