The decentralised finance (DeFi) landscape has witnessed a remarkable transformation in 2024-2025, with on-chain perpetual futures trading emerging as the dominant force in crypto derivatives. Leading this trend is Hyperliquid, a platform that has not only captured the majority of the on-chain perpetual futures market but has also demonstrated the immense potential for sophisticated financial products to operate entirely on-chain.
As we examine this success story, an intriguing opportunity emerges for the Liquid Network to leverage its unique advantages and capture a significant portion of this rapidly growing market.
Understanding Perpetual Futures: The Backbone of Modern Crypto Trading
Perpetual futures, commonly referred to as “perps,” are derivative contracts that allow traders to speculate on the price of an underlying asset without actually owning it and without an expiration date. Unlike traditional futures contracts, perpetual futures contracts never settle, making them ideal for ongoing price speculation and hedging.
The key characteristics that make perpetual futures attractive include:
- Leverage: Traders can control larger positions with smaller amounts of capital, typically ranging from 2x to 100x leverage depending on the platform and asset.
- No Expiration: Unlike traditional futures, perpetuals don’t have a settlement date, allowing traders to hold positions indefinitely as long as they maintain sufficient margin.
- Funding Rates: A mechanism that helps keep the perpetual futures price close to the spot price through periodic payments between long and short positions.
- Capital Efficiency: Traders can gain exposure to price movements without the need to hold the underlying asset, making it particularly useful for assets that are expensive to store or transfer.
How Perpetual Futures Work On-Chain
Traditional perpetual futures trading has been dominated by centralised exchanges like Binance, FTX (before its collapse), and Bybit. However, the move to on-chain trading represents a fundamental shift toward decentralisation, transparency, and user custody of funds.
On-chain perpetual futures operate through smart contracts that handle all the critical functions: order matching, margin calculations, liquidations, and funding rate distributions. This approach offers several advantages over centralised alternatives, including elimination of counterparty risk, transparent operations, and user control over funds.
The technical implementation typically involves automated market makers (AMMs) or order book systems built on blockchain infrastructure. Traders deposit collateral into smart contracts, which then manage position sizing, margin requirements, and automatic liquidations when positions become under-collateralised. Oracle systems provide real-time price feeds to ensure accurate pricing and fair liquidations.
Hyperliquid’s Dominance: A DEGEN Story in Numbers
Hyperliquid has emerged as the undisputed leader in on-chain perpetual futures trading, achieving remarkable market penetration and volume growth. Hyperliquid is recognised as the largest platform for perpetual futures trading, capturing 70% of the on-chain market share and handling over $22 billion in daily trading volume.
The platform’s growth trajectory has been exceptional. The protocol processed $175 billion in trading volume in March and recorded $83 billion by mid-April. Hyperliquid’s volume now stands at nearly 10% of the centralised exchange’s total, pointing to a shift toward decentralised derivatives platforms. This represents a significant milestone in the DeFi space, as it demonstrates that on-chain platforms can compete directly with their centralised counterparts.
More recent data shows continued acceleration. In July 2025, the perpetual DEX (dominating the market with over 75% market share) closed its best month ever with $320M cumulative trading volumes and a whopping 47% month-on-month growth. This growth momentum indicates that the market for on-chain perpetual futures is far from saturated.
The Broader Market Context
The success of Hyperliquid is part of a larger trend toward on-chain derivatives trading. Perpetual futures have become the beating heart of crypto trading: during Q2 2025, the total trading volume of perpetual futures across centralised and decentralised exchanges is estimated to have reached $12 trillion — accounting for approximately 59% of all crypto derivatives activity
The decentralised segment is growing particularly rapidly. In 2025, the trading volume of decentralised perpetuals on DEXs reached a staggering $2.6 trillion, surging 138% This explosive growth suggests that we’re still in the early stages of the transition from centralised to decentralised derivatives trading.
Key Factors Behind Hyperliquid’s Success
Several factors have contributed to Hyperliquid’s dominance in the on-chain perpetual futures space:
- Performance and User Experience: Hyperliquid has focused heavily on providing a trading experience that rivals centralised exchanges, with fast execution, low latency, and an intuitive interface.
- Liquidity Aggregation: The platform has successfully bootstrapped liquidity, creating a virtuous cycle where more liquidity attracts more traders, which in turn brings more liquidity.
- Competitive Fee Structure: Hyperliquid has a tiered fee structure based on 14-day trading volume. Users with no volume pay a taker fee of 0.045% and a maker fee of 0.015%. As volume increases, fees decrease, with Diamond tier users (over $500M in volume) paying 0.026% for takers and 0.000% for makers.
- Technical Innovation: The platform has built its own high-performance blockchain infrastructure optimised for derivatives trading, enabling it to handle high throughput and maintain low latency.
- Risk Management: Sophisticated liquidation engines and margin systems that protect both traders and the protocol from excessive risk.
The Liquid Network Opportunity: Bitcoin-Native DeFi
While Hyperliquid has demonstrated the viability of on-chain perpetual futures, its success has primarily been built on Ethereum and other smart contract platforms. This presents a significant opportunity for the Liquid Network, Bitcoin’s leading sidechain, to capture market share by offering unique advantages that other chains cannot match.
The Liquid Network presents several compelling advantages for perpetual futures trading:
- Native Bitcoin Integration: The Liquid Network is a Bitcoin layer-2, enabling the issuance of security tokens and other digital assets. This provides direct access to Bitcoin (L-BTC) as collateral, which is particularly attractive for institutional traders and Bitcoin maximalists who prefer to keep their exposure within the Bitcoin ecosystem.
