For years, Ethereum has been at the forefront of decentralized finance, pioneering on-chain financial tools and tokenized assets that underpin the crypto economy. However, the rapidly growing sector of perpetual futures, or 'perps,' has largely flourished on other platforms. Traders often cite Hyperliquid or Solana as the go-to destinations for on-chain perpetuals, 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 has made it an ideal settlement layer, but its block times and gas costs have historically made it an expensive platform for latency-sensitive trading applications.
The launch of GMX on Arbitrum in 2021 established a template for other perps builders to follow, with Warner noting that 'Ethereum mainnet fees were prohibitively expensive, which naturally attracted perps builders to Arbitrum.' 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, stating that 'trading is effectively a network-effects business.
You have to build where the liquidity and users currently exist.' This dynamic has become self-reinforcing, with protocols launching where traders already are, liquidity providers following the traders, and new applications building around existing liquidity. Boulous sees Aerodrome as complementary to perpetual exchanges rather than competitive with them, noting that 'you can kind of think of perps as a customer of spot exchanges.' Solana and Hyperliquid have surged in popularity due to their ability to build high-performance trading infrastructure, with Solana's large base of retail traders and low fees making it an attractive destination for perps. However, Ethereum's layer-2 ecosystem has become a compromise, preserving Ethereum's security while dramatically improving trading performance.
Ethereum's scaling strategy has relied on layer-2 networks to handle high-volume activity, but this approach has also dispersed users and liquidity across multiple ecosystems. 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 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. The next milestone for decentralized perpetuals 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.