The rise of perpetual futures in crypto trading
Perpetual futures are now the most popular type of crypto derivatives, with only the expiry date stripped away from customary futures contracts that traders dislike. Without a settlement day, traders just keep their position open until it is liquidated by a margin call. Add to that a high leverage, plus the fact that funding payments keep the price of the contract very close to the spot price, and you have a product that never sleeps.
So no surprise then that perpetual futures make up the huge majority of crypto derivatives volume today. They’re loved by traders for their flexibility, by operators for their liquidity and by everyone for their speed, dynamic price discovery, and 24/7 nature.
From AMM pools to on-chain order books
These early perpetual DEXs were based on AMM pools, which worked initially but had problems with inventory imbalance and slippage, and struggled to attract professional market makers. This eventually led to the development of the on-chain central limit order book model.
Protocols like Hyperliquid extend this model to implement a fully on-chain CLOB using a custom L1. This means that the user experience is often very similar to a top-tier CEX, while all operations are fully on-chain and transparent to users. The matching engine is fast, the settlement layer is built for trading, and the UX for power traders with limit orders and tight spreads is much closer to what they want. It is the missing link between trading on centralized exchanges where it is comfortable but not trustless and trading on DeFi where it is trustless but awkward.
Why decision-makers are exploring their own perpetual DEX
From a business perspective this makes a lot of sense; a perpetual DEX is not just a fancy trading platform. It is a revenue engine. Every trade, every funding cycle and every market listing creates a new source of fee income.
Building in-house also allows you to maintain control. You get to define your roadmap, define the assets that make up your ecosystem, and set the rules of the game. You do not have to depend on an external exchange that is not necessarily aligned with your vision in the long-term.
It has a large ecosystem effect – if your perpetual DEX is well designed, traders, developers, liquidity partners and market makers spend their time in your ecosystem. It creates network stickiness and positions your brand as a core financial layer whose use cases extend beyond just a trading venue.
What Is a Perpetual DEX and Why Hyperliquid’s Model Matters
Perpetual futures and funding rates – the mechanics behind the product
On the surface, perpetual futures look simple, but in reality, the funding rate is what makes perpetual futures possible and keeps the balance for perpetual futures. Due to contracts not expiring, funds have to be moved from long to short traders and vice versa to keep the contract at the spot price.
If the perpetual is trading at a premium to spot, the longs pay the shorts and vice versa. As a result, the tug of war will maintain the price parity, keeping the contract close to the market price.
This primitive is a requirement for infinite time DEX operators, and if you get it wrong so does your funding logic and your product doesn’t work. But get it right and you instantly create a product that traders trust.
Perpetual DEX vs spot DEX vs centralized derivatives exchange
Spot DEXs are sufficient for swaps, but they cannot accommodate leveraged trading, advanced order types, or high speed in stressed conditions. CEXs with these properties force their teams to take full custody of users’ funds, with associated counterparty risk, which the teams cannot ignore.
A perpetual DEX is a middle ground between the two.
It also allows for leverage and speed without custodianship, for users to have ownership, for rules to be clear, and to avoid many of the problems that arise from centralization. For businesses, it allows for more capital to be used efficiently, and the ability to specialize markets, risk parameters, and incentives for their audience.
Hyperliquid at a glance – L1, on-chain order book, and HyperCore
Hyperliquid consists of an application chain for perpetual trading (an app-chain) that uses a custom first layer (L1) blockchain, which implements an on-chain central limit order book (CLOB) to clear orders on-chain at low latency, while making the state completely visible to all participants on the network.
The architecture is based around HyperCore, a high-performance execution engine that maintains strict determinism of its internal states for trading logic, and an extension layer called HyperEVM that provides smart contract capabilities without affecting throughput or performance of the trading engine.
This two-layer structure provides the speed of a centralized exchange, alongside an audit trail that meets the expectations of DeFi users.
Why Hyperliquid is a useful blueprint for builders
For future founders building their own perpetual DEX, Hyperliquid history shows that an on-chain CLOB can outperform centralized venues, that a custom chain can outperform a generic chain, and that traders will go to a venue when offered a more fair or more reliable trading experience.
By designing for a smooth UX and measurable performance, along with deliberate ecosystem strategy, this protocol shows us that a derivatives product can be built without having to rely solely on hype cycles. The lessons learned here can be applied by other builders to make a product more attractive to traders, who want fast, understandable, and trustworthy products.