- USDT Availability: The Liquid Network supports L-USDT natively, providing the essential stablecoin infrastructure needed for perpetual futures trading. This combination of Bitcoin and L-USDT creates a market and foundation for sophisticated derivatives products.
- Enhanced Settlement: Lower settlement fees, improved speeds, and greater anonymity. These characteristics make it well-suited for high-frequency trading applications, such as perpetual futures.
The Confidential Transactions Advantage
Perhaps the most compelling advantage that the Liquid Network offers over EVM-based chains is its implementation of Confidential Transactions (CT). This feature provides privacy benefits that are particularly valuable for sophisticated traders and institutional participants.
Confidential Transactions on Liquid allows any two parties to transact without anyone else being able to view the asset (e.g. LBTC, USDT-Liquid) and amount transacted (not even the Liquid Federation members and functionaries can see this information). This level of privacy is unprecedented in the DeFi space and offers significant advantages for perpetual futures trading.
The benefits of Confidential Transactions for perpetual futures trading include:
- Trading Privacy: Large traders and institutions can execute positions without revealing their trading strategies or position sizes to competitors or front-runners. Bitcoin transactions on Liquid have native confidentiality since the asset type and amount of tokens are hidden from the public ledger. Only active participants (and designated parties) can see the sensitive details of the transaction.
- Protection from MEV: Maximum Extractable Value (MEV) attacks, including front-running and sandwich attacks, are significant problems on public blockchains like Ethereum. Confidential Transactions make it much more difficult for malicious actors to identify and exploit trading opportunities.
- Institutional Appeal: Professional trading firms and institutions highly value privacy in their trading operations. The ability to trade large positions without revealing market impact or strategy is a significant competitive advantage.
- Reduced Market Manipulation: When position sizes and trading patterns are hidden, it becomes much more difficult for bad actors to manipulate markets or coordinate attacks against specific positions.
Market Opportunity and Growth Potential
The opportunity for Liquid Network to capture a portion of the on-chain perpetual futures market is substantial. With over $22 billion in daily trading volume currently flowing through platforms like Hyperliquid, even capturing a modest market share could represent billions in daily trading volume.
Several factors suggest that the market is ripe for a Bitcoin-native perpetual futures platform:
- Bitcoin Institutional Adoption: As more institutions hold Bitcoin as a treasury asset, there’s growing demand for Bitcoin-native financial products that don’t require exposure to other blockchain ecosystems.
- Privacy Regulations: Increasing regulatory focus on financial privacy could make Confidential Transactions a requirement rather than just a nice-to-have feature.
- Market Fragmentation: The current dominance of a single platform (Hyperliquid) suggests that there’s room for competition, especially from platforms that offer differentiated features like enhanced privacy.
- Cross-Chain Friction: Many Bitcoin holders are reluctant to bridge their assets to other chains due to security concerns and complexity. A native Bitcoin sidechain solution eliminates these barriers.
Implementation Considerations
The Liquid Network is no stranger to issuing securities, having supported security token offerings, worked with STOKR to issue tokenised stocks, and with Nexbridge to issue US Treasury bills. Since retail hasn’t paid much attention to the network, a focus on institutional products might be the better fit for the network, and doubling down on it.
For the Liquid Network to successfully capture perpetual futures volume, several technical and strategic considerations would need to be addressed:
- Liquidity Bootstrap: The most significant challenge would be attracting initial liquidity. This could be addressed through liquidity programs, market maker incentives, and partnerships with existing trading firms.
- Oracle Infrastructure: Reliable and secure price feeds are crucial for perpetual futures. The Liquid Network would need robust oracle solutions to provide accurate asset pricing.
- Risk Management Systems: Sophisticated margin and liquidation systems would be essential to maintain protocol solvency and user confidence.
- User Interface: The success of platforms like Hyperliquid demonstrates that user experience is crucial. A Liquid-based perpetual futures platform would need to provide a professional-grade trading interface.
- Regulatory Compliance: Given the enhanced privacy features, careful consideration of regulatory requirements would be necessary to ensure broad accessibility while maintaining compliance. There could be markets for white labelled traders who can access certain products, while others can opt to trade in the wild west market, given each trader’s appetite for risk or compliance.
The Path For Perps
The success of Hyperliquid has proven that the demand for on-chain perpetual futures can compete with centralised exchanges in terms of volume. However, the market is still in its early stages, and there are significant opportunities for platforms that can offer differentiated features.
As the DeFi space continues to mature and institutional participation increases, the advantages offered by the Liquid Network become increasingly valuable. The question is not whether there’s demand for Bitcoin-native, privacy-enhanced perpetual futures trading, but rather when a platform will emerge to meet this demand.
The opportunity is clear: capture even a fraction of the $2.6 trillion in decentralised perpetual futures volume, and you have a platform that could reshape the Bitcoin DeFi ecosystem while providing users with the privacy, security, and performance they need for sophisticated derivatives trading.
The kicker here is that this isn’t even a market Liquid has to win. If 1% of this total daily on-chain volume were to move over to a perpetual exchange on the Liquid Network, the volume would be:
- Volume=1% of $35,000,000,000
- Volume=0.01×$35,000,000,000
- Volume=$350,000,000
This would represent a daily trading volume of $350 million USD.
That should be more than enough to fill the current dormant block space the network has available every minute, and bring more demand for than the 4000 BTC currently pegged into the network, generating additional fees for block signers and interest in the system.
