For years, Ethereum was synonymous with decentralized finance, pioneering on-chain financial tools. However, the rapidly growing sector of perpetual futures has largely thrived on other platforms.
Traders are more likely to find on-chain perpetuals on Hyperliquid or Solana due to Ethereum's base layer not being optimized for fast, low-cost, and high-frequency trading. According to AJ Warner, chief strategy officer at Offchain Labs, perpetuals 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 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 argued that technical performance is only part of the story, and 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 combining low fees with a large base of retail traders.
However, Ethereum's layer-2 ecosystem has become a compromise, preserving Ethereum's security while dramatically improving trading performance. 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, argues 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 closer attention to on-chain derivatives, the conversation is shifting from whether decentralized perpetuals can work to whether they can compete with traditional infrastructure.
Institutions still need deeper liquidity, more efficient capital usage, and better execution before deploying significant trading volume on-chain. 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 rather than diminishing, 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.