On October 11, 2023, DWF Ventures unveiled its primary investment focus in derivative protocols, with a specific emphasis on perpetuals, through an in-depth article titled “Hindsight.” This article seeks to provide a detailed analysis of the decentralized exchanges (DEXs) landscape in relation to perpetuals, highlighting noteworthy developments in this area.
The inception of perpetuals dates back to 2016 when Bitmex introduced them. Since then, their growth has been remarkable, with perpetual contracts now constituting a substantial 97% of the cryptocurrency market trading volume. The surging interest in perpetual decentralized exchanges (DEXs) underscores the noticeable contrast between centralized exchanges (CEX) and DEXs, highlighting the boundless growth potential inherent in perpetual DEXs.
There is a clear and significant contrast between centralized exchanges (CEX) and decentralized exchanges (DEX), particularly in the context of central limit order books (CLOB) and trading procedures. The limitations of blockchain technology have presented a substantial challenge in emulating or surpassing the user-centric experience offered by CEX on DEX platforms.
There are ongoing efforts to establish a decentralized “CEX experience.” Protocols such as dYdX are leading the way in replicating the Limit Order Book (LOB) model, while HyperliquidX is pushing the boundaries in the realm of decentralization.
In the realm of embracing DeFi innovation, perpprotocol has emerged as a pioneering force by introducing the vAMM model. This model offers an attractive alternative for traders who desire decentralization combined with immediate on-chain liquidity.
DriftProtocol has adopted a hybrid approach to address the inherent limitations of on-chain LOB and vAMMs. This innovative approach involves routing orders through three distinct sources to achieve efficient on-chain matching, bridging the gap between traditional order books and automated market makers.
A noticeable shift is observed in the ascendancy of Liquidity Pool (LP) models within perpetual DEXs. Spearheaded by GMX, the peer-to-pool model departs from the conventional vAMM model, presenting a fresh perspective on liquidity management.
Kwenta.io is leading in transforming the LP model using the Synthetix Debt Pool, reducing slippage and promoting trading synthetic assets and perpetual futures.
The perpetual DEX sector is rife with innovation, driven by distinctions from traditional exchanges, and DWF Ventures anticipates how protocols will shape its future.
Decentralization and innovation drive perpetual DEX progress, promising a user-centric trading ecosystem through various models.
