For years, Ethereum was synonymous with 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 thrived on other platforms.
Traders are more likely to find on-chain perpetuals on Hyperliquid or Solana than Ethereum, due to the latter's base layer not being designed for extremely fast, low-cost, and high-frequency trading. AJ Warner, chief strategy officer at Offchain Labs, notes that perpetuals 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 into markets attracting 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. When GMX launched on Arbitrum in 2021, it established a template for others to 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, 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, and that 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 surged due to their ability to build high-performance trading infrastructure, with Solana's large base of retail traders being a key factor. However, Ethereum's layer-2 ecosystem has become a compromise, preserving Ethereum's security while dramatically improving trading performance.
The focus on execution misses the network's longer-term role in the on-chain financial stack, with Ethereum's role being the settlement and collateral base where the deepest liquidity, the widest range of assets, 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 is to be able to do things on-chain that can't be done, or can't be done as cheaply, in traditional markets, with perpetuals already demonstrating what programmable markets can become.