A cryptocurrency wallet generated $10.1 billion in trading volume on decentralized derivatives platform Papertrade while losing nearly $1 million on its actual trades, only to finish approximately $17,800 ahead after receiving substantial staking rewards.
Blockchain analytics firm Lookonchain identified the activity on October 12, reporting that wallet 0x35b2 executed 1,012 trades, accumulated $979,000 in trading losses and received 252 million PAPER tokens alongside approximately 997,000 USDC in staking rewards.
The unusual outcome highlights an increasingly important question for decentralized finance: can a trading platform’s incentives make repeatedly losing money on trades economically worthwhile?
The wallet’s final reported profit was relatively modest compared with its extraordinary activity. But the figures illustrate how token distributions and revenue-sharing mechanisms can change trading economics, potentially encouraging participants to pursue rewards rather than conventional trading profits.
One Wallet Executes 1,012 Trades Worth an Average $9.98 Million Each
According to Lookonchain, the address 0x35b29bdd690f95fe35c9645f21866b04616295a7 generated $10.1 billion in cumulative notional trading volume through 1,012 transactions on Papertrade.
That works out to an average of approximately $9.98 million per trade, an unusually large figure for a single wallet on a newly launched decentralized derivatives platform.
Despite the volume, the trading activity itself was unprofitable. The address recorded approximately $979,000 in losses, equivalent to about 0.0097% of its cumulative reported notional volume.
However, the wallet also accumulated 252 million PAPER tokens through the protocol’s loss-based token issuance system and received roughly 997,000 USDC through staking rewards.
The USDC rewards were sufficient to offset the trading losses, leaving a reported net profit of approximately $17,800. The slight difference between the rounded loss and reward figures reflects the precision of the published estimates.
Importantly, the 252 million PAPER tokens should not be interpreted as $252 million in additional earnings. PAPER represents a claim on the protocol’s reward mechanisms, and its realizable value depends on liquidity, transferability and future distributions.
The wallet owner’s identity and the strategy behind the trading activity have not been publicly established. The figures come from Lookonchain’s analysis rather than independently audited financial statements.
Papertrade Rewards Losing Traders With PAPER Tokens
Papertrade operates on HyperEVM, using price information from Hyperliquid to settle synthetic perpetual positions against a protocol-controlled liquidity pool.
Unlike conventional derivatives exchanges, Papertrade does not match every trade against another trader through its own order book. Instead, its liquidity pool acts as the counterparty, gaining when traders lose and paying out when their positions are profitable.
The protocol supports leverage of up to 1,000 times and advertises trading without conventional notional fees, spreads or recurring funding payments. It instead applies an asymmetric deduction to profitable positions.
Its defining feature is the PAPER token.
Under Papertrade’s protocol documentation, eligible realized trading losses generate PAPER tokens. The initial issuance schedule allows up to 100 PAPER per dollar of eligible loss while the pool remains below a specified liquidity threshold, with the issuance rate declining as the pool grows.
Traders can stake PAPER to participate in USDC distributions generated by the protocol, including fees and qualifying liquidity-pool gains.
That creates an unusual relationship between losses and potential future income. A trader losing money receives tokens that can generate rewards, rather than simply walking away with a reduced account balance.
However, those tokens do not automatically reimburse the original loss. The protocol’s launch rules also describe PAPER as initially nontransferable, making staking distributions particularly important to its economic value.
The reported 252 million PAPER allocation is also worth examining. At a maximum issuance rate of 100 PAPER per dollar, that quantity would require at least $2.52 million of eligible loss basis. This exceeds the reported $979,000 net trading loss, illustrating why gross losing settlements and offsetting profitable trades cannot be treated as the same figure.
The wallet’s exact sequence of gains, losses, token issuance and reward claims would be needed to reconcile the full economics.
Papertrade’s Launch Has Already Exposed Other Market-Structure Risks
The discovery comes shortly after Papertrade began live trading on October 10, following substantial prelaunch deposits and interest in its high-leverage trading model.
The protocol has already faced scrutiny over traders attempting to exploit its reliance on external market prices.
As Dave Finances reported in its investigation into Papertrade’s response to Hyperliquid price manipulation attempts, some participants allegedly moved prices on Hyperliquid while holding considerably larger synthetic positions on Papertrade.
Papertrade acknowledged the manipulation attempt and said it was tightening trading limits and other controls.
That issue is separate from the activity identified by Lookonchain. There is no established evidence that wallet 0x35b2 engaged in price manipulation or violated protocol rules.
Both developments nevertheless demonstrate how aggressively traders are testing the economics of a new derivatives platform offering extreme leverage and unconventional financial incentives.
