> For the complete documentation index, see [llms.txt](https://learn.trovemarkets.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://learn.trovemarkets.com/trove-pudgy-penguins.md).
# Trove × Pudgy Penguins
Trove is partnering with **Pudgy Penguins** to bring **Pudgy Floor Perpetuals** on-chain.A cash-settled perp that tracks the **Pudgy Penguins floor** via Trove’s oracle framework.
The product is designed around a single principle:
**thin underlyings demand strong reference pricing + conservative risk logic.**
***
### What You’re Trading
Pudgy perps are **cash-settled** and track a **Pudgy Floor Index**.
* You are **not** trading a specific Pudgy token ID
* No NFTs move, no NFT custody, no delivery mechanics
* PnL is realized in the settlement asset based on the index move
{% hint style="info" %}
You’re trading the **collection floor index**, not a single NFT.
{% endhint %}
***
### Why NFT Perps Failed Before
Two years ago, “NFT perps” largely broke for predictable reasons:
* **Self-referential pricing:** last trade / internal prints became “truth” in thin markets
* **Wick-driven liquidations:** low liquidity created extreme prints → liquidation cascades
* **Bad debt events:** weak reference pricing + aggressive parameters amplified risk
Trove’s Pudgy perp is built specifically to avoid those failure modes by using a **tri-layer oracle** plus a **smoothed risk mark** (ORACLE + MARK + SMA).
***
## Oracle Design
{% hint style="info" %}
**Oracle = (Mark + Validator + EMA) / 3**
{% endhint %}
The oracle price is formed by averaging **three independent signals**, each starting at **⅓ weight**:
1. **Mark** (internal market signal)
2. **Validator** (external floor consensus)
3. **EMA** (trend + smoothing model)
This tri-layer design anchors pricing in external reality while remaining responsive to live market conditions.
***
### Design Principles
External data grounds the oracle in real-world pricing. Internal signals ensure responsiveness to live market sentiment.
***
### Oracle Components
#### 1) Mark (last traded price on Trove)
**Mark** reflects **real-time trader sentiment** and executed price discovery on Trove.
* Source: on-chain executions for the Pudgy perp market
* Strength: responsiveness to live demand
* Risk it avoids: ignoring actual flow and order-book reality
***
#### 2) Validator (cross-market floor consensus)
**Validator** is the **floor price aggregated across multiple NFT marketplaces**.
This is the “reality anchor.” The goal is not to chase every listing, it’s to create a **robust floor reference** that isn’t dominated by any single venue.
Validator logic (high level):
* pull floor listings across marketplaces
* filter suspicious / stale / abnormal floors
* aggregate into a cross-market floor value
{% hint style="info" %}
Validator is *not* “random external prices.” It’s a **cross-market floor**.
{% endhint %}
***
#### 3) EMA (HyperPS-style smoothing model)
**EMA** is an exponential moving average model (HyperPS-inspired) that:
* smooths short-term noise
* tracks trend
* reduces impact of one-off spikes
***
### Dynamic Weighting (Beta)
As more volume and deeper price discovery forms on Trove, the oracle can evolve:
* if internal liquidity becomes strong, **Mark/EMA weighting may increase** (>33%)
* if external markets become noisier, **Validator weighting may decrease**
* weights are tested and may vary during the Trove beta to optimize robustness
{% hint style="info" %}
Weights can change over time as liquidity and reliability change.
{% endhint %}
***
## ORACLE MARK SMA (Risk Mark)
Pricing for trading is one thing. **Liquidations and risk** are another.
Trove uses **ORACLE MARK SMA** as the **risk mark,** a smoothed mark built from the oracle stream.
**Why:** thin markets produce wicks. If you liquidate off last trade, you invite manipulation and cascades.
So the system references a mark that is:
* composite (3-signal oracle)
* smoothed (SMA)
* harder to game via single prints
{% hint style="info" %}
Liquidations are based on **ORACLE MARK SMA**, not last-price wicks.
{% endhint %}
***
## Funding
Funding is the mechanism that keeps the perp aligned with the oracle reference over time.
* If perp trades **above** the reference, **longs pay shorts**
* If perp trades **below** the reference, **shorts pay longs**
Funding prevents permanent drift while letting the market trade freely.
***
## Market Integrity and Safety
Pudgy perps are designed with **thin-underlying rules** in mind:
* robust oracle (Mark + Validator + EMA)
* smoothed risk mark (ORACLE MARK SMA)
* conservative market parameters during early liquidity
Typical safeguards include (parameterized per market):
* max leverage caps
* open interest caps
* funding clamps
* circuit breakers / oracle staleness rules
---
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