INTRODUCTION
Two years ago on-chain derivatives looked like an experiment—thin perpetual swaps on a handful of pairs and volumes that felt more like pocket money. By mid-2025 the story is very different. Hyperliquid, running its own L1, has cleared more than 1.5 trillion dollars in a year and already lists on-chain options. dYdX v4, after the migration to a Cosmos chain, is chasing the “institutional standard” badge with sub-20 millisecond latency and a battle-tested risk engine. Together they push the idea of “derivatives 2.0”: CEX-grade depth, blockchain transparency.
For a market maker, the upgrade means richer fee streams—and tougher tech requirements. The central difference is matching architecture: Hyperliquid writes every order directly to the chain, dYdX keeps the book on a high-speed server. Choosing between them is really choosing between speed, gas cost, and transparency.
WHY DERIVATIVES 2.0 ARE HOT
• Up to 50× leverage with no CEX counter-party risk.
• Block finality measured in hundreds of ms, not minutes.
• Options settled by smart contract instead of OTC spreadsheets.
ARCHITECTURE SNAPSHOT
Hyperliquid: fully on-chain order book
Every order, cancel, match, and liquidation is a blockchain transaction. A block finalizes in roughly 0.4–0.5 seconds. To quote a micro-spread you need your own validator plus a private relay; otherwise 700–900 ms of public-RPC lag simply hands the edge to someone else. Upside: total transparency and no trusted matcher. Downside: gas cost and serious DevOps overhead.
dYdX v4: off-chain matching on Cosmos
The order book lives on a powerful off-chain engine; margins and liquidations settle on the Cosmos chain. Round-trip latency is around 20 ms and gas is near zero. High-frequency market making is straightforward, but you trust the server for fair ordering and front-run control.
PERPETUALS—SPREAD, DEPTH, FUNDING
Hourly funding on Hyperliquid
Every 60 minutes the protocol re-prices funding against a spot index. Spikes can push the annualized rate to ±1 500 bps during macro events. Narrow spreads plus aggressive funding = rich arbitrage: short the HL perp, long spot or a dYdX perp, collect the payment. Watch the clock—funding can flip in an hour.
Eight-hour funding on dYdX
The rate changes three times per day, far smoother. Institutions like the predictability; market makers face lower carry but also lower position risk.
OPTIONS—EARLY BOOK VS. TEST NET
HLP-Options: set the implied vol yourself
Hyperliquid’s option module is already live but thin. With few competitors, a maker can post a reasonable smile and earn the entire premium. Risk: one chunky trade can distort the curve if you are not delta-hedged.
dYdX option module: launch planned for Q4 2025
The team is testing an options risk engine with shared margin. Only BTC and ETH strikes for now. The book will open later, but building your IV engine early is smart—institutions will compress spreads quickly once it goes live.
MARGIN DESIGN AND LIQUIDATIONS
Single pool HLP
All margin feeds a collective insurance fund. Capital is efficient—no need to collateralize every pair separately—yet every trader shares loss events. April 2025’s flash crash in SOL drained 2.3 percent of the fund but fees refilled it inside a day.
Isolated margin dYdX
Each market carries its own collateral and insurance. Cleaner risk segregation, but capital gets fragmented.
SPECIFICS OF MARKET MAKING ON ON-CHAIN PLATFORMS
1. On-chain CLOB Requires Active Risk Management
On Hyperliquid, every order is an on-chain transaction, which means:
- Smart order management is required, with cancellations timed before block finalization
- Continuous position monitoring after each new block
- Gas costs and fees must be factored into strategy design
- Order spam should be minimized to avoid sanctions from validators
2. Front-Running and Order Priority
In a public mempool and MEV-relay environment:
- It’s crucial to operate via private relay networks or direct node connections
- Apply gas-tipping for block priority
- Use dynamic pricing models based on network congestion
3. Providing Liquidity on Both Sides of the Book
- On Hyperliquid, it's optimal to run short-term intraday positions with micro spreads
- On dYdX, it’s better to place longer-term passive quotes with a wider spread
- Actively hedge between platforms to avoid directional risk
- Opportunities for Arbitrage and Quantitative Strategies
- Funding Arbitrage — targeting temporary funding rate discrepancies
- Volatility Arbitrage — trading implied volatility differences on Hyperliquid with delta hedging on other venues
- Cross-Venue Spread Arbitrage — capturing price spread between Hyperliquid, dYdX, and CEX perpetuals
OPEN QUESTIONS
— Hyperliquid’s zero-MEV claim lacks third-party audits; builders could still reorder.
— Option PnL history is under six months; long-run sustainability unknown.
— ESMA has yet to rule whether on-chain perps with 50× leverage fall under MiCA trading venue rules.
— No stress test proves an on-chain CLOB at 10 000 orders per second won’t choke gas.
CONCLUSION
Hyperliquid offers raw decentralization, hourly funding, and an infant options book; dYdX offers off-chain speed, smoothed funding, and isolated risk. The real winner is the market maker who blends the two: validator plus relay for Hyperliquid, institutional hedge on dYdX. While rivals argue philosophy, you write the IV curve and pocket fees.
