For a long time, Ethereum has been at the forefront of decentralized finance, pioneering financial tools such as lending protocols and tokenized assets that form the foundation of the crypto economy. However, the rapidly growing sector of perpetual futures has largely developed on other platforms.
When asked where on-chain perpetuals are currently traded, traders are more likely to mention Hyperliquid or Solana rather than Ethereum. This is because perpetuals require extremely fast, low-cost, and high-frequency trading, which Ethereum's base layer was not designed to handle. According to AJ Warner, chief strategy officer at Offchain Labs, the main developer firm behind the layer-2 Arbitrum, 'perpetuals demand 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 into markets that 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 platform for running latency-sensitive trading applications.
When the decentralized perps exchange GMX launched on Arbitrum in 2021, it established a template that many others would follow. 'Ethereum mainnet fees were prohibitively expensive, which naturally attracted perps builders to Arbitrum,' Warner said. Today, much of Ethereum's perpetual trading activity takes place not on the Ethereum mainnet but on layer-2 networks like Arbitrum and Base. Ethereum's layer-2 ecosystem has become a compromise, preserving Ethereum's security while dramatically 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. Chris Boulous of Dromos Labs argued that technical performance is only part of the story. 'Trading is effectively a network-effects business,' he said. '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. 'You can kind of think of perps as a customer of spot exchanges,' Boulous said. Spot exchanges provide pricing, liquidity, and hedging opportunities that perpetual markets depend on.
'Spot and perps are two sides of the same liquidity coin.' While Ethereum's layer-2 ecosystem is not the only place where developers can build high-performance trading infrastructure, Hyperliquid has built an application-specific chain optimized for perpetual trading, and Solana has combined low fees with a large base of retail traders. According to Brian Smith of the Jito Foundation, the user base matters as much as the technology. 'The most important ingredient for any exchange platform, but especially perps, is retail organic flow,' he said. 'Solana is the king of retail trading activity.' Smith also argues that Ethereum faces an additional challenge: fragmentation.
'You need to be able to trade everything in a single spot,' he said. 'What Ethereum is suffering from is a level of fragmentation.' Ethereum's scaling strategy largely relied on layer-2 networks like Arbitrum and Base to handle high-volume activity.
While that approach dramatically reduced costs and improved performance, it also dispersed users and liquidity across multiple ecosystems. Traders often need to bridge assets between networks, making the experience less seamless than on single-chain ecosystems such as Solana. Not everyone sees that fragmentation as a fatal flaw, 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 the framing itself misses what's happening. 'I'd push back gently on the premise that it's a competition in the first place,' he said. Purpose-built trading chains may ultimately win on execution speed, but they still require somewhere to source collateral, liquidity, stablecoins, and settlement. '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.' Several leading perpetual trading platforms either operate directly on Ethereum layer 2s or remain closely connected to Ethereum's ecosystem for collateral, settlement, and developer tooling.
'L2s are how Ethereum scales into use cases like active trading without giving up the thing that makes the base layer valuable,' Saint Olive said. 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.
'It comes down to execution, custody, and predictability, not ideology,' Saint Olive said. Institutions still need deeper liquidity, more efficient capital usage, and better execution before deploying significant trading volume on-chain. For Boulous, the next milestone is straightforward: 'You have to be able to do things on-chain that you can't do, or can't do 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. 'Perps are the leading indicator, the first place you can watch traditional financial activity genuinely migrate on-chain,' Saint Olive said. That may also explain why Ethereum's role in the market is evolving rather than diminishing.
Solana and purpose-built chains like Hyperliquid have established themselves as the venues where traders execute high-speed transactions. Ethereum, meanwhile, is increasingly positioning itself as the settlement and collateral layer that underpins those markets through its layer-2 ecosystem and broader DeFi infrastructure. Whether that division of labor persists will depend on how quickly Ethereum can solve some of the challenges its critics point to: fragmented liquidity across layer 2s, better interoperability between networks, and a smoother user experience.
If it can, proponents argue Ethereum doesn't necessarily need to become the fastest place to trade perpetuals. It simply needs to remain the deepest and most trusted place to settle them.