According to the white paper vision description of the PerpDEX project parties, PerpDEX is a 100 trillion business.

But in the cruel market reality, PerpDEX is currently just a niche market in the DeFi track.

From dYdX to GMX, GNS and then to Aevo, the PerpDEX paradigm has evolved from AppChain CLOB to AMM based on general L2 and then to modular CLOB. Although it has undergone several iterations, it has never truly broken the circle and has not challenged the market position of CEX like spot DEX. PerpDEX, which is doing well, can only barely maintain itself.

Why is this happening? Traditional answers include: regulatory uncertainty, technical bottlenecks in decentralized infra, user habits and trust, low AMM funding efficiency, insufficient market education, fierce competition in CEX, etc.

But these problems also exist in spot DEX. Why can spot DEX overcome them but PerpDEX cannot?

Today, let’s explore the ins and outs of the PerpDEX dilemma and how Orderly Network is trying to solve this problem in an innovative way.

1. Source of the dilemma: order flow siloing, liquidity fragmentation, and lack of freedom

Before chain abstraction is implemented, each L1/L2 network will be an independent island.

Today, every emerging L1/L2 network application ecosystem will be equipped with at least one PerpDEX as standard. This inevitably leads to the isolation of order flow and liquidity fragmentation in the niche market of PerpDEX. Each network is like an independent island, with its own order flow and liquidity pool, which is difficult to share with other networks.

Moreover, under natural conditions, the distribution of order flow and liquidity has a strong Matthew effect. Networks with strong order flow and abundant liquidity will attract more order flow and liquidity, PerpDEX with strong order flow and abundant liquidity will attract more order flow and liquidity, and trading pairs with strong order flow and abundant liquidity will attract more order flow and liquidity.

In this market environment, most rational traders will choose to trade or hedge in the BTC-USD-Perp and ETH-USD-Perp trading pairs with sufficient liquidity. Most rational investors will choose to add LP or actively make markets for the BTC-USD-Perp and ETH-USD-Perp trading pairs.

Free marketeers would argue that since this is the natural outcome of the market, there is no need for us to intervene.

However, the strong Matthew effect of the PerpDEX market, together with the islandization of order flow and fragmentation of liquidity, has led to the following problems:

-Inefficient liquidity: When liquidity is dispersed across multiple isolated networks and platforms, overall capital utilization efficiency is reduced.

- Rising transaction costs: The slippage of the Altcoin-Perp trading pair on PerpDEX is much greater than that of the contract trading pair on CEX. This not only affects the user experience, but also hinders the participation of institutional investors.

- Reduced market pricing efficiency: As order flows are segmented into different isolated islands, the efficiency of PerpDEX's price discovery mechanism is affected. In fact, PerpDEX's liquidation price is overly dependent on oracle feeds. This severely reduces the freedom of PerpDEX to list new assets.

- Due to the fragmentation of the market, it is difficult for each PerpDEX to achieve true economies of scale. This may lead to high operating costs and difficulty in providing users with more competitive rates and services.

- Limited innovation in the track: Emerging small PerpDEX projects that may bring innovative ideas find it difficult to obtain sufficient order flow and liquidity, making it difficult to verify and improve their innovative concepts, resulting in a weakening of the innovation momentum of the entire track.

These problems make PerpDEX almost unable to achieve the key features that make spot DEX successful: freely listing new assets and freely adding liquidity to new assets.

2⃣Orderly Network: Building the full-chain liquidity layer of PerpDEX

In the face of the current predicament of PerpDEX, Orderly Network proposed the concept of "full-chain liquidity layer", which aims to reverse the trend of isolation between various L1/L2 networks by learning from the idea of ​​modular public chains. If this concept can be realized, it will bring about the following revolutionary changes:

-Lower transaction costs: By pooling liquidity across the entire network, slippage can be significantly reduced and traders’ costs reduced.

- Higher capital efficiency: Liquidity providers can cover more trading needs with less funds, improving capital efficiency.

- Better user experience: Traders no longer need to switch back and forth between multiple platforms and can complete all operations on a unified interface.

- Broader space for innovation: Developers can develop more innovative financial products based on this unified liquidity layer.

In this context, Orderly Network proposed an ambitious solution. Its core concept is to integrate liquidity on different chains through a unified order book and cross-chain settlement mechanism.

Orderly Network’s solution mainly includes the following key components:

1. Unified order book: All orders on the chain are integrated into a centralized order book to achieve optimal price discovery and matching.