Why Losing Money Can Become a Rational Trading Strategy
The striking part of this case is not the $10.1 billion headline volume. It is the fact that the wallet’s reported trading losses were almost entirely offset by income generated through the protocol.
In traditional trading, losing $979,000 is an unsuccessful outcome regardless of how much volume produced it. Papertrade complicates that calculation because losing trades can create an asset that participates in future revenue distributions.
A sophisticated participant might therefore evaluate a losing position differently. The relevant question becomes whether the value of the tokens earned and the cash distributions they generate exceeds the economic cost of the trading losses.
In this wallet’s case, Lookonchain’s numbers suggest that the USDC distributions alone slightly exceeded those losses.
But that does not establish a repeatable, risk-free strategy. Reward rates can change, competing stakers can dilute future distributions, the liquidity pool can experience financial pressure and profitable positions may encounter delayed settlement if available liquidity becomes insufficient.
As explained in Dave Finances’ guide to crypto perpetual futures, leverage and trading risks, large notional exposure does not necessarily require equivalent starting capital. It also does not measure the amount of actual wealth generated.
Those distinctions are particularly important when evaluating a platform capable of producing billions in notional activity through repeated leveraged trades.
Does $10.1 Billion in Volume Represent Genuine Market Demand?
The figures also raise a difficult question about how investors should interpret trading volume on incentive-driven exchanges.
Volume is commonly treated as evidence of adoption, liquidity and customer engagement. But a protocol that rewards certain trading outcomes can encourage transactions whose primary economic purpose is obtaining those rewards.
That does not automatically constitute wash trading or market manipulation. The wallet’s activity may have involved legitimate exposure, hedging or a deliberate token-acquisition strategy.
Still, $10.1 billion in notional volume from one address provides little information about how many independent investors are using Papertrade or how much capital they have committed.
The average reported trade size, approaching $10 million, suggests that repeated large positions played a central role in generating the volume. Without a detailed transaction-level analysis, it would be premature to characterize the activity as artificial.
The distinction becomes important when comparing decentralized exchanges. Papertrade’s synthetic liquidity-pool model is fundamentally different from an order-book market where transactions match independent buyers and sellers.
Staking Rewards May Matter More Than Headline Trading Volume
The most revealing figure may actually be the $997,000 in USDC staking rewards.
It shows that the wallet’s reported profitability depended overwhelmingly on payments generated by Papertrade’s broader economic system, not its ability to predict cryptocurrency prices.
That raises a sustainability question.
Staking distributions ultimately need an economic source. Papertrade’s model draws on settlement outcomes and gains accruing to its liquidity pool. These distributions can be substantial when the pool is profitable, but their durability depends on future activity and the balance between losing and winning traders.
A growing PAPER supply also means more tokens may compete for future distributions.
For a holder accumulating hundreds of millions of PAPER tokens, the critical variables are therefore not simply the current reward balance but the share of total staked supply, expected future distributions and the ability to realize value from the tokens.
The same distinction applies to trading-volume incentives elsewhere in decentralized finance. A platform can report impressive activity while generating a much less impressive amount of sustainable economic value.
Papertrade’s Incentive Model Faces an Early Real-World Test
The wallet’s reported $17,800 profit does not demonstrate that Papertrade’s design is broken. Rewarding early participants who take financial risks is an intentional feature of the protocol, not necessarily an unintended loophole.
The more important issue is what happens as traders adapt their behavior around that design.
If participants repeatedly generate losses to acquire PAPER and later recover more through staking, rewards could become a significant driver of trading activity. If the economics become less favorable as token issuance changes and more holders compete for distributions, the strategy could disappear just as quickly.
Investors should therefore watch whether Papertrade continues attracting activity after its earliest reward opportunities become less attractive.
That will help distinguish lasting demand for its derivatives product from trading primarily motivated by token ownership and revenue sharing.
The $10.1 billion wallet provides an unusually clear example of that tension. A trader can be unsuccessful at trading, highly active by volume and marginally profitable after rewards, all at the same time.
For Papertrade, the bigger test is whether a system designed to compensate losing traders can produce sustainable liquidity and revenue without encouraging activity whose main purpose is extracting incentives.
Johan Shamshad is a financial markets writer at Dave Finances covering cryptocurrencies, trading platforms, brokers, fintech, financial regulation, and developments across global markets. He previously worked at Gulf News, adding newsroom experience to his coverage of fast-moving financial and digital-asset markets.
His work focuses on identifying market-moving events, company developments, regulatory changes, product launches, and shifts in trading and financial infrastructure.
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