RWA Perpetual Contracts: DeFi Devours the Last Piece of Wall Street's Puzzle

Author: OKX

Foreword:

Currently, the Crypto Market's exploration of RWA primarily focuses on asset tokenization—that is, how to map the ownership of real-world assets such as government bonds, stocks, or real estate onto the blockchain to achieve more efficient settlement and holding. However, this solution, centered on efficient holding and settlement, cannot fully meet the other demand in the financial market, which has a much larger and more active trading volume: namely, leveraged trading and risk management in response to asset price fluctuations.

In fact, the true engine of liquidity in global financial markets is not static asset holders, but traders seeking leveraged directional exposure. From the US end-of-month options market with a notional value of approximately $50 trillion each month, to the CFD (Contracts for Difference) market outside the US with a monthly trading volume of approximately $30 trillion , retail investors' thirst for high leverage and short-term risk exposure has never ceased. Despite the enormous trading volume, existing traditional financial instruments still fall short in meeting this demand: 0DTE options force traders to bear the non-linear risks of Theta (time decay) and Vega (volatility) in addition to simply betting on direction. The CFD market, on the other hand, is heavily criticized for its opaque black-box mechanism and centralized counterparty risk.

From the perspective of traders seeking directional exposure, what many traders truly crave is not "options" or "tokenized stocks," but rather a pure Delta One (linear/symmetric return) exposure—that is, the fluctuations in asset prices can be simply and directly converted into investment profits and losses proportionally, without any loss or deviation in between (Arthur Hayes wrote an article last year, "Adapt or Die," reviewing the complete background of their development of crypto perpetual contracts, which you may find interesting to read) .

It is precisely within this structural mismatch that DeFi protocols have astutely seized this market opportunity. Some DeFi entrepreneurs are attempting to introduce perpetual contracts, which have undergone nearly 10 years of proven maturity in the Crypto market, into the traditional asset space. These products employ a synthetic derivatives architecture, anchoring the price of the underlying asset through oracle price feeds and funding rate mechanisms, providing 24/7 leveraged trading services for stocks, commodities, and forex without the need for actual holding or delivery of assets.

Chart: RWA Perps Dex's main trading asset types

I. Market Background (Entry Opportunities in the RWA Perps Market)

1.1 Market Entry 1: The US ODTE Option Market

The US options market has undergone a profound structural transformation over the past decade. According to data from Cboe Global Markets , a major options exchange, the trading volume of end-of-day options in the S&P 500 index has surged from less than 5% in 2016 to over 60% currently, with a monthly notional turnover of $48 trillion (approximately 40 times the monthly trading volume of perpetual contracts on CEX exchanges). This data not only reflects the increased trading frequency but also reveals a massive capital force in the market seeking extremely high intraday leverage exposure.

Note: 0DTE stands for "Zero Days to Expiration," also known as end-of-day options. These options contracts expire at the end of the trading day. Traders use them for ultra-short-term speculation, seeking quick returns and mitigating the risk of overnight positions.

The charts above show the proportion of S&P 500 index options with different expiration dates from 2016 to 2025. It can be seen that 0DTE options accounted for only 5% of the options market in 2016, but the market share soared to 61% in 2025. This means that nearly half of the S&P 500 index options trading in the market is betting on the direction of the day for ultra-short-term speculation.

Chart: The chart above shows that retail investors are the absolute main force in the 0DTE market.

From the perspective of first principles of financial instruments, financial derivatives can be divided into Delta-One products and non-linear products. Traditional Delta-One instruments such as stocks and futures have symmetrical risk exposure: the gains from an increase in the underlying price and the losses from a decrease are linearly proportional in scale. However, options were originally designed to manage asymmetric risk.

For example, a fund manager holding a large amount of Apple stock might be unwilling to sell due to a positive outlook on the company's long-term fundamentals, but he worries that short-term earnings fluctuations could cause a sharp drop in the stock price. In this case, he could purchase put options to insure his position. Under this structure, his potential for profit remains intact as the stock price rises (symmetrical upside potential), but his potential loss is strictly locked within the premium already paid (asymmetric downside risk).

