a16z Crypto Partner: Perpetual contracts are rewriting the global trading rules

Author: jay

Compiled by: Jiahua, ChainCatcher

Perpetual contracts ("perps") refer to futures contracts that never settle. As a native innovation in cryptocurrency, they experienced an explosion on-chain in 2025. Today, they have become one of the largest markets in the crypto space, covering traditional assets with trading volumes reaching trillions of dollars.

Last year, the trading volume of perpetual contracts settled by top centralized exchanges reached $86.2 trillion (a year-on-year increase of 47%), while the growth rate of on-chain perpetual contracts was even more astonishing: the leading decentralized exchanges (DEX) reached a trading volume of $6.7 trillion (a year-on-year increase of 346%). Currently, the trading volume of DEX accounts for about 7.8% of the trading volume of centralized exchanges (CEX), whereas just over a year ago, this ratio was only about 2.5%. [Note: While a few centralized platforms regulated by the U.S. offer products similar to perpetual contracts to U.S. investors, all centralized and decentralized exchanges restrict U.S. investors from trading actual perpetual contracts.]

More importantly, perpetual contracts are gradually shedding their image as a marginalized crypto primitive and are beginning to demonstrate a fundamental transformative power in reshaping trading behavior and market structure.

So, what is driving the popularity of perpetual contracts? Why now? The following content will explore why global traders are increasingly favoring perpetual contracts, the scale opportunities in this market, and where builders see the potential.

A Brief History and Evolution of Perpetual Contracts

The idea itself is actually older than the cryptocurrency industry. Theoretically, perpetual contracts existed as early as 1993 when Nobel laureate Robert Shiller proposed perpetual futures contracts, initially conceived as a tool to hedge against real estate value risks. However, it wasn't until 2016, with the rise of BitMEX and XBTUSD (the longest-running Bitcoin perpetual swap contract), that perpetual contracts became popular in the crypto space.

Fast forward ten years, modern exchanges now offer perpetual contracts covering stocks, indices, commodities, interest rates, startup valuations, and even the price of Nvidia H100 GPUs.

For years, perpetual contracts have been a billion-dollar revenue engine for centralized exchanges. As retail demand for leverage has grown, perpetual contracts have become the primary venue for short-term price discovery, liquidity, and trading activity—often with trading volumes several times that of spot trading on many large Asian centralized exchanges.

In the past year and a half, decentralized perpetual contract exchanges have begun to substantially eat into the market share of perpetual contracts held by centralized exchanges. With the structural advantage of self-custody, perpetual DEXs are rapidly closing the gap with CEXs in terms of liquidity, performance, and features aimed at active traders.

With breakthrough successes from perpetual DEXs like Hyperliquid, leading crypto wallets and applications have begun to support perpetual contracts and launched high-quality trading experiences, reaching millions of users. In the second half of 2025, the front end of perpetual DEXs experienced explosive growth—from casual mobile applications to complex multi-site trading terminals emerging one after another.

Notably, Hyperliquid, through HIP-3 (Builder-Deployed Perpetuals), has broken the boundaries of services that DEXs can offer. This mechanism allows anyone to launch perpetual markets on the exchange without permission. With HIP-3, builders can list almost any asset and earn a 50% fee share while managing their own oracles and risk parameters.

At the same time, new entrants and competitors such as Avantis, Lighter, Ostium, and Variational have emerged or accelerated product development. The increasingly fierce competition has forced perpetual DEXs to differentiate themselves in exchange design, market structure, asset support, and permissionlessness, prompting some trading platforms to find strong product-market fit in new categories like real-world asset (RWA) perpetual contracts.

For years, perpetual contract traders have merely speculated on crypto assets—BTC, ETH, SOL, and various long-tail altcoins. However, at the end of last year, when the trading volume of perpetual contracts significantly cooled from recent peaks amid a broader crypto market sell-off, RWA perpetual contracts began to gain traction. A few perpetual DEXs listed commodities, stocks, and stock indices, expanding the range of tradable assets to include private companies like Nvidia, Samsung, and even SpaceX, as well as commodities like silver and palladium.

This year, the growth of RWA perpetual contracts has accelerated even further. In recent weeks, RWA accounted for as much as 44% of total trading volume on Hyperliquid, and RWA trading pairs have now stabilized as some of the highest fee-generating pairs on the exchange. On Ostium, RWA has dominated the majority of trading volume for months.

Decentralized exchanges have also excelled in facilitating price discovery for RWAs like crude oil, especially during weekends when traditional exchanges are closed.

With the rise of RWA perpetual contracts, we see more and more companies beginning to develop products and businesses related to perpetual contracts. In just the past six months, new exchanges, trading interfaces, market deployers, and liquidity providers have emerged.

Players entering this space include entirely new startups, existing startups transitioning to perpetual contracts, and some of the largest global fintech companies integrating perpetual trading into their existing products.

