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 thrived on other platforms. Traders now often turn to Hyperliquid or Solana for on-chain perpetuals, as these networks offer the fast, low-cost, and high-frequency trading that Ethereum's base layer was not designed to provide.
According to AJ Warner, chief strategy officer at Offchain Labs, 'Perps require frequent transactions, fast execution, and deep liquidity, making them a natural fit for the Arbitrum platform.' The distinction has become increasingly important as decentralized perpetual exchanges mature and attract institutional attention. Ethereum's security-first architecture makes it an ideal settlement layer, but its block times and gas costs have historically made it expensive for latency-sensitive trading applications.
The launch of GMX on Arbitrum in 2021 established a template for others to follow, with Ethereum mainnet fees being prohibitively expensive and attracting perps builders to Arbitrum. Today, much of Ethereum's perpetual trading activity takes place on layer-2 networks like Arbitrum and Base, which preserve Ethereum's security while improving trading performance. Chris Boulous of Dromos Labs argues that technical performance is only part of the story, and 'trading is effectively a network-effects business' where you have to build where liquidity and users exist.
Solana and Hyperliquid have surged as they offer low fees and a large base of retail traders, with Smith of Jito stating that 'retail organic flow' is crucial for any exchange platform. Ethereum faces the challenge of fragmentation, with users and liquidity dispersed across multiple ecosystems, making the experience less seamless. However, some proponents argue that Ethereum's focus on execution misses its longer-term role in the on-chain financial stack, with Matthieu Saint Olive stating 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 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.
While much of today's decentralized perpetual volume revolves around crypto assets, market participants see the infrastructure supporting perps as the foundation for broader capital markets. Ethereum's role in the market is evolving, with Solana and purpose-built chains like Hyperliquid establishing themselves as venues for high-speed transactions, and Ethereum positioning itself as the settlement and collateral layer that underpins those markets.