Strategic Business Case for Launching a Perpetual Futures DEX
New revenue lines and fee structures
A perpetual futures DEX is not just a trading facility; it is a multi-layered revenue model that has its revenue streams multiply as the user base grows.
- Trading fees
Because every trade is a source of income, with high leverage and active markets generating high turnover, we can reinvest our fees into building better services.
- Funding spread capture
The funding payments between longs and shorts also create a small spread which the protocol can net, a subtle but important source of income for long-term viability.
- Listing fees and priority requests
Projects will pay to get their tokens listed, especially if your DEX attracts meaningful trading volume. Early access, custom listing slots and curated baskets are potential sources for premium fees.
- API partnerships and ecosystem integrations
If you can build a good API layer, prop shops, bot builders, and quant traders will plug in, and many will pay for higher throughput or custom-data feeds.
- Premium features for pro traders
Paid add-ons to the platform include advanced charting options, higher rate limits, custom dashboards, and strategy tools.
- White-label opportunities
Once your engine is stable, then you can license your technology to other ecosystems. Think of it as turning your DEX into a revenue generating product line.
With the right perpetual DEX design, the protocol could pay for itself, provide sustainable income and drive long-term ecosystem growth.
Owning the trading venue vs listing on others
Listing your token on someone else’s exchange is easy. Owning the exchange is powerful.
If you run your own perpetual DEX, you have control over every aspect of the trading experience.
- Full control over product roadmap
You have more control over which markets to launch, how leverage works, when to add features, and what tools traders use. You are not beholden to a third party that moves at the speed it wants.
- Custom liquidity incentives
Of course, rather than following the incentives of other platforms, you can always create your own, ensuring that the campaigns are targeted at the traders you want, not the ones you hope to catch.
- Stronger brand identity
Your marketplace becomes your center of gravity where people see your name every day, your analytics are being used by traders to make decisions and your markets represent your community.
- Ownership of user data and behavior insights
In a perpetual DEX, you own your data. Volumes, user activity, spikes in activity, and the markets in which people express interest are all visible without relying on third-party aggregators.
- Reduced dependency on CEXs and external DEXs
You don’t have to worry about being delisted, being deprived of liquidity or being dependent on proprietary controlled environments where your interests don’t necessarily align.
In other words, by having your own perpetual DEX, you get to be the rails.
When it makes sense to build your own perpetual DEX
Not every project needs a DEX right out of the gate, but sometimes a DEX is the smartest move in the book:
- You are building an L1 or L2 ecosystem
Every chain needs a flagship exchange to provide liquidity and speed but also to ensure the traders have an incentive to keep using the network.
- You already have a large trading community
If your users actively speculate, hedge, or trade on leverage, launching a native perpetual decentralized exchange should be a no-brainer retention increase.
- You want to launch RWA perps or new asset classes
Real world asset trading, sector baskets, volatility markets and macro indexes don’t always fit on mainstream DEXs. Your own market-making platform gives you the freedom to innovate.
- You are focused on niche derivatives
Gaming tokens, AI indexes, meme baskets, specific volatility products, a custom perpetual DEX lets you experiment and build your niche before anyone else even realizes they should care.
For example, in short, if your project has already liquidity, community, or storytelling, a perpetual DEX can compound them.
Risk and responsibility for operators
There is a huge opportunity to build a perpetual DEX, but there are a lot of responsibilities and trade-offs that need to be understood from day one.
- Regulatory exposure
Additionally, an operator must understand the challenges presented by derivatives, such as geo-blocks, compliance filters and potential changes in regulatory requirements.
- Technical risk
A perpetual DEX can never go down. However, bugs, performance issues, and smart contract problems can affect traders within seconds, making successful development and auditing of smart contracts important to exchanges.
- Liquidity obligations
New exchanges search for liquidity partners. Absence of liquidity leads to spread widening and abandonment. Thus, partners, incentives, and enduring liquidity support are planned in advance.
- 24 by 7 operational oversight
Perpetual markets are always open for business. Liquidations happen anytime. Price feeds should always be on-call, along with monitoring, incident management, and risk checks.
Operating a perpetual DEX requires high performance infrastructure that is always-on, with a major focus on speed, security, and reliability.
Ready to build your own perpetual DEX?
Core Design Choices – Order Book, AMM, or Hybrid
Order book perpetual DEX design (CLOB model)
If you want a perpetual DEX that operates like a central limit order book (CLOB) exchange, that’s what you get with CLOBs. Real depth, tighter spreads, and the kind of execution flow that institutional and serious traders expect.
Hyperliquid and other CLOBs on-chain show that an on-chain CLOB can be competitive if built on a bespoke chain. They offer advanced order types, control over order size, and an order book design that appeals to professional traders and market makers seeking precision in their transactions.
The trade-off is complexity. To run a fully on-chain CLOB, you need to be in a high throughput environment and ensure that your matching rules and state engine are deterministic and non-lagging. It will be the most complex architecture, but it is also the one that can provide the best performance and liquidity.
AMM-based perpetual exchanges
In AMM-based perpetual DEXs, the order book is replaced by liquidity pools with pricing mechanisms. Instead of the market makers being used to create an order book, trades are executed based on pricing curves, which is easier to implement, and better for early stage ecosystems without deep market maker involvement.
The benefits are clear:
Simple liquidity provisioning
Anyone can become an LP by depositing their assets, which provides the service with early liquidity instead of professionals.
Predictable pricing logic
AMM curves allow for easier price movement and control, making them easier for small teams.
Lower operational overhead
No matching engine, no complex order types, and very few technical moving parts to maintain.
Correspondingly, AMMs have their own disadvantages: AMMs have inventory risk and are liable to slippage during high volatility, and their spread is generally larger than what can be obtained on an equivalent order book. AMMs are typically used in niche markets or in earlier ecosystems where convenience is more important than precision.
Hybrid architectures and app-chains
A hybrid architecture might be the best of both worlds, in which order book matching with AMM liquidity assistance is combined with high throughput settlement layers. The majority of perpetual DEXs use such a hybrid architecture.
Some implementations compare an order book for execution, falling back on AMM pools if they run low on liquidity. Others use app-chains built for trading specifically, where block times and state updates are adjustable and the order of transactions is determinable.
This hybrid approach allows teams to start with AMM liquidity, before subsequently moving to a CLOB, or using a hybrid CLOB/AMM model, which can help support different types of trading styles as the ecosystem matures and grows, whilst providing liquidity according to trader demand. It strikes a balance between performance, accessibility and scalability.
Decision checklist for founders and CTOs
Choosing an architecture is not about optimizing an existing design; it’s about making technical infrastructure choices that are aligned with your ecosystem considerations and goals. A checklist helps clarify the path:
- Latency requirements
Do your traders need near-instant execution or is block-by-block trading acceptable? CLOBs or app-chains tend to fare better in high-speed environments.
- Capital and liquidity needs
Are you able to incentivize market makers to provide an order book, or do you need to start with AMM pools to bootstrap liquidity?
- Development complexity
Alternatively, if you don’t have the dev resources and technical capability to maintain an on-chain matching engine, is an AMM a better first step?
- Long-term liquidity strategy
Are you focused on pro traders/high volume, or are you focused on retail trading/niche markets?
- Scalability outlook
Do you think your DEX will need an app-chain to scale or do you believe L1 or L2 will be enough?
The answer will depend on your users and liquidity market makers, as well as your long-term vision for your ecosystem. Setting your design direction early means you can avoid re-work later.
Reference Architecture for a Hyperliquid-Style Perpetual DEX
Execution layer – app-chain vs L1 or L2 deployment
The first big architectural decision you’ll need to make when launching a perpetual DEX is whether to deploy your smart contract to a general-purpose chain like Ethereum or to a dedicated app-chain like Hyperliquid. Both paths are valid, but entail very different trade-offs.
App-chain approach
This gives you control over block times, throughput, and transaction ordering, and is why Hyperliquid uses a custom L1: when everything in the chain is optimized for trading, the speed and determinism of a DEX chain is simply impossible on a general-purpose chain.
The tradeoffs are lower latency, better execution consistency, and better CLOB experiences at the expense of running validators, managing its networking, upgrading, and building the ecosystem tooling. It also requires more engineering power, making their trading engine feel like a premium trading product (in a good way).
L1 or L2 deployment
By launching on Ethereum, or an L2, or a chain with an existing user base, you get security and users, without your own huge engineering task to build from scratch.
However, you inherit their block space, gas costs, latency and possible network congestion. For small perpetual DEXs or those focused on retail, this is probably still the most practical approach. This can be a limitation in high-frequency applications.
The right choice depends on your audience, your performance goals, and your tolerance for chain-level complexity.
