For years, Ethereum has been at the forefront of decentralized finance, pioneering on-chain financial tools like lending protocols and tokenized assets. However, the rapidly growing sector of perpetual futures has largely flourished on other platforms. Traders often associate on-chain perpetuals with Hyperliquid or Solana rather than Ethereum, as these platforms offer the fast, low-cost, and high-frequency trading required for perpetuals. According to AJ Warner, chief strategy officer at Offchain Labs, perpetuals demand 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.
As a result, many perpetual trading platforms have launched on layer-2 networks like Arbitrum and Base, which offer improved trading performance while preserving Ethereum's security. 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, with Solana's large base of retail traders and low fees making it an attractive destination 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, with Ethereum serving as the settlement and collateral base for deeper liquidity, a wider range of assets, and more mature DeFi primitives. 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, with institutions seeking deeper liquidity, more efficient capital usage, and better execution.