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Hello readers,
Along with stablecoins, perpetual futures are arguably the most successful product created on crypto infrastructure. With volumes exceeding those of the crypto spot markets by nearly 5x, Perps have found a clear product-market fit among retail traders.
TradFi is now catching on as traditional assets are being integrated into these new derivatives products. It’s all happening on crypto rails. And it may be an even bigger catalyst for the merger of TradFi and crypto than tokenized assets.
In today’s report, we go deeper into the onchain Perps Market with coverage on Lighter, an Ethereum L2 and Perps DEX launched in October of last year.
Is the Perps market a “winner-take-all” sector? Or can Lighter ultimately compete with Hyperliquid?
We explore in this week’s edition of The Watch List.
*Please note that you can click the data citation note under each chart to access the supporting dashboard for this week’s report.
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Let’s go.
Lighter is a decentralized perpetual futures exchange built on a custom Ethereum L2.
The core pitch: off-chain-style trading performance, onchain settlement, and ZK-verifiable matching/liquidations. The idea here is to deliver CEX-like performance, with verifiable order matching, liquidations, and settlement anchored to Ethereum.
The platform uses a centralized-style matching engine for speed, but state transitions are verified using custom ZK circuits and anchored to Ethereum.
Said another way, trades, risk checks, liquidations, and order matching are executed quickly, then cryptographically proven and settled back to the Ethereum L1. Per Lighter docs, Ethereum serves as the base layer for proofs and system state changes, with deposits/withdrawals also handled on Ethereum. This means that Ethereum smart contracts hold deposited assets, rather than a bridge or exchange operator. Users ultimately trust Ethereum with their assets (and their accounting), rather than Lighter.
Lighter’s design differs from a general-purpose onchain order book, where every action would need to be executed directly on shared blockspace. It also differs from Hyperliquid, which runs on its own purpose-built L1 and is secured by its own validator set, rather than settling through Ethereum L1. And it differs from a CEX, where users must trust the exchange with their assets, with no visibility into the accounting.
Lighter is trying to sit in the middle: CEX-like UX + self-custody + Ethereum anchored settlement/accounting & deposits/withdrawals (trust minimized).
The big idea is that Ethereum has historically struggled to host a dominant perps venue because perps need low latency. Tight spreads. Deep liquidity. And reliable liquidations.
Hyperliquid solved this by building its own purpose-built L1 (secured by its own validator set). Lighter is trying to solve it while staying closer to Ethereum’s security and settlement layer.
That makes it strategically important for Ethereum. If Lighter succeeds, it shows that Ethereum can support high-performance derivatives exchanges without pushing that activity to a separate L1. It will also show other builders that Ethereum’s liquidity, decentralization/security, brand, user base, and network effects still make it a top L1 to build on.
Over the last 90 days, Lighter has generated $14.6m in fees, down 61% q/q.
For reference, Hyperliquid generated $153m over the same period (10.4x).
Similar to Hyperliquid, Lighter “buys back” the LIT token with user fees. Over the last 90 days, $11m LIT has been purchased off the market, representing 75% of user fees. More on Lighter token economics later in the report.
Open interest on the Lighter perps DEX is currently $688m, down 43% over the last 90-days.
For reference, Hyperliquid’s open interest is currently $7.6b (11x Lighter).
Over the last 90 days, Lighter has averaged $2.2b of volume/day, down 68% q/q.
For reference, Hyperliquid averaged $7b in daily volume over the last 90 days.
Over the last 90 days, Lighter is averaging 13.3k active traders, down 89% q/q. The large spike in user activity in Q4 of last year is likely tied to the LIT airdrop, which distributed 25% of the supply to early users on December 30, 2025.
Daily fees per active trader over the last 90-days was $11.90, up 140% q/q. This indicates that the 13k traders still active on Lighter are high-value, repeat users.
For reference, Hyperliquid currently has roughly 50k active daily traders (3.75x Lighter). Its daily revenue per active trader has averaged $34 over the last 90 days (1.8x higher than Lighter).
Max Supply: 1,000,000,000 LIT
Circulating Supply: 250,000,000 LIT (25%)
Initial Airdrop 12/30/25: 25% (fully circulating)
Team: 26% (unlocks begin 1/1/27)
Ecosystem Fund: 25% (unlocks TBD)
Investors: 24% (unlocks begin 1/1/27)
Lighter has zero unlocks through year-end. Starting 1/1/27, team and investor unlocks begin at a rate of roughly 14m LIT/month ($12.3m at the current LIT price of $0.88)
If the project successfully onboards users and competes with Hyperliquid, these unlocks could be offset by future “buy-backs” ($11m over the last 90 days).
LIT is currently trading at a $222m valuation ($888m fully diluted). The token is trading at $0.88, a cycle low and 72% off its all-time high.
Lighter’s P/S Ratio is currently 6.8x based on the circulating market cap and 27.5x based on the fully diluted value (based on 30-day fees annualized).
For reference, Hyperliquid currently has a P/S Ratio of 19x (72x fully diluted) based on 30-day revenues annualized. As such, Hyperliquid appears overvalued on a relative basis. However, we think this could be misleading, given Hyperliquid's significant lead in the Perps DEX category (57% of DEX open interest and 72% of DEX volumes).
Lighter has a current buyback yield of 14%, based on the circulating market cap.
In total, 11.6m LIT have been bought back from inception, removing 4.6% of the circulating supply (from the 250m LIT airdrop).
For reference, Hyperliquid's current buyback yield is 6.3% (based on circulating market cap).
Competition. Hyperliquid currently dominates the Perps DEX market. Furthermore, Aster has more market share than Lighter today. Not to mention, most Perps trading still occurs on CEX’s (Binance, Bybit, Deribit, etc). Coinbase and Robinhood are entering the fray. And you have to think that more competition is coming from TradFi implementations. This is a crowded market, and the winner in the onchain DEX category is likely to be “winner takes most.”
Execution. Hyperliquid is innovating fast. By opening the platform to 3rd-party builders via HIP-3 (3rd-party DEXs) and HIP-4 (3rd-party prediction markets), network effects are growing. The question for investors is whether Lighter can keep up, innovate, and incorporate new features with a more centralized team of builders.
As we shared in our recent Perps Market Report, we view the sector as one of the most important within crypto.
That said, we’re not sure if the market needs 5+ Perps DEXs. Let’s also not forget that there are already several popular centralized options available to traders (Binance, Bybit, Deribit, etc.). Of course, additional competition is coming from Coinbase and Robinhood (and eventually TradFi incumbents).
Power laws are real. Therefore, “winner takes most” is likely the outcome for the sector — driven by lindy, network effects, and liquidity. Hyperliquid is the runaway favorite here for good reason (strong user base, brand, community, liquidity, 3rd party builders, and integrations with trading apps and wallets).
With that said, Lighter could potentially serve as the hub for “Ethereum-based perps traders.”
Similar to spot DEXs, where you have a leading DEX on each major L1. We could see a world where Hyperliquid is the big winner. But maybe Lighter serves Ethereum-based perps traders who value Ethereum’s security guarantees at the base layer. Remember that Ethereum still has the most liquidity, network effects, and users of any chain. Lighter can still be a large business, even if it only serves Ethereum-based users.
Furthermore, Robinhood is an investor in Lighter, and Lighter's founder went to school with Robinhood’s founder. We think there is a chance Robinhood may integrate Lighter into its app to offer perps trading to U.S. users.
We’ll be monitoring this space moving forward, as we’ve yet to allocate to the Perps theme/sector in the current bear market (waiting for a “fat pitch”).
Seven months into the latest bear market, we’re currently at a critical inflection stage of the cycle. If you’d like to be notified if/when we add LIT to our active portfolio (or any other assets), plus receive weekly “cycle awareness” reports, you can subscribe to TDR Pro here.
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.