Perpetual DEXs grew from 1% of global perpetual futures volume in 2022 to $12.09 trillion in annual trading volume by 2025. Here is how they got there.
Every experienced crypto trader knows perpetual futures. They let traders take leveraged long or short positions on crypto assets without expiration dates. That means traders do not need to roll contracts, deal with delivery mechanisms, or manage the basis risk that arises when futures expire on fixed dates. As a result, perpetual futures have become the dominant crypto derivatives product. According to CoinGecko Research, they accounted for roughly 78% of all crypto derivatives trading volume in 2025.
For most of their history, traders could access perpetual futures only through centralized exchanges. They deposited funds with BitMEX, Binance, Bybit, or OKX and trusted those platforms to hold their collateral, execute orders, and manage liquidations fairly. That trust came with counterparty and custody risks. FTX’s collapse in November 2022, which we covered in our crypto hacks research, showed how severe those risks could be. It also exposed another problem. Traders had no independent way to verify whether an exchange was solvent or whether it managed positions as claimed.
The Need for Perpetual DEXs
Developers built perpetual DEXs to solve those problems. These decentralized exchanges run perpetual futures contracts through smart contracts rather than centralized servers. Over the past five years, they have improved enough to attract serious trading activity. Their market share grew from 1% in 2022 to about 10% by the end of 2025. During the same period, on-chain perpetual futures processed more than $12 trillion in annual trading volume. This growth suggests that perpetual DEXs have become a mainstream alternative.
This article traces that journey from start to finish. It explains where perpetual futures came from and why traders needed an on-chain version. It also explores the protocol designs that emerged as the market evolved. Finally, it covers the platforms that gained and lost market share, what Hyperliquid did differently to capture about 70% of the on-chain market, and what the data reveals about where the sector is heading. Like our Ethereum history research and our bull run psychology research, this article is both a story about DeFi infrastructure and a study of market psychology, leverage, liquidations, and what happens when financial markets run on code.
What Perpetual Futures Are and Why They Dominate
A perpetual futures contract, or perp, is a derivative instrument. It lets traders speculate on an asset’s price with leverage without an expiration date. Unlike traditional futures contracts, which settle on a fixed date, perpetual contracts remain open as long as traders maintain enough margin.
Funding rates make perpetual contracts possible. They are periodic payments between long and short position holders that keep the perpetual price close to the underlying spot price. When the perpetual price trades above the spot price, long holders pay short holders. This encourages more short positions and fewer long positions until prices move closer together. When the perpetual price trades below the spot price, short holders pay long holders. This encourages more long positions and fewer short positions. In this way, funding rates keep perpetual prices aligned with the spot market.
How Perpetuals Took Over Crypto
Arthur Hayes, the founder of BitMEX, introduced the crypto perpetual contract in 2016. He launched it on the exchange’s Bitcoin/USD market. The product gained traction because it gave traders leveraged exposure without the need to roll expiring futures contracts. By 2019, BitMEX’s Bitcoin perpetual contract often generated more daily trading volume than the spot Bitcoin market across major exchanges. By 2021, Binance, OKX, and Bybit had launched their own perpetual products. Perpetual futures had become the main venue for Bitcoin and Ethereum price discovery. They generated more trading volume, greater price impact, and more liquidation-driven volatility than spot markets.
Several features explain why perpetual futures dominate crypto derivatives. First, traders can use leverage of up to 100x on some platforms. This lets them control positions much larger than their capital. Second, funding rates provide insight into market sentiment. For example, persistently positive funding rates show that more traders are taking long positions, as we explain in our bull run psychology research. Finally, perpetual contracts remove the need to roll expiring positions. This makes them simpler for both retail and professional traders.
The Problem With Centralized Perps: Why the DEX Version Was Needed
For the first five years of crypto perpetuals, the entire market was centralized. Traders sent their collateral to an exchange and trusted it to hold their funds, execute orders fairly, liquidate positions accurately, and remain solvent enough to pay profits.