In order to achieve this insurance function of "separation of rights and obligations", the cost structure of options must include not only the intrinsic value (Delta) reflecting the direction, but also the time value (Theta) reflecting the probability of volatility.

The significant growth in the 0DTE market share in recent years reveals a paradox: many traders are not using it to manage asymmetric risk or engage in complex volatility trading, but rather as the sole means to obtain intraday directional leverage. In this situation, traders are forced to pay a high time value cost for an unnecessary "insurance function." Even if the directional judgment is correct, the trade will still incur losses as long as the rate of increase in the underlying asset is insufficient to cover the rate of time value decay.

The chart shows that time value is the main part of an option that shrinks over time, and it is also the core of the battle for 0DTE option traders.

Therefore, the value of perpetual contracts, as a Delta One product, lies in stripping away unnecessary time and volatility costs, providing a purely linear leveraged exposure, and mathematically, it can more accurately match the speculative needs of this part of the capital than 0DTE options.

1.2 Market Entry 2: CFD Markets Outside the United States

Outside the United States, retail leverage demand is primarily met by CFDs (Contracts for Difference), with the average monthly trading volume of the CFD market reaching $30 trillion by 2025.

While CFDs offer a linear return Delta One structure, their market operation model is based on a brokerage model, resulting in significant transparency issues. The vast majority of CFD brokers employ a B-Book (platform-based market maker) model, where the broker directly acts as the counterparty to the client's trades. (While some reputable brokers with robust risk control may hedge profitable clients to mitigate risk, the top companies in the CFD market only account for about 20% of the market share, leaving a large number of small and medium-sized brokers in the remaining 80%. Overall, many brokers engage in opaque practices, profiting from client losses.) In this zero-sum game structure and opaque environment, brokers possess both the technical authority and economic incentive to manipulate quotes, slippage, and execution speed.

Compared to CFD products, RWA Perps can also be understood as a kind of "transparent CFD based on smart contracts." By putting the liquidation logic, funding rate calculation, and oracle quotes on-chain, DeFi protocols eliminate the possibility of centralized brokers interfering with transaction results. At the same time, the atomic settlement mechanism based on stablecoins improves the efficiency of fund transfers to the second level, realizing true self-custody of funds and real-time settlement.

II. Challenges in Building RWA Perps Products

RWA Perps is not simply a replica of the perps we've seen before that focus on crypto assets. Crypto assets have the characteristics of 24/7 trading, real-time pricing, and T+0 on-chain settlement, while traditional assets are subject to the legal framework of the physical world, holiday systems, and outdated bank clearing protocols.

This asynchronicity of the underlying properties constitutes the "impossible triangle" in RWA Perps' product design:

• High Leverage : Meets the speculative demand of retail users for high leverage.

• 24/7 Availability : Maintaining the core value of DeFi—making transactions possible anytime, anywhere.

• Risk Externalization : Ensures that the protocol and market makers do not bear directional betting risks, thus achieving systemic long-term survival.

2.1 How is the on-chain price of RWA Perps anchored when the US stock market is closed?

Perps' product is essentially a "mirror of price discovery," requiring a continuous feed of external spot prices. However, when Nasdaq or CME closes for weekends or overnight, it causes a break in the oracle's data source.

This pricing vacuum and misalignment during US stock market closures gives rise to two core risks:

Risk 1: Market makers lack sufficient risk hedging channels due to weekend market closures.

Professional market makers can offer extremely narrow spreads and deep liquidity because they don't bet on direction but instead pursue neutral positions, charging only the spread. This means that for every $1 million worth of Tesla stock contracts a market maker sells to a trader on-chain, they must immediately buy an equivalent amount of assets in the traditional spot or futures market to hedge that risk exposure.

When traditional markets close for hedging, market makers cannot adjust their hedging positions. To mitigate this risk, market makers can only cancel orders or add a large risk premium to their quotes during market closures. This explains why spreads in traditional order book models can expand non-linearly to dozens of times the normal level on weekends, easily leading to a liquidity crunch.

Risk 2: The risk of a gap-up opening on Monday.

Due to the 24/7 trading nature of native crypto assets, price curves are typically continuous, giving liquidation engines ample time to close out user positions during price drops. However, in the RWA Perps space, the upward and downward pressure accumulated by traditional assets during market closures is released instantly upon Monday's opening. If a significant gap occurs at the Monday opening, the liquidation engine will be trapped in a vacuum during this "price gap," unable to find counterparties to execute liquidations before margin calls occur.

To address the above challenges, RWA Perps currently offers two main solutions:

• Internal simulated pricing (e.g., TradeXYZ / Hyperliquid): Introduces an exponential moving average (EMA) algorithm to allow prices to slowly "drift" based on on-chain buying and selling forces when the oracle disconnects, maintaining a 7x24 shell, but theoretically still a potentially manipulated "shadow market".

• Forced risk downgrading (e.g., Ostium): This is a more pragmatic risk control solution. Ostium introduces the 0DTE attribute: requiring all high-leverage positions to be automatically closed or have their leverage significantly reduced before the market closes. Only low-leverage positions (with sufficient margin buffer to cover 5%-10% gaps) are allowed to remain overnight. This approach sacrifices some "persistence" in exchange for absolute system safety in the face of Monday's opening gaps, preventing the LP pool from being penetrated by systemic bad debts.

2.2 How to provide TradeFi-level transaction depth on-chain at low cost?

In DEX development, the choice of liquidity supply and order execution mechanism are core variables that determine the system's capital efficiency, risk allocation logic, and user experience. Currently, the two main solutions are: CLOB (Central Limit Order Book) and Oracle-based Pool (oracle-driven liquidity pool).

Hyperliquid has validated the success of the order book model on crypto-native assets, its core being zero-friction hedging execution: market makers can transfer risk across platforms in milliseconds using stablecoins. After accepting orders on the on-chain order book, market makers can use stablecoins to hedge risk at the millisecond level on a 24/7 CEX. Because crypto funds and assets operate within a highly interconnected crypto network, hedging costs are extremely low, allowing market makers to keep price spreads within a very narrow range, thereby attracting trading volume and creating a positive feedback loop.

In the RWA field, market makers face significant cross-border hedging friction: on the one hand, the time mismatch between on-chain USDC (T+0) and traditional fiat currency settlement forces market makers to keep a large amount of USD idle in traditional accounts as hedging reserves for a long time; on the other hand, the market closure mechanism of traditional banks on weekends and holidays makes it impossible for market makers to hedge in time when they encounter sudden market conditions on non-working days.

This is the core logic behind why Ostium founder Kaledora has always insisted on a pool-based model rather than an order book. She believes that the frictionless hedging of crypto-native asset exchanges is difficult to achieve in the RWA perps space. When market makers take on an NVDA order in RWA perps, they cannot use stablecoins to hedge on Nasdaq in milliseconds because they have to overcome numerous obstacles from traditional banking channels.

2.3 When traders continuously profit from one-sided market trends, how does the system ensure it doesn't go bankrupt?

The third challenge concerns how the protocol can ensure long-term solvency through external hedging. GMX's pool model has survived in the crypto market because it acts as a "passive market maker," leveraging the statistical advantages of a large sample size to steadily absorb the position wear and liquidation profits generated by high-leverage positions during frequent fluctuations. In the volatile crypto market, the mathematical expectation of this model is favorable to the pool's limited partners (LPs).

However, the risk distribution of RWA assets is quite different. Major indices such as the S&P 500 often experience long-term bull markets with one-sided trends lasting for several years. In the absence of a risk externalization (hedging) mechanism, users' continuous profits will directly translate into net losses for the LP fund pool. This means that the system will not only fail to capture volatility dividends, but will also be completely drained by one-sided positions, ultimately facing solvency depletion.

III. Representative Projects and Architecture Game Theory: Oracle Pricing + Pool-based Pricing vs. Order Book

The chart shows RWA Perps Dex daily trading volume, which can be seen to shrink dramatically over the weekend.

The core contradiction of RWA Perps revolves around the "discontinuity of physical time": although various RWA Perps Dex platforms generated over $20 billion in trading volume within 30 days, trading volume would plummet by 70-90% during weekends. This data reveals the current reality of the industry: despite DeFi's attempt to break free from the gravity of traditional finance, liquidity remains highly dependent on TradeFi's opening hours.

Faced with this gap, the market has evolved two distinct architectural paradigms: the active hedge pool model represented by Ostium, and the internal pricing order book model represented by Trade.xyz in the Hyperliquid ecosystem.

3.1 Early RWA Perps Projects: Synthetix, Gains Network

Before Ostium and Hyperliquid attempted to reconstruct RWA transactions through complex hedging mechanisms or order books, the DeFi market had already conducted its first round of experiments with "synthetic assets." Early protocols, represented by Synthetix and Gains Network, completed proof-of-concept for RWA Perps, demonstrating the strong demand for on-chain capital exposure to traditional assets, but also fully exposing the limitations of the first-generation mechanisms in terms of capital efficiency and risk control.

Synthetix: Global Debt Pool Model

Synthetix was one of the first protocols to attempt to bring real-world asset prices onto the blockchain. Between 2020 and 2021, Synthetix aggressively attempted to list mirrored stocks such as sAAPL and sTSLA, trying to bring US stocks onto the blockchain.

As the pioneer of the "pool counterparty" model (where the counterparty is all SNX stakers), Synthetix's design philosophy is to establish an order book-free, infinitely liquid exchange model: all synthetic assets are freely exchanged at prices provided by oracles, and users do not need to match trading counterparties. This greatly solved the problem of liquidity cold start in the early stages (especially when liquidity mining incentives were just being implemented).

Synthetix delisted most RWA assets after 2021, mainly because the protocol layer lacked a proactive hedging mechanism, making it extremely vulnerable to attacks when US stock assets such as sTSLA could not update their prices during market closures.

Overall, Synthetix pioneered the model of providing on-chain RWA mirror asset liquidity through derivatives collateral pools. Its design of no order book + oracle pricing is still influential today, but in reality, it began to withdraw from the RWA Perps market around 2022.

Gains Network (gTrade): A Market Making Pool Model Driven by Oracle Pricing

Gains is another early project exploring on-chain synthetic leveraged trading (RWA), supporting various trading pairs including cryptocurrencies, forex, and US stocks. Its design utilizes an independent asset pool as the counterparty: users open synthetic leveraged positions using USDC, DAI, or ETH as collateral, with trading profits and losses borne by the pool (gToken Vault).

• Liquidity Model and Market Making Game Mechanism:

• Unilateral vault: Gains' market-making pool mainly consists of stablecoins such as USDC/DAI.

• GNS tokens serve as a risk buffer and incentive: To prevent the market-making pool from being wiped out in extreme market conditions, the protocol introduces GNS tokens as a last line of defense. When the market-making pool has a surplus, the protocol will use the excess profits to buy back and burn GNS tokens to reduce inflation. When the market-making pool incurs a loss, the system will issue new GNS tokens and sell them off-exchange to replenish the market-making funds.

In terms of pricing, Gains obtains real-time prices based on Chainlink and adds a fixed spread, with the spread revenue distributed as commission to LPs and GNS stakers. For risk control, it introduces features such as price impact fees (charging an additional fee for large orders to simulate slippage and compensate for pooled risk) and limit protection (setting upper and lower limits for single-trade profits and losses to force profit-taking or forced liquidation).

Overall, Gains offers a highly leveraged synthetic trading experience with multi-market coverage and is considered one of the important examples of decentralized exchanges benchmarking against centralized platforms. It proves that the "oracle + liquidity pool" model can support large-scale trading under reasonable risk control. However, it also exposes challenges such as the liquidity pool needing to bear the risk of concentrated profits and the lack of hedging mechanisms. These issues provide experience for the mechanism innovation of subsequent projects.

3.2 Ostium: Breaking the limitations of pool-based models, creating an on-chain CFD brokerage.

Ostium is a rising RWA Perp DEX that officially launched on the Arbitrum mainnet in August 2025. While Ostium retains a pool-based model for liquidity supply and order execution , they have reflected on earlier pool models like GMX and Gains Network. They deeply understand that the traditional pool model's adversarial game of "trader profits equal LP losses" is detrimental to LPs in the long run. More importantly, it limits trading volume and hinders market expansion ( as analyzed in the previous Perp DEX research ). Therefore, they have implemented special designs to integrate traditional brokerage A-Book (hedging) and B-Book (internal consumption) on-chain to alleviate this zero-sum game conflict.

Liquidity Model and Market Making Game Mechanism Explanation

• Basic liquidity model (two-tier pool architecture)

• Level 1 Buffer: Liquidity Buffer. This is the protocol's "moat," accumulated from protocol revenue. Traders' profits are first paid out here, and losses also first go into this area. Although the specific mechanisms differ, its role is similar to the market-making pool's protective cushion in Gains Network.

• Secondary Buffer: OLP Vault. This is a pool of funds provided by LPs. The OLP will only intervene as a direct counterparty when the Liquidity Buffer is exhausted.

• The core evolution that breaks through the main limitations of the original pool-based model: completely separating "settlement" and "market making": Ostium knew that the above simple two-level buffer could not cope with long-term directional imbalances (the data shown in the figure below proves this to be true; the funds in the liquidity buffer layer are easily exhausted, and when the v1 version of the product only has the above two basic layers, LPs still have to face long-term one-way risks). To this end, Ostium introduced a more important design - completely separating the two functions of settlement and market making from the original passive market making pool of LPs.

Currently, the OMM market-making hedging vault has not yet been officially launched. It is expected that when handling high transaction volumes, the product will require a professional market-making team with extremely strong execution capabilities. These remain significant challenges: the team not only needs to possess the compliant entity qualifications to connect with traditional financial institutions, but also must achieve millisecond-level cross-market hedging to mitigate the basis risk between oracles and external live trading. At the same time, it needs to have strong fund allocation capabilities to overcome the maturity mismatch of on-chain and off-chain fund flows, and be able to monitor Delta net position imbalance in real time, flexibly using dynamic spreads or impact fees for precise risk control and flow limiting.

Risk control during market closure

Ostium is deeply aligned with US stock trading hours, using oracle-embedded timestamps to ensure market orders are executed only when the market opens, effectively eliminating the risk of price vacuums during market closures. To address the common gap risk in US stocks, the platform has established a strict "liquidation checkpoint": 15 minutes before the daily close, the system automatically forces liquidation of positions with leverage exceeding a threshold (e.g., 10x), bringing intraday leverage up to 100x back to a safe range.

Why didn't existing pool-based projects like GMX adopt a similar design?

We believe the main reasons for GMX's long-term adherence to its pool model without separating directional risks are the excessive trade-offs and differing market perspectives. The current design already achieves relative balance through internal mechanisms (such as adaptive funding fees, price impact, and separation of long and short pools). Introducing external/independent hedge vaults would sacrifice returns, increase complexity, and raise centralization risks. Furthermore, GMX's pools actually bear the combined exposure of all traders. In the highly volatile crypto market, according to the law of large numbers, individual random bets statistically tend towards negative expected value, while the pool, as a combined counterparty, captures positive expected value. Ostium, on the other hand, focuses on the RWA market, such as stocks, which has much lower volatility; they aim to penetrate the traditional CFD brokerage market.

In addition, in August 2025, the GMX Governance Forum proposed the Global Hedge Vault (GHV) , which aims to introduce an external market maker mechanism to achieve something similar to Delta Neutral, indicating that other pool-based projects are also paying attention to this new trend.

Why use a pool model instead of an order book?

Ostium founder Kaledora has a clear theoretical logic for why she insists on pool-based trading and does not allow weekend trading. She was also attacked by the Hyperliquid community for criticