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 rapid growth of perpetual futures, also known as 'perps', has largely taken place on other platforms. 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, layer-2 networks like Arbitrum and Base have become increasingly popular for perpetual trading, offering a compromise between Ethereum's security and improved trading performance. Meanwhile, other chains like Solana and Hyperliquid have also gained traction in the perpetual futures market, with Solana's large base of retail traders and low fees making it an attractive destination. Despite this, Ethereum's layer-2 ecosystem is still seen as a vital part of the decentralized finance infrastructure, providing a settlement and collateral layer that underpins the perpetual markets.
As institutions begin to take notice of on-chain derivatives, the focus is shifting from whether decentralized perpetuals can work to whether they can compete with traditional infrastructure. While Ethereum may not need to become the fastest place to trade perpetuals, it needs to remain the deepest and most trusted place to settle them, with a smooth user experience and better interoperability between networks.