In recent years, Ethereum has been at the forefront of decentralized finance, pioneering on-chain financial tools such as lending protocols and tokenized assets. However, the rapid growth of perpetual futures, also known as "perps", has largely occurred on other platforms.
Traders often associate on-chain perpetuals with Hyperliquid or Solana rather than Ethereum, due to the latter's base layer not being optimized for extremely fast, low-cost, and high-frequency trading. According to AJ Warner, chief strategy officer at Offchain Labs, "Perps require frequent transactions, fast execution, and deep liquidity, making them a natural use case for the Arbitrum platform." The distinction has become increasingly important as decentralized perpetual exchanges mature and attract institutional attention. Ethereum's security-first architecture made it an ideal settlement layer, but its block times and gas costs made it expensive for latency-sensitive trading applications.
The launch of GMX on Arbitrum in 2021 established a template for other platforms to follow, and Offchain Labs prioritized perpetuals as a strategic category. Today, much of Ethereum's perpetual trading activity takes place on layer-2 networks like Arbitrum and Base, which have reduced block times and become attractive trading destinations due to their growing user base and liquidity. Chris Boulous of Dromos Labs argues that technical performance is only part of the story, and that "trading is effectively a network-effects business" where protocols launch where traders already are, and liquidity providers follow.
Solana and Hyperliquid have also surged in popularity due to their ability to provide low fees and a large base of retail traders. However, some Ethereum proponents argue that the focus on execution misses the network's longer-term role in the on-chain financial stack, with Matthieu Saint Olive stating that "Ethereum's role is the settlement and collateral base where the deepest liquidity, the widest range of assets, the stablecoins, and the most mature DeFi primitives live." As institutions begin to pay closer attention to on-chain derivatives, the conversation is shifting from whether decentralized perpetuals can work to whether they can compete with traditional infrastructure.
Ultimately, Ethereum's role in the market is evolving, with Solana and purpose-built chains like Hyperliquid establishing themselves as venues for high-speed transactions, while Ethereum positions itself as the settlement and collateral layer that underpins those markets.