For years, Ethereum has been at the forefront of decentralized finance, pioneering on-chain financial tools such as lending protocols and tokenized assets. However, the rapidly growing sector of perpetual futures has largely thrived on other platforms. Traders are more likely to find on-chain perpetuals on Hyperliquid or Solana than on Ethereum, due to the latter's base layer not being optimized for high-frequency, low-cost trading.
According to AJ Warner, chief strategy officer at Offchain Labs, perpetuals require frequent transactions, fast execution, and deep liquidity, making them a natural fit for layer-2 platforms like Arbitrum. 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 perpetual exchanges 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. You have to build where the liquidity and users currently exist, and that dynamic has become self-reinforcing.
Solana and Hyperliquid have also surged in popularity, with Solana's large base of retail traders and low fees making it an attractive platform for perpetual trading. However, some Ethereum proponents argue that the focus on execution misses the network's longer-term role in the on-chain financial stack.
Matthieu Saint Olive, a staff product manager at MetaMask, argues that Ethereum's role is the settlement and collateral base where the deepest liquidity, the widest range of assets, and the most mature DeFi primitives live. Several leading perpetual trading platforms operate directly on Ethereum layer 2s or remain closely connected to Ethereum's ecosystem for collateral, settlement, and developer tooling.
As institutions begin paying closer attention to on-chain derivatives, the conversation is shifting from whether decentralized perpetuals can work to whether they can compete with traditional infrastructure. Institutions still need deeper liquidity, more efficient capital usage, and better execution before deploying significant trading volume on-chain. The next milestone is to be able to do things on-chain that can't be done, or can't be done as cheaply, in traditional markets.
While much of today's decentralized perpetual volume still revolves around crypto assets, market participants increasingly see the infrastructure supporting perps as the foundation for broader capital markets. Ethereum's role in the market is evolving, with Solana and purpose-built chains like Hyperliquid establishing themselves as venues for high-speed transactions, and Ethereum positioning itself as the settlement and collateral layer that underpins those markets.