State engine and modules inspired by HyperCore and HyperEVM
A perpetual DEX is at its best when its trading logic is decoupled from the rest of the system. Hyperliquid achieves this with a dual-layer architecture: HyperCore, which handles the trading engine and HyperEVM, which runs smart contracts. This design maintains speed.
Separating this out means that your trading engine can be deterministic and simple, updating positions, executing orders and funding rate adjustments in the controlled space, while further governance, incentives and ecosystem can be handled by the smart contract layer.
This reduces risk, avoids unnecessary computation during order flow, and allows trading logic to be separated from generic contracts competing for processing.
Smart contract suite for perpetual trading
All perpetual DEXes implement a stack of smart contract modules that ease trading in a safe, composable, transparent, and predictable manner.
Core contract modules
Margin engine
Oversees collateral deposits, margin requirements, and leverage rules.
Position manager
Tracks trades, open interest, PnL calculations, position lifecycle tracking.
Funding rate logic
Payments between longs and shorts keep perp prices in line with the spot price.
Liquidation module
Mandatory liquidations occur when the margin falls below some value, preventing bad debt from amassing.
Fee module
Calculates maker, taker and protocol fees at every step of trading.
Insurance fund
Absorbs system losses, stabilizes the platform, and prevents extreme volatility events.
Governance hooks
DAO or council voting enables parameter tuning, market listings and upgrades to the system.
These modules create a smooth trading experience and provide operators the ability to tune performance as their environment grows.
Matching engine, order routing, and throughput targets
The matching engine is the most important component of a CLOB-based perpetual DEX, handling order matching and determining the priority and speed of the matching. Another example is Hyperliquid, which has extremely high order-per-second processing and instant finality built on its protocol.
What a matching engine must include
Efficient CLOB data structures
Highly optimized storage of bids and asks across multiple markets.
Support for pro order types
Limit, market, stop, reduce-only, and advanced combinations for serious traders.
Batching and queue rules
Establish unambiguous priority logic to prevent unfair advantage, and ensure deterministic execution.
Throughput and latency goals
Engine should be able to withstand lots of load during volatility spikes.
If your DEX can’t route orders quickly, traders will notice, so a well-architected matching engine makes for better performance and more trust.
Oracles and index price construction
As perpetual futures always utilize the index price, the protocol needs access to high-quality oracle data in order to calculate the funding rates, PnL and verify liquidations.
Spot prices are sourced from multiple venues for price fairness and stability.
Reliable price aggregation
If an exchange stops updating its prices, your system needs to ignore that feed to avoid drifting.
Stale data checks
A single bad data point should never cause liquidations or distort PnL.
Manipulation resistance
Partnering with decentralized oracle providers allows the pricing to be secured without centralized API reliance.
Oracle network integration
A bad oracle can destroy traders’ trust and liquidity, while a good oracle stabilizes markets.
Account model, collateral, and risk tiers
Your account model shapes the trading experience. Traders must be educated about leverage and offered flexible, straightforward, and equitable options.
Two main account models
Cross margin
All positions share collateral. This benefits active traders with several positions who think of them as one.
Isolated margin
Each position has its own margin bucket, making it more favorable for new users, who can limit their exposure.
Collateral options
Stablecoins like USDC are standard, but multi-collateral models can use native assets or asset baskets for a more advanced approach.
Risk tiers and haircut rules
Certain assets have higher leverage caps. Haircuts are imposed to reduce risk by reducing volatility exposure.
The right structure allows traders flexibility and ensures security for the protocol.
Frontend, APIs, and low latency connectivity
The best engineered backend means little without an intuitive trading interface. Perpetual DEX users expect tools that are fast, simple and accessible, whether they are on desktop, mobile, or APIs.
Frontend expectations
Fast access to charts, one-click order placement, position dashboards and real-time updates with no lag in data.
API infrastructure
WebSockets for live feeds, REST endpoints for management actions, and FIX style connectivity for the serious trading desks.
Analytics dashboards
Traders love data: volume, open interest, funding rates, leaderboards, trade statistics to keep users informed and engaged on exchanges.
The combination of a great UI and powerful APIs will produce a professional and trust worthy DEX that traders will use.
Implementation Roadmap – From Idea to Mainnet Launch
Phase 1 – Discovery and product strategy
Good perpetual DEXs start with clarity. You need to know exactly what you are building before you even think about writing a line of code, who you are building for, and what makes you unique.
What happens during this stage
Requirements workshops
Founders, engineers and product teams work side by side to define precisely what the use case for your perpetual DEX will be, and what problems you want to solve.
