Papertrade Keeps PAPER Token Non-Transferable Over Perp Attack Concerns

Papertrade says PAPER stays locked in place

Papertrade said on Monday that it has no current plans to let its PAPER token be transferred. The team gave the reason in a post on its verified X account at 6:30 p.m. ET on Oct. 19.

The team said external perpetual futures markets for PAPER could make attacks on the platform's trading bankroll profitable. A perpetual future, or "perp," is a contract that lets traders bet on a price without an expiry date.

The decision leaves traders who earned PAPER by taking trading losses holding a token they cannot move between wallets or sell.

What holders can and cannot do with PAPER

• PAPER cannot currently be moved between wallets or sold.
• Holders can still stake PAPER. Staking means locking tokens up to earn a share of returns.
• Staking pays out USDC, a stablecoin pegged to the US dollar, from trading fees and surplus in the liquidity pool.
• Unstaking is also still allowed, but it only returns PAPER to the holder's wallet. It does not make the token tradable.

How the plan changed since October 1

The position differs from the roadmap Papertrade set out on Oct. 1. That plan placed token transfers in a fourth phase after launch and said they would be turned on "after a sufficient period of time has passed." It gave no date.

The earlier plan justified the transfer restriction as a way to encourage trading participation and reduce congestion on the blockchain.

The attack argument Papertrade laid out

Papertrade runs on HyperEVM, the smart-contract network tied to Hyperliquid. Its trades settle against a liquidity pool funded by cumulative user losses, and it reads prices from Hyperliquid's order books instead of placing trades on Hyperliquid itself, according to the project's documentation.

The team said a PAPER perp would amount to a leveraged bet on whether the bankroll can stay solvent. In its explanation, an attacker could try to combine gains from manipulating the prices Papertrade uses with profits from a short position against PAPER, making the total payoff larger than the bankroll alone.

Papertrade said it can cap its own bankroll but cannot control derivatives exposure outside its system. In a hypothetical example, the team said spending $15 million to attack a $10 million bankroll would lose money, but adding $10 million of PAPER short exposure could turn the same attack profitable. The team presented these numbers to illustrate its risk argument, not to describe an attack that happened.

PAPER derivatives are already trading elsewhere

Aster said Monday that it had launched PAPER pre-launch perpetuals with up to three times leverage. MNX announced PAPER pre-market futures with three times leverage on Oct. 18.

Those contracts are separate from moving or selling the PAPER balances that holders have in their own wallets.

A planned change to PAPER issuance

In the same statement, Papertrade outlined a planned change to how PAPER is issued. The team said it would gradually dilute older holders in favor of more recent users, moving the token closer to a trading-rebate mechanism.

The team said it would publish full documentation over the coming day and announce when the contract upgrades entered a timelock. Activation was scheduled 24 hours after that point, pending final security checks.

What is confirmed

• Papertrade stated it has no current plans to allow off-contract token transferability.
• The statement was posted on the project's verified X account at 6:30 p.m. ET on Oct. 19.
• Staking and unstaking remain available, with staking rewards paid in USDC.
• PAPER is not now transferable or sellable by holders.
• Aster and MNX each said they launched leveraged PAPER derivatives, as announced by those platforms.

What is still unclear

• No date has been given for when, or whether, PAPER transfers will be enabled.
• The $15 million and $10 million figures were a hypothetical example from Papertrade, not a reported attack.
• Full documentation of the planned issuance change had not yet been published at the time of the statement.
• The timing of the contract upgrades depends on a timelock and final security checks, which have not been confirmed as complete.

Why this matters

Many crypto tokens can be freely moved or sold. PAPER holders cannot do either right now, so the value they can access is limited to staking payouts in USDC. The team's stated worry is that outside leveraged markets for PAPER could give attackers a financial reason to target the platform's trading pool, which is funded by user losses.

What happens next

Papertrade said it would publish full documentation of the issuance change over the coming day, then announce when the contract upgrades enter a timelock, with activation set 24 hours after that, subject to final security checks.

Sources

• The Defiant