All these diverse players converge on the same opportunity: perpetual contracts are poised to become one of the dominant trading tools in the global financial landscape.

Market Opportunities for Perpetual Contracts

Stepping back to examine traditional finance (TradFi), options are one of the largest and most active markets globally. They exist across currencies, stocks, indices, commodities, and ETFs, serving as extremely powerful and expressive tools that allow trading based on many different predictions: timing, volatility, price ranges, etc.

However, if we zoom in on retail trading behavior, we find that a significant amount of activity is concentrated in a specific category of options: short-term, leveraged, directional risk exposure. A prominent example is 0DTE (zero-day-to-expiration options)—traders seek high elastic returns from intraday movements at low costs.

This type of trading is one of the fastest-growing categories of options. By 2025, the average daily trading volume of 0DTE SPX (S&P 500 Index) options reached 2.3 million contracts, a year-on-year increase of 51%, accounting for 59% of the total trading volume of SPX options. In response to this demand, the market has launched several new index products with daily settlements, including CBTX and MBTX Bitcoin ETF index options, as well as options for the equally weighted Cboe Magnificent 10 index.

Thus, while options have many complex uses—structured hedging, volatility trading, discrete trading, convexity (the characteristic where your maximum loss is fixed, but potential gains are theoretically unlimited)—the vast and growing flow of retail funds is actually just seeking short-term, leveraged directional exposure. This exposure is precisely what perpetual contracts can perfectly satisfy.

There is a trade-off: options excel at certain risk and convexity returns and remain the default tool for expressing volatility. The most a trader can lose is the premium they paid. However, with perpetual contracts, the entire collateral position can be liquidated. But for most retail traders seeking directional leverage, perpetual contracts have several structural advantages:

• Always online. The latest generation of perpetual markets operates 24/7, with no trading time limits or market closures. Continuous access is a reasonable expectation for a global, crypto-native user base.
• No strike price, no expiration date, no rollovers. With a single continuous position, traders do not need to select parameters daily or weekly, manage expiration dates, or rebuild positions. They can hold for seconds, months, or theoretically even indefinitely.
• Simpler risk exposure. For perpetual contracts, the primary considerations are price, collateral, and liquidation thresholds. In contrast, with options, even if your directional judgment is correct, you may still incur losses due to time decay, changes in implied volatility, and path dependency. Perpetual contracts eliminate these complexities. Trading is a pure expression of directional belief.
• Capital efficiency for continuous exposure. Short-term options require upfront payment of the full premium and repeated rollovers. Perpetual contracts require margin—typically just a small fraction of the nominal value—which often provides higher capital efficiency for directional positions held for a day or less.

Options will not disappear. They have long been a part of financial history and may retain dominance in a significant portion of trading use cases, especially when involving certain risks and more complex return structures. However, for the vast and growing flow of funds seeking Delta-1 directional leverage, perpetual contracts have captured trillions of dollars in trading volume and billions in revenue.

This raises the question: as perpetual contracts transition from niche tools to mainstream trading primitives, at which layer of the tech stack will value be concentrated?

In traditional markets, the most valuable companies are often built on top of exchange infrastructure rather than the exchange layer itself. For example, the market capitalization of retail broker Robinhood is higher than that of its underlying Nasdaq exchange.

Whether this model holds true in the crypto space—whether platforms like Hyperliquid, Lighter, or Ostium can accumulate sufficiently strong network effects at the exchange layer—is one of the most intriguing open questions in the field.

Regardless, builder activity is rapidly expanding. We have seen growth among developers in the following areas:

• Customized distribution layers: Vertical or audience-specific front ends that not only present markets but also package narratives, strategies, gamification, or social touchpoints.
• Market makers and operators (e.g., HIP-3 deployers): Operating a popular market on Hyperliquid allows deployers to essentially have a "mini-exchange" without building the most complex exchange infrastructure. Today's deployers may have only scratched the surface of data or price elements that could be "perpetualized" in the future.
• Specialized liquidity provision: Market makers focusing on long-tail markets, event-driven order books, and cross-site inventory management.
• Perpetual-specific data infrastructure: An ecosystem of community-driven dashboards, block explorers, heat maps, and analytical tools has emerged around positions, funding rates, liquidations, trader signals, leverage exposure, and retention groups. More mature, high-quality, real-time data will make the entire ecosystem more transparent and efficient for all participants.

Of course, significant open questions and challenges remain, covering distribution, liquidity depth of new trading platforms, oracle reliability as the asset range expands, inevitable extreme events ("10/10" events), and regulation (currently restricting U.S. investors from accessing these products). As perpetual contracts "graduate" from the crypto-native bubble and step onto the global financial stage, these are all expected growing pains. As the perpetual contract ecosystem matures, the question is no longer whether perpetual contracts can scale, but rather who will build the most valuable applications and infrastructure around them when they do scale.