Competitor analysis
Review comparable platforms like Hyperliquid, dYdX, GMX, and other derivatives DEXs for market understanding, differences in approach or design, and potential gaps.
Choosing the right chain
Choosing the L1, L2, or custom app-chain affects the performance, costs, latency, and long-term scalability of applications running on that layer.
Designing trader personas
Are you targeting pro traders, retail users, quant teams, or eco-system native communities? Your UX, incentives and product decisions will vary greatly depending on your target user.
Scoping MVP vs v1
An MVP is the least functionality needed in an application to test your hypothesis. When you have a version 1, go public. This may help avoid overbuilding and set reasonable timelines.
That is the starting point for all the next steps. This has the benefit of a much more predictable and aligned development.
Phase 2 – Architecture, PoC, and validation
Now that a product strategy is in hand, the next step is to bring some of this thinking into concrete form. This is when technical clarity is delivered.
Key activities in this phase
System architecture diagrams
You’ll explain how smart contracts, matching engines, pricing modules, oracles, APIs, front-ends, and more interact.
Proof of Concept build
A trading prototype will allow testing of the core gameplay loops and is not a full build.
Stress tests
Pushing the prototype to its limits gives understanding into throughput and order processing behavior, including worst-case scenarios.
Latency and risk validation
Perpetual DEXs have duration-sensitive elements; thus, this step ensures your execution flow, margin calculation, and liquidation mechanism function under pressure.
This phase also allows you to identify architecture issues early on and before they become expensive.
Phase 3 – Full scale development and integrations
Once the project has been validated, it is said to be in full build mode, being the most intense part of the project.
What gets built
Smart contracts
Margin engines, position tracking, funding rate logic, liquidation modules, fee structures, governance hooks.
Matching engine and order book
Features high performance matching logic used for limit, market, stop and advanced order types.
Wallet and account integrations
Integrates with MetaMask, WalletConnect, hardware wallets, and other ecosystem wallets.
Compliance tools
KYC and AML layers for jurisdictions where access is restricted.
Analytics and dashboards
Traders need real-time information about PnL, funding, open interest, spreads, and volume.
Admin panel
In particular, tools for performance monitoring, listing management, and health checking are useful for operators.
This is where your perpetual DEX starts to feel real, as all your modules come together as one system.
Phase 4 – Security reviews, testnet, and trading competitions
The security of a perpetual DEX is paramount and so the system must be battle-tested on real users with high volatility and high frequency before its launch.
Critical steps in this stage
Multi round audits
Internal reviews, third party audits, formal verification and automated testing are used to find vulnerabilities.
Incentivized testnet
Traders, market makers, and developers can use the platform to trade, stress test the engine, and find bugs.
Volume and competition events
By simulating real world activity, trading races can reveal performance data or usability or scalability problems.
Feedback loops
Power users and liquidity partners also contribute to optimizing the leverage, UI, and risk parameters of these products.
This phase ensures that the platform is functional and battle tested.
Phase 5 – Mainnet launch and post launch expansion
After testing is complete, the product goes live. The work doesn’t end, however, as there are still more steps to take.
How the launch unfolds
Staged feature release
Low leverage, narrow spreads, and safe collateral tend to precede high confidence and market complexity.
Gradual leverage ramp up
Increasing leverage too quickly would expose traders to liquidation shock. Thus, step by step increases are used to protect traders and the insurance fund.
Market listings in phases
Start with BTC and ETH, then add altcoins, indexes, RWA perps, or niche derivatives.
Adding new product lines
Subsequently, teams often issue options or structured instruments, or engage in spot trading to profit.
Performance optimization
Infrastructure is monitored and tuned, and upgraded to keep the DEX responsive and reliable.
A well executed post launch strategy is what turns a DEX from an immediate trading powerhouse to a long term one.
Conclusion
A perpetual DEX is not a simple tool for trading. It is a highly calculated, long term asset that positions your ecosystem to attract advanced, capital-efficient traders, and unlocks powerful new revenue streams. From designing a high performance architecture, to compliance strategy, governance framework, token economics and mainnet launch strategy, every step will require serious technical depth. If you want to create a perpetual exchange at the speed, stability and sophistication of Hyperliquid, partnering with a team that understands the full lifecycle makes all the difference. Blockchain App Factory provides end to end perpetual DEX development services that help you build a high speed, secure and scalable derivatives platform and position your project for long term success.