We covered the risks of centralized custody in our history of crypto hacks and history of crypto scams. However, centralized perpetual exchanges introduce additional risks that make trust even more important for derivatives traders.
Where Centralized Exchanges Fall Short
The biggest issue is liquidation manipulation. A centralized exchange running its own perpetual market has information that traders cannot see. It knows where the largest liquidation clusters are. The exchange also controls the price feeds that trigger liquidations. In some cases, it can move prices for a short period to trigger liquidations before prices recover. Traders have long accused major exchanges of “stop hunting,” where prices move just enough to trigger stop-loss orders and liquidations before reversing. In some cases, investigations confirmed those claims.
The second issue is opacity. Traders cannot see how a centralized exchange manages large positions, operates its insurance fund, or handles positions that are too large to liquidate without affecting the market. Some exchanges also used socialized loss mechanisms during periods of extreme volatility. Under these systems, profitable traders gave up part of their gains to cover losses from positions that could not be fully liquidated. Traders had no way to verify how those losses were calculated or distributed.
FTX Exposed the Risks
The FTX collapse in November 2022 showed how severe these risks could become. FTX was the world’s second-largest crypto exchange and one of the largest derivatives platforms. Its collapse did not result from market manipulation or trading losses. Instead, the company mixed customer funds with its trading arm, as we explain in our Bitcoin history research. For traders, the outcome was the same. They lost access to their funds.
Perpetual DEXs remove many of these risks. Smart contracts hold traders’ collateral, and anyone can audit them on-chain. Published protocol rules determine how liquidations work. Anyone can also verify the insurance fund’s balance on-chain. No company holds customer funds, no employee can misuse them, and no exchange can selectively enforce rules that benefit itself. Instead of trusting a company, traders trust code. That model introduces its own risks, especially smart contract exploits, but those risks differ from the transparency and custody problems of centralized exchanges.
The Architecture Problem: Three Ways to Build Perpetual DEXs
Building a perpetual futures exchange on a blockchain is harder than building a spot DEX. Spot DEXs use automated market makers, or AMMs, to quote prices based on the assets held in their liquidity pools. Most of the engineering focuses on the pricing mechanism.
Perpetual DEXs face additional challenges. They must support leverage and margin requirements, execute liquidations reliably, manage funding rates, and maintain oracle price feeds that resist manipulation. Different teams have solved these problems in different ways. As a result, the history of perpetual DEXs is also the story of competing architectural designs.
The three architectures that have competed for dominance:
Virtual AMM (vAMM): This model uses an automated market maker to determine prices. Traders interact with a virtual liquidity pool instead of trading against each other. The pool does not hold real assets. Instead, it is a mathematical model that simulates liquidity. Perpetual Protocol’s early design used this approach. It allows trading without matching buyers and sellers directly. However, the virtual price can drift away from the market price, creating tracking errors that become more costly during periods of high volatility.
GLP / Liquidity Pool Model: Liquidity providers deposit a basket of assets into a protocol-managed pool. Traders then trade against that pool. When traders profit, the pool pays them. When traders lose, the pool keeps those losses. GMX introduced this design with its GLP model. It solves the challenge of bootstrapping liquidity and generates protocol revenue from trading fees and trader losses. However, it concentrates counterparty risk in a single pool. It can also reduce returns for liquidity providers during extended bull markets, when traders earn consistent profits.
Central Limit Order Book (CLOB): This model replicates the order book used by centralized exchanges. Buyers and sellers place orders at specific prices, and the system matches them when those prices overlap. dYdX and Hyperliquid both use this approach. It delivers tighter spreads, stronger price discovery, and greater market depth than other designs. However, it also requires extremely high throughput. Ethereum’s mainnet cannot support that level of performance. As a result, both dYdX and Hyperliquid built their own blockchain infrastructure to make on-chain CLOBs possible.
