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, or 'perps,' has primarily flourished on other platforms.
Traders are more likely to find on-chain perpetuals on Hyperliquid or Solana rather than Ethereum, due to the latter's base layer not being optimized for fast, low-cost, and high-frequency trading. 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 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 place to run latency-sensitive trading applications. As a result, many perpetual trading platforms have turned to 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 argued that technical performance is only part of the story, stating 'Trading is effectively a network-effects business.
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. Solana and Hyperliquid have also surged in popularity, with Solana's large base of retail traders and low fees making it an attractive platform for perpetual trading. 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, stated '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 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.
The next milestone, according to Boulous, 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.