What a hedged PAPER farm costs
A long and a short of the same size cancel the price risk, and still lose money every time. That loss is the cost of the PAPER, and it depends almost entirely on how far the price moves before you close.
Why a hedge is not free
Open a long and a short of the same size at the same price. Whatever the price does next, one leg loses exactly what the other gains, before the exchange takes its cut.
The losing leg pays its loss in full and mints PAPER on it. The winning leg is where Papertrade earns: it charges nothing on losses and takes everything from winning closes, in three steps.
- A deadband. The exit is measured as if the price were 0.002% less favourable, so a win smaller than that pays nothing.
- A haircut. Papertrade calls it asymmetric impact: a cut of the gain that is steepest on the smallest price moves and shrinks as the move grows.
- A fee. 2% of what is left.
So the pair always ends in a net loss: the loss of one leg minus what the other was allowed to keep. That net loss, divided by the PAPER the losing leg minted, is the cost of hedged PAPER.
Bigger move, smaller haircut
The haircut depends on how far the price moved between open and close, not on the leverage. Close both legs after a tiny move and the winner keeps almost nothing; let the price travel and it keeps most of its gain.
BTC at 100x, $100.0K per leg, both legs closed by hand:
| Price move at close | Winning leg keeps | Net cost of the pair | PAPER minted | Cost per PAPER |
|---|---|---|---|---|
| 0.02% | 38.7% | $12.26 | 702 | $0.01747 |
| 0.05% | 60.7% | $19.64 | 1,755 | $0.01119 |
| 0.1% | 72.4% | $27.57 | 3,511 | $0.00785 |
| 0.25% | 81.3% | $46.79 | 8,777 | $0.00533 |
| 0.5% | 84.6% | $76.86 | 17,554 | $0.00438 |
| 0.9% | 86.2% | $124.33 | 31,598 | $0.00393 |
Worked out at the mint rate of 35.8 PAPER per $1 and the haircut terms Papertrade publishes right now.
The lowest this kind of hedge can go today is $0.00336 per PAPER. At very large moves the haircut shrinks to its base rate of 10%, and the fee stays.
The catch is that a bigger move takes longer to arrive, and both margins stay locked while you wait. It also needs room: at high leverage the losing leg is liquidated before the price gets far.
Close it yourself, or wait for liquidation
Leverage decides how far the price can go before the losing leg is liquidated. A liquidation is a hard stop: the whole margin is forfeited, and PAPER is minted on all of it.
The trigger sits a little before the point where the margin would be gone, about 0.048% of the price earlier. At low leverage that gap is nothing. At very high leverage it is a large part of the margin, which makes being liquidated much dearer than closing by hand just before.
| Leverage | Liquidation at a move of | Cost if closed just before | Cost if liquidated |
|---|---|---|---|
| 10x | 9.952% | $0.00342 | $0.00346 |
| 100x | 0.952% | $0.00393 | $0.00497 |
| 1000x | 0.052% | $0.01122 | $0.01889 |
Against a plain loss
A trader who simply loses pays $0.0279 per PAPER at the current mint rate. The median wallet with 10K+ PAPER has paid $0.0104.
A hedge pays the haircut every single time, but never more than that: the cost is known before the trade is opened. Trading one way can come out cheaper, but only while the wins keep outrunning the losses.
When the payout queue is on
If the pool cannot pay a winner at once, the profit waits in a queue. Two things change for a hedged pair: the pool-side fee on the losing leg is waived, so that leg mints slightly more PAPER, and the winning leg is paid later rather than at close. Right now the queue is empty.
What the arithmetic leaves out
- Entry. It assumes both legs open at the same price. Two orders are never filled at the same instant, and the gap between them is a cost or a gain of its own.
- The return. It prices the PAPER, not what the PAPER will earn. That depends on staking payouts, which have fallen far since launch.
- A hedge elsewhere. A short on another exchange escapes the haircut but pays that exchange's fees and funding, and it is invisible in the Papertrade data.
Checked against real closed trades, the model on PAPER Scope is off by less than one percentage point of the win.
Short answers
Is hedged PAPER farming free of risk?
No. The hedge removes the price risk and replaces it with a known cost. What stays open is whether the PAPER ever earns that cost back, and what happens if the two legs are opened or closed at different prices.
Which leverage makes PAPER cheapest?
Leverage does not change the haircut. It sets how much margin is locked and how far the price can move before liquidation, and so how big a move the pair can wait for.
Why did my winning trade pay so little?
Because of the haircut on small moves. A win closed after a move of a few hundredths of a percent gives most of its gain back to the pool.
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Text last updated Oct 11, 2026. The figures are read live from the public Papertrade data. PAPER Scope is unofficial and none of this is financial advice.