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, or 'perps', has largely developed outside of Ethereum. This is because perps require extremely fast, low-cost, and high-frequency trading, which Ethereum's base layer was not designed to optimize.
As a result, traders have turned to other platforms like Hyperliquid and Solana for on-chain perpetuals. Nevertheless, Ethereum's layer-2 ecosystem has become a compromise, preserving Ethereum's security while improving trading performance. Networks like Arbitrum and Base have reduced block times and become attractive trading destinations due to their growing user base and liquidity.
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 an expensive place to run latency-sensitive trading applications. When GMX launched on Arbitrum in 2021, it established a template that many others would follow, and Offchain Labs prioritized perpetuals as a strategic category. Today, much of Ethereum's perpetual trading activity lives on layer-2 networks like Arbitrum and Base.
Chris Boulous of Dromos Labs argued that technical performance is only part of the story, and '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 established themselves as high-performance trading infrastructure, with Solana combining low fees with a large base of retail traders. However, Ethereum's layer-2 ecosystem is not the only place where developers can build high-performance trading infrastructure. According to Brian Smith of the Jito Foundation, 'perps on-chain are really hard,' and require a 99.99% success rate.
Ethereum's scaling strategy relied on layer-2 networks to handle high-volume activity, but this approach 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. Matthieu Saint Olive, a staff product manager at MetaMask, argued 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. Warner argued that 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.
Saint Olive believes perpetuals are already demonstrating what programmable markets can become, and that may explain why Ethereum's role in the market is evolving rather than diminishing.