The Rise of DEXs in the Perpetuals Market: Tristan Yver of Zeta Markets Shares His Insights

DEXs are rapidly gaining ground in the perpetuals market, now holding nearly 10% of the market share, up from just 3-4% earlier this year. This growth is particularly noticeable on Solana-based platforms, where perpetual trading volumes have surged by over 50% since late 2023.

DEXs are quickly capturing a larger share of the perpetuals market, now holding nearly 10% of the market, up from just 3-4% earlier this year. This growth is particularly evident on Solana-based platforms, where perpetual trading volumes have surged by over 50% since late-2023. In July 2024 alone, the DEX-to-CEX futures trade volume ratio reached 13.9%, highlighting the increasing appeal of on-chain trading.

These trends indicate growing confidence in DeFi solutions, driven by transparency, lower costs, and the inclusion of new assets like real-world assets (RWAs) on decentralized platforms.

With Tristan we discussed the key drivers behind the increasing shift from CEXs to DEXs in perpetuals trading and how DEXs are solving liquidity challenges to attract more traders.

Also he gave us a new perspective on trading strategies on DEXs, such as arbitrage and funding rate exploitation, and how they are attracting sophisticated traders.

What do you see as the primary drivers behind the growing shift from centralized exchanges (CEXs) to decentralized exchanges (DEXs) in the perpetuals market?

The shift from CEXs to DEXs in the perpetuals market is primarily driven by greater transparency, reduced counterparty risk, and enhanced control over assets. Decentralized exchanges operate on-chain, ensuring that users can audit transactions, positions, and collateral in real time, which builds trust. Moreover, recent regulatory pressures on centralized exchanges have made decentralized platforms more appealing, offering a censorship-resistant and more permissionless environment. Zeta Markets has observed that traders are increasingly drawn to these advantages. Together with improvements in the user experience and execution speeds, DEXs like Zeta X are closing the gap with CEXs, further accelerating this shift.

Solana-based platforms have seen a significant surge in perpetuals trading volumes recently. What unique advantages does Solana offer for these kinds of trading activities compared to other blockchains?

Solana’s unique combination of high throughput and low-latency transactions makes it an ideal blockchain for perpetuals trading. With its ability to process thousands of transactions per second and sub-second finality, Solana enables traders on platforms like Zeta Markets to experience near-instant order matching and execution, critical for high-frequency and algorithmic trading strategies. Unlike Ethereum, Solana’s low transaction fees allow traders to trade actively and frequently without worrying about prohibitive gas costs, making it particularly well-suited for driving usage in high throughput applications like perpetuals trading.

How has Zeta Markets managed to tackle the liquidity challenges that have traditionally been a barrier for DEXs in attracting more traders?

Zeta Markets has addressed liquidity challenges by leveraging partnerships with key liquidity providers who are native to the Solana ecosystem. This enables Zeta X to integrate with and onboard liquidity providers quickly and efficiently. Additionally, Zeta Markets is also building Bullet, a purpose-built L2 solution for high-frequency trading, which will further enhance throughput while maintaining a high-performance order book structure. This will make market making more cost effective and efficient, ultimately attracting and retaining liquidity providers.

Can you elaborate on some of the new trading strategies, such as arbitrage and funding rate exploitation, that are emerging on DEXs, and how these strategies are attracting more sophisticated traders to Zeta Markets?

Due to the transparency and granularity of on-chain exchanges traders have more access to data, this opens the door for strategies like arbitrage and funding rate trades which are gaining traction on DEXs like Zeta Markets.

Arbitrage opportunities arise from divergences in prices of contracts between Zeta’s perpetuals markets and other trading venues, allowing sophisticated traders to capitalize on these price discrepancies by trading across different platforms.

Funding rate trades enable traders to earn yield. This yield is naturally created when there is an imbalance of traders who are going long and short – to address the imbalance funding rates are paid. Funding rate traders will look to earn the funding rate while using other instruments to hedge their risk. Zeta X’s enhanced platform will package up these strategies making these more accessible to the entire user base.