The Platforms That Built the Category
Pioneer
dYdX: The Protocol That Defined On-Chain Perpetual DEXs (2021–2023)
73% market share in January 2023 → Single-digit share by 2024 · StarkEx → dYdX Chain
dYdX launched its perpetual futures product on Ethereum in 2021. Within two years, it accounted for most perpetual DEX trading volume. It used StarkEx, a zero-knowledge rollup built by StarkWare, to process orders off-chain while settling transactions on Ethereum. This design gave dYdX enough throughput to support an order book while avoiding the gas costs that made Ethereum’s mainnet unsuitable for high-frequency trading.
By early 2023, dYdX handled roughly 73% of all perpetual DEX trading volume. It became the benchmark for every protocol that followed. The platform offered up to 20x leverage, competitive fees, and an order book that felt familiar to traders moving from centralized exchanges. Its DYDX governance token also launched in 2021 through one of DeFi’s largest retroactive airdrops, rewarding early users who traded on the platform.
Scaling Beyond StarkEx
As trading activity grew, StarkEx no longer provided the throughput dYdX wanted. The protocol also depended on StarkWare’s infrastructure. To gain more control, dYdX launched its own Cosmos-based blockchain, dYdX Chain, in November 2023. The new network featured a fully decentralized central limit order book, where validators matched orders directly. It was one of the first large-scale efforts to run an on-chain order book on its own blockchain with a permissionless validator set.
Losing Market Leadership
Building a more decentralized network did not help dYdX keep its lead. After controlling about 73% of the perpetual DEX market in early 2023, its share fell to the single digits as Hyperliquid captured most on-chain perpetual trading activity. The decline was not the result of weaker technology. In many ways, the protocol became more decentralized and more capable. Instead, Hyperliquid delivered a trading experience that better matched what users valued most.
Innovator
GMX: The Liquidity Provider’s Perpetual DEX (2021–Present)
GLP model · Liquidity provider revenue · Arbitrum and Avalanche · Continued LP profitability
GMX launched on Arbitrum in September 2021 and popularized the GLP liquidity pool model, which many perpetual DEXs later adopted. Instead of matching buyers and sellers through an order book, GMX lets traders open positions against a multi-asset liquidity pool containing ETH, BTC, USDC, and other assets. Liquidity providers who deposit into GLP earn a share of trading fees and liquidation fees collected by the protocol.
A Different Incentive Model
GMX aligned the interests of the protocol and its liquidity providers. GLP holders act as the counterparty to every trade. When traders make a profit, the value of the pool falls. When traders lose, the pool gains value. In practice, GLP has generated positive returns for liquidity providers because trader losses have historically exceeded trader profits across the platform. While returns are never guaranteed, the model has attracted deep liquidity over time.
Built for Liquidity Providers
The same design also affects the trading experience. Without an order book, prices rely on external oracles instead of buy and sell orders. Large trades execute against oracle prices rather than the best available bid or ask. As a result, large positions can experience more slippage than on order book-based perpetual DEXs. Leverage is also lower than on many centralized exchanges, reaching up to 50x in GMX v2.
GMX focuses on liquidity providers rather than active traders. Its pool-based design prioritizes stable returns for LPs over the execution quality that professional traders often seek.
The Trade-Off
GMX v2, released in 2023, added isolated markets and updated its fee structure. These changes improved capital efficiency and risk management. However, the core design remained the same. Liquidity still comes from pooled assets instead of an order book, which limits how closely GMX can match the execution quality of order book-based perpetual DEXs. Although its market share has declined since 2022, GMX continues to maintain an active liquidity provider base and steady fee generation.
Dominant
Hyperliquid: The Protocol That Came to Dominate Perpetual DEXs (2023–Present)
70% on-chain market share · $432B March 2026 volume · Custom Layer 1 · HYPE airdrop
Hyperliquid launched its perpetual futures platform in late 2023 and expanded faster than any previous perpetual DEX. In 2024, perpetual DEXs processed about $1.5 trillion in trading volume, up 138% from the previous year. Hyperliquid accounted for more than half of that volume during the fourth quarter. By mid-2025, it controlled more than 75% of the market, while dYdX and GMX had both fallen to single-digit shares.
Built Around Trading
Hyperliquid runs on its own Layer 1 blockchain, HyperCore, which supports a fully on-chain central limit order book. The network supports a fully on-chain order book with fast finality, deterministic execution, and enough throughput for high trading activity. This approach differs from dYdX’s Cosmos-based design, which relies on a more general blockchain architecture.
By mid-2026, Hyperliquid accounted for about 70% of on-chain perpetual futures volume. The platform processed more than $180 billion in monthly trading volume and held over $7 billion in open interest. It offers up to 50x leverage across dozens of markets, maker and taker fees that compete with centralized exchanges, and an order book that closely resembles the experience offered by Binance and Bybit while keeping trading and collateral on-chain.
The HYPE Token
Hyperliquid launched the HYPE token through an airdrop in November 2024, allocating 31% of the supply to early users. Staking HYPE provides trading fee discounts of up to 40%, while part of the protocol’s revenue funds a buyback-and-burn program. The airdrop rewarded early participants, created immediate liquidity for the token, and strengthened user participation through fee incentives.
Expanding the Ecosystem
HyperEVM launched in February 2025, expanding Hyperliquid beyond perpetual futures by adding support for general-purpose smart contracts. More than 170 projects have since started building on the network. In July 2025, Hyperliquid also integrated with Phantom Wallet, giving Phantom users direct access to perpetual futures trading. Its Layer 1 blockchain, expanding ecosystem, and integration with Phantom helped Hyperliquid remain the largest perpetual DEX.
$432B
Hyperliquid monthly trading volume | March 2026
For context, Coinbase reported Q1 2026 revenue of $1.41 billion, a 31% year-over-year decline. Coinbase’s derivatives volume in the same quarter was $4.2 billion, up 169% year over year.
Hyperliquid processed more trading volume in a single month than Coinbase processed in derivatives across an entire quarter.
The category is growing. The decentralized version is growing even faster.
Challenger
The Emerging Competition: Aster, Lighter, and Drift
Hyperliquid dominance under pressure · New architectures competing · Solana ecosystem
Hyperliquid’s position at the top is no longer uncontested. Aster and Lighter gained strong traction during the second half of 2025.
Lighter, founded by tech entrepreneur Vladimir Novakovski, raised $68 million in November 2025 after launching its public mainnet. Its architecture was designed to reduce concerns around bridge risk and centralization.
Drift Protocol is the leading perpetual DEX in the Solana ecosystem. It gives traders an order book-based perpetuals experience with Solana’s speed and low transaction costs. For Solana-native exposure, Drift has the deepest order flow in the ecosystem.
Drift’s position within Solana’s highly active retail trading community, the same ecosystem that produced the 2024-2025 memecoin wave documented in our memecoin research, gives it a user base with high trading frequency that generates strong volume relative to its TVL.
The challenger market now supports clear differentiation. New protocols are not trying to beat Hyperliquid on order book quality, throughput, or liquidity depth. They are competing on decentralization through Lighter’s validator architecture, ecosystem integration through Drift’s Solana-native position, and capital efficiency with newer synthetic perpetual designs that require less collateral for the same exposure.
The Volume Story: From $4 Trillion to $12 Trillion in One Year
The perpetual DEX market expanded at an exceptional pace in 2025.
Total trading volume reached $12.09 trillion by year-end, up from $4.1 trillion at the start of the year. According to DeFiLlama, approximately $7.9 trillion, or nearly 65% of all lifetime perpetual DEX volume, was traded during 2025 alone. In other words, most of the market’s historical volume was generated in a single year.
Growth accelerated through the second half of the year. Monthly trading volume first exceeded $1 trillion in October 2025, and December alone processed more than $1 trillion. If that pace had continued for twelve months, it would have equated to more than $12 trillion in annual trading volume.
The acceleration reflected the same trend identified by Coinbase Research. As broad altcoin participation failed to match previous cycles, traders increasingly turned to leveraged products instead of spot markets in search of higher returns, a shift documented in our altcoin season research.
The market share story was equally notable. According to Grayscale and CoinMetrics, perpetual DEXs accounted for roughly 1% of global perpetual trading in 2022. By mid-2025, that figure had risen to 4-6%.
Spark data shows a similar trend. The ratio of decentralized to centralized perpetual volume increased from roughly 3% at the beginning of 2025 to approximately 10% by year-end. During the same period, cumulative on-chain perpetual futures volume surpassed $6 trillion, reinforcing the steady shift toward decentralized derivatives markets.
$12.09T
Total perp DEX volume in 2025
10%
On-chain share of total perp market by end 2025
What Perpetual DEXs Reveal About Market Psychology
Beyond market structure, perpetual DEXs provide real-time insight into market sentiment. The most important metrics are funding rates, open interest, and long-to-short positioning across major trading pairs.
Funding rates are periodic payments between long and short traders that keep perpetual prices aligned with spot markets. Persistently positive funding rates mean more traders are long than short, with long holders paying a premium to maintain their positions. As covered in our bull run psychology research, prolonged periods of positive funding rates have preceded major corrections in every crypto cycle because they point to a heavily leveraged market that can unwind through forced liquidations.
Open interest, the total value of outstanding perpetual contracts, measures how much leveraged exposure exists in the market.
- Rising open interest alongside rising prices usually means new capital is entering the market.
- Rising open interest while prices fall means leveraged long positions remain open despite mounting losses, increasing liquidation risk.
- Falling open interest alongside falling prices points to deleveraging as positions are closed, reducing liquidation risk.
Liquidation data from perpetual DEXs also provides information unavailable on most centralized exchanges. On Hyperliquid, every liquidation is recorded on-chain, allowing anyone to view the wallet address, position size, entry price, and liquidation price.
This transparency has led to real-time liquidation tracking services that aggregate data across platforms and show where the largest liquidation clusters are forming. Information that was once available only to centralized exchanges is now public, giving traders a better view of market positioning and areas where volatility may increase.
The Hyperliquid Incident: When On-Chain Transparency Creates New Risks
Hyperliquid’s transparent architecture, which allows anyone to view positions and liquidation rules on-chain, also exposed a weakness during the JELLY incident in October 2025.
Because the platform’s liquidation process and position data were publicly visible, a sufficiently large trader could, in theory, structure positions to exploit the liquidation system and put pressure on the insurance fund. The JELLY incident followed this pattern. An attacker built a large position in a low-liquidity asset, manipulated its price to trigger liquidation thresholds, and exploited the interaction between Hyperliquid’s liquidation process and the market structure of a thinly traded token. The event produced losses that briefly put the platform’s insurance fund at risk.
Hyperliquid responded by manually intervening in the liquidation process, overriding the intended automatic operation. The intervention protected the insurance fund, but it also renewed questions about how decentralized the protocol really is. The incident showed that balancing decentralization with the performance expected from a modern derivatives exchange still requires trade-offs.
That trade-off remains one of the biggest questions facing the perpetual DEX sector. The platforms with the best trading experience rely on some degree of centralization. Hyperliquid, for example, operates with a relatively small validator set, has shown that manual intervention may be required during exceptional market events, and depends on weighted price feeds from centralized exchanges for its oracle system.
These are not design flaws. They are trade-offs that balance decentralization with the speed, reliability, and performance expected from a competitive derivatives market.
What’s Next for Perpetual DEXs
By mid-2026, perpetual DEXs have shown they can compete with centralized exchanges for professional traders. The next questions are how much market share they can gain and how quickly adoption grows.
The metric I watch most closely is the decentralized share of total perpetual futures volume. It has grown from roughly 1% in 2022 to 10% by the end of 2025. Several factors contributed to that growth. FTX’s collapse exposed the risks of centralized custody. Hyperliquid showed that on-chain order books could match the trading experience of centralized exchanges. At the same time, tighter regulation of centralized derivatives platforms in the US and Europe has increased compliance costs while making self-custody more attractive to institutional participants seeking regulatory certainty.
The second area I watch is the response to Hyperliquid’s dominance. The combined market share of competitors, including dYdX, GMX, Vertex, Drift, and smaller platforms, fell from 65% to 27% over the same period. Can any one competitor, or the group as a whole, reduce Hyperliquid’s lead? The answer depends on whether traders remain loyal to Hyperliquid or switch to the platform that offers the best trading experience.
DeFi’s history points to the second outcome. Liquidity moves to the platform with the best execution. Hyperliquid’s biggest advantage is its liquidity, creating a feedback loop where more liquidity attracts more professional traders, who generate even more liquidity.
Lastly…
The third area is regulation. As documented in our crypto regulation research, the SEC-CFTC joint guidance released in March 2026 classified major crypto assets as digital commodities and confirmed the CFTC’s oversight of crypto derivatives. The next question is how that framework applies to decentralized derivatives platforms with no legal entity, no US-registered counterparties, and no way to implement many traditional compliance requirements.
BitMEX introduced the crypto perpetual swap in 2016 as a centralized product. Nine years later, its on-chain counterpart processes trillions of dollars in monthly volume, accounts for roughly 10% of the global perpetual market, and is still gaining market share.
The infrastructure behind that growth, from vAMMs to GLP pools to purpose-built Layer 1 blockchains, is one of DeFi’s largest technical achievements. Regulation is now the main factor that could determine how quickly the sector grows over the next several years.
Key Takeaways
Perpetual futures account for roughly 78% of all crypto derivatives trading volume. BitMEX introduced the first crypto perpetual in 2016 as a centralized product. The on-chain version, perpetual DEXs, grew from approximately 1% of total perpetual volume in 2022 to 10% by the end of 2025, processing $12.09 trillion in annual trading volume.
Three architectures have competed for perpetual DEX dominance: virtual AMMs (Perpetual Protocol’s early design), liquidity pool models (GMX’s GLP), and central limit order books (dYdX and Hyperliquid). CLOB-based architectures have delivered the strongest trading experience but require blockchain throughput that Ethereum mainnet cannot support. Both dYdX and Hyperliquid ultimately built their own chains.
dYdX held 73% of on-chain perpetual volume in January 2023 before falling to a single-digit market share by 2024, one of the sharpest market share declines in DeFi. The decline was driven by Hyperliquid’s execution quality, tokenomics, and purpose-built Layer 1, which provided the throughput needed to compete with centralized exchanges.
Hyperliquid captured approximately 70% of on-chain perpetual futures volume by mid-2026, processing $432 billion in March 2026 alone. The HYPE airdrop in November 2024, the Phantom Wallet integration in July 2025, and the launch of HyperEVM in February 2025 each contributed to a product flywheel that competitors have yet to match.
The JELLY incident in October 2025 showed that Hyperliquid’s transparent design created a vulnerability to coordinated liquidation attacks in thinly traded assets. The platform’s response required manual intervention, raising questions about how decentralized the protocol is.
Funding rates, open interest, and the long-to-short ratio are among the most useful real-time measures of market sentiment in crypto. Because this data is public on perpetual DEXs, traders can monitor liquidations and market positioning in ways that are not possible on centralized exchanges.
Sources & Further Reading
- What Is a Perpetual DEX? 2026 Guide to On-Chain Perps — Bitcoin.com
- Hyperliquid Now Owns 44% of On-Chain Perp Volume — Pump Parade, Medium
- What Are the Top Perp DEXs to Know in 2026? — BingX
- Monthly Perpetual Futures Trading Volume on DEXes Hits $1T — CoinMarketCap
- Perp DEX Landscape: Lessons from Hyperliquid’s Rise and dYdX’s Competitive Defeat — OKX Ventures Research
- Perpetual DEX Comparison: dYdX, GMX, Hyperliquid & More — Spark
- Best Perp DEX in 2026 — Hyperliquid vs dYdX vs GMX vs Drift — perp.wiki
- Perpetual DEX Volume and TVL Data — DeFiLlama
- Hyperliquid — On-Chain Perpetual Futures Exchange
- dYdX — Decentralized Perpetual Futures
- GMX — Decentralized Spot and Perpetual Exchange
- Drift Protocol — Solana Perpetual DEX