2. Cross-chain settlement layer: Orderly Chain built on OP Stack is responsible for the settlement and ledger recording of cross-chain assets.

3. Multi-chain asset vault: Deploy fund vaults on each chain to ensure the security and decentralization of assets.

4. Developer-friendly SDK: Provides an easy-to-use SDK that allows developers to quickly access Orderly’s liquidity network.

This design attempts to strike a balance between centralized efficiency and decentralized security, achieving efficient order matching through a centralized order book while ensuring security through decentralized asset custody and settlement.

3⃣Orderly Network’s achievements and new challenges

According to the data from the Dune dashboard, the actual operational performance of Orderly Network is as follows:

- Significant market size: Orderly Network has achieved an impressive cumulative transaction volume of $83.7 billion.

- Strong user base: With 429,499 total accounts and 298,464 unique wallet addresses, Orderly Network has built a fairly large and diverse user base, laying a solid foundation for future growth.

- Substantial Revenue Generation Capabilities: With cumulative net revenues of $7.8 million, Orderly Network's business model is substantially profitable.

-Multi-chain layout: Orderly Network's total locked value (TVL) is $18.43M, distributed on multiple mainstream public chains, including Optimism, Arbitrum, and Base. This diversified chain deployment strategy not only disperses risks, but also expands the potential market scope.

- Active Ecosystem: The platform currently has 29 active builders and 59 Perp trading pairs. Orderly Network has successfully cultivated a thriving ecosystem, attracting the participation of many developers and project parties.

In general, Orderly Network's market performance and ecological development are quite impressive. However, in the near future, Orderly Network faces many new challenges:

1. Diversion of the hot Meme coin market: The arrival of the Meme coin super cycle has had a significant impact on the PerpDEX trading market. The contract trading pairs of Meme coin and PerpDEX are essentially the on-chain Degen players selling high volatility and high odds. However, Meme coin does not involve leverage, the risk is more controllable, and it is more attractive to on-chain Degen players.

2. Strong Matthew Effect in the PerpDEX Market: PerpDEX built on the full-chain liquidity layer of Orderly Network is basically at the tail end of the market. Due to the existence of the strong Matthew effect, most of the trading volume is concentrated on a few well-known PerpDEXs, and it is difficult for new platforms to stand out.

3. Cold reception after airdrop: Similar to other PerpDEX projects such as Aevo, Orderly Network also faced problems such as declining TVL, collapsing trading volume, and a large number of active users after the token airdrop. According to Dune data, its TVL, trading volume, and active users have nearly halved in the recent period.

4. Difficulty in user retention: In the cryptocurrency world, user loyalty is generally low. How to retain users amid fierce competition is a major challenge facing Orderly Network.

4. Orderly Network’s breakthrough strategy

Facing these new challenges, Orderly Network did not sit idly by. It took a series of measures to try to break through:

1. Launch of VALOR staking mechanism: By incentivizing users to stake native tokens ORDER and VeORDER to obtain VALOR, Orderly Network attempts to lock in more liquidity and increase the secondary market price of tokens, thereby retaining TVL and trading users. Through the VALOR staking mechanism, more than 76 million ORDER tokens have been staked, with a recent annualized yield of up to 22%. This highly attractive staking mechanism helps to increase the participation and loyalty of token holders.

2. Strategic financing and cooperation: The recent strategic investment of US$5 million led by OKX Ventures not only brought financial support, but more importantly, opened up the possibility of in-depth cooperation with industry giants in the field of derivatives.

3. Continue to expand the ecosystem: Orderly Network is actively expanding more public chain support and partners, trying to enhance its competitiveness through economies of scale. Orderly Network is constantly expanding the public chain networks it supports, currently covering multiple mainstream networks such as ETH mainnet, Polygon, Arbitrum, Optimism, Base, and Mantle, and will soon be integrated with Solana.

4. Technological innovation: Orderly Chain, built on OP Stack, combined with Celestia’s data availability and LayerZero’s cross-chain protocol, demonstrates the platform’s leading position in technological innovation and lays the foundation for future cross-chain operations and scalability. Continue to optimize cross-chain technology and order book efficiency to provide a better user experience.

Conclusion

The vision of the full-chain liquidity layer of Orderly Network is undoubtedly exciting to the market. It attempts to solve a core pain point of the PerpDEX track with a modular paradigm. However, the road from vision to reality is never smooth. In the future, can Orderly Network truly become a hub for full-chain derivatives liquidity? We may have to wait for a while to find out the answer to this question.

The end.