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, also known as "perps", has largely developed outside of Ethereum. This is because perpetuals 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 such as Hyperliquid and Solana for on-chain perpetuals. Despite this, Ethereum's layer-2 ecosystem has become a compromise, offering the security of Ethereum 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. The distinction between Ethereum's role and that of other chains has become increasingly important as decentralized perpetual exchanges mature and attract institutional attention.
While Ethereum's security-first architecture makes it an ideal settlement layer, its block times and gas costs have made it an expensive place to run latency-sensitive trading applications. The rise of layer-2 networks has allowed Ethereum to scale into use cases like active trading without giving up the value of its base layer.
As institutions begin to pay closer attention to on-chain derivatives, the conversation is shifting from whether decentralized perpetuals can work to whether they can compete with traditional infrastructure. Ethereum's role is evolving to become the settlement and collateral layer that underpins the markets, with its layer-2 ecosystem and broader DeFi infrastructure providing the deepest liquidity, widest range of assets, and most mature DeFi primitives.