On-chain derivatives trading volume hit an all-time high in March, when it reached nearly $317 billion. Rachel Lin, co-founder and CEO of decentralized perpetual trading exchange (perp DEX) SynFutures, pointed out to Crypto Briefing that there are still capital efficiency issues hindering the growth of perp DEXs despite recent developments.
Lin explained that current AMM models struggle to compete with the order books of centralized exchanges: despite offering better transparency, they struggle to deal with high slippage when liquidity is low, which is a big concern for investors.
“Like previous versions, SynFutures V3 introduces an update that has a greater impact on liquidity providers (LPs) and traders. The new version includes a new AMM model called Oyster AMM (or oAMM), which allows LPs to provide concentrated liquidity for any derivative pair listed on the platform. In V1 and V2 of SynFutures, LPs can already provide single-token liquidity, but with the new AMM, LPs will also be able to provide concentrated single-token liquidity, i.e. liquidity concentrated within specific price ranges”.
This new feature could improve capital efficiency for liquidity providers and achieve higher returns while reducing slippage for traders, Lin added.
Increasing regulatory scrutiny is causing volumes to plummet
Although on-chain derivatives trading volumes showed a solid performance in March, this momentum appears to be cooling, as trading volumes in May just surpassed $175 billion. This movement could be tied to increased scrutiny from government organizations, Lin highlighted, citing the SEC’s recent moves against Coinbase and Uniswap.
“In early March, we saw Bitcoin surpass levels reached more than 2 years ago. Ethereum inflows supported this uptrend and altcoins also saw big gains. All this momentum undoubtedly snowballed and carried over into the on-chain derivatives market, among other sectors,” Lin shared.
Blast plays a key role in on-chain trading
The Ethereum layer-2 (L2) Blast blockchain has been a key ecosystem for on-chain derivatives trading in recent weeks, dominating volume for much of April and now battling hand-to-hand with Arbitrum for that dominance.
Lin is optimistic about Blast’s landscape, noting that SynFutures is one of the founding projects of “what could become one of the largest L2s.” However, DEX’s CEO stated that they intend to roll out their platform across several chains in an effort to maintain their significant share of trading volume on the chain.
“New DEXs are entering the space and rolling out on new chains on a bi-weekly if not weekly basis, so the numbers in terms of volume are in constant flux. One chain will be at the top one day and the other may be at the top the next. SynFutures is a multichain DEX, so while V3 has launched on Blast, we are exploring deployment on other L2s in the near future.”
