For a long time, perpetual trading in the crypto world was dominated by big-name centralized exchange platforms such as Binance, Bybit, OKX and MEXC, for these platforms were widely perceived to have significant advantages over their decentralized counterparts.
CEX platforms are ideal for perps trading because they’re able to tap into vast liquidity and process transactions extremely rapidly, while offering a user-friendly interface. They also combine extremely high leverage with more advanced order types.
However, such features are no longer exclusive to CEX platforms, with a flood of new announcements and integrations this year demonstrating that decentralized exchanges are fast catching up, offering a perps trading experience that’s every bit as good.
1: dYdX’s Cosmos Migration
While dYdX focused on the enhanced decentralization it gained from having its own, Cosmos-based appchain, another major benefit was the increased trading efficiency enabled by the migration.
When the dYdX DEX migrated off Ethereum to its native dYdX Chain, it obtained enhanced throughput and substantially faster transaction speeds. It also created a new off-chain orderbook mechanism to enable traders with much lower slippage than before, as well as significantly reduced gas speeds to lower costs for traders. Moreover, the seamless interoperability with the wider Cosmos ecosystem enables dYdX to tap into a vast pool of liquidity shared across multiple networks.
With these capabilities, dYdX is able to offer an efficient perps trading experience that’s every bit as good as those found on CEX platforms, with up to 50X leverage.
2: GMX’s Synthetic Asset Perps
GMX changed the game for decentralized trading platforms when it became the first DEX to offer synthetic assets perps, which are financial instruments that make it possible to speculate on derivatives of a range of crypto and TradFi assets, without owning them directly.
The synthetic assets are supported by the GMX exchange, which provides liquidity via its multi-asset GLP liquidity pool to support highly leveraged trading, while accurate price information is delivered via Chainlink Oracles. The complex algorithms that govern the GLP pool ensure not only deep liquidity, but also help to reduce price impact for large volume trades to support a more streamlined perps experience.
With GMX’s synthetic assets, users can trade not only cryptocurrencies such as BTC, ETH and SOL, but also commodities such as gold, silver and platinum, as well as traditional currencies like the U.S. dollar and euro with up to 100X leverage.
3: Injective’s Cross-Chain Perps
Another key advance in decentralized trading came from Injective Protocol, which introduced the idea of cross-chain perpetual swaps using the IBC protocol. The innovation paved the way for users to trade perps contracts on multiple crypto assets, without being restricted to a single blockchain.
The IBC protocol supports the simplified and secure exchange of data between heterogeneous blockchains within the Cosmos ecosystem, dramatically enhancing liquidity for more obscure assets, enabling much higher leveraged trading. Moreover, Injective’s unique consensus mechanisms allow extremely rapid transaction execution and settlement, with minimal trading fees, making it one of the most cost-effective DEX platforms for perps trades.
It was a key innovation that set the stage for more advanced financial instruments and the creation of customized markets that rival the diversity of CEX-based perps trading environments.
4: ApeX Pro’s Customizable Leverage
While other DEX platforms are focused on enhancing scalability to support perps trading, ApeX Pro came up with an even more ingenuous innovation in the shape of customizable leverage, allowing traders to determine for themselves how much they want to leverage their position for any asset.
With ApeX Pro perps, traders can set their own leverage for each trade from directly within the user interface. It allows up to 50X leverage for BTC and ETH trading pairs, and 25X leverage for any other cross-margined asset type, but traders can select a lower leverage if they desire to hedge against risk.
What this means is that traders have the unique ability to customize their position value, in order to achieve a more desirable balance of prospective returns versus potential risk. The system automatically displays the maxim position based on the user’s chosen leverage, as well as the required margin to avoid liquidation, allowing traders to make more informed decisions in real time.
5: Orbs’ Perpetual Hub Ultra
Earlier this year, the SpookySwap and THENA DEXs became the first to implement Layer-3 protocol Orbs’ new Perpetual Hub Ultra, paving the way for them to integrate perpetual trading features and expand beyond their standard spot trading markets.
Orbs’ Perpetual Hub Ultra is based on a plug-and-play infrastructure that utilizes Symm.io smart contracts to tap into liquidity across dozens of centralized and decentralized exchange platforms and blockchain networks, and trade assets across them with rapid finality. It also gives SpookySwap and THENA users the ability to trade tokens that arne’t available natively on those platforms, with up to 60x leverage and support for more than 300 token pairs. For example, it allows THENA to support the popular PUMP memecoin, even though that token isn’t supported by the BNB Chain, where its DEX platform is based.
Perps trading involves the use of three innovative primitives, including a Hedger protocol that optimizes liquidity routing, a Liquidator mechanism to manage user’s positions by adjusting the collateral and margin thresholds, and a Price Oracle that provides insights on unrealized profit and loss data to help traders decide when to execute.
6: Perpetual Protocol’s v3
Announced in January 2024, Perpetual Protocol v3 was a major upgrade that delivered a real breakthrough in decentralized perps trading, integrating a unique Smart Liquidity framework that supports off-chain orderbooks for superior liquidity matching, with support for biometric wallets to enhance security.
The Smart Liquidity Framework is a modular system that’s designed to support any kind of method for finding liquidity, including on-chain and off-chain sources. For instance, users can choose between XYK-style automated market makers, requests-for-quotes from over-the-counter liquidity providers, centralized central limit orderbooks and oracle-based liquidity strategies.
Through its flexible and composable liquidity model, Perpetual Protocol v3 is uniquely able to mimic an off-chain orderbook experience while ensuring that all trade settlements are processed on-chain.
DEXs Have Achieved Parity
Perpetual trading used to be the sole domain of CEX platforms, but recent advances in efficiency, speed and scalability, enabled by some of the innovations we’ve just discussed, has allowed DEXs to flip that notion on its head. By leveraging superior infrastructure from projects such as Orbs to tap into much deeper liquidity, DEXs are able to provide a superior user experience for perps traders, as evidenced by their surging trading volumes this year.
In conclusion, DEX-based perps are rapidly achieving parity with their CEX counterparts, increasing the appeal of decentralized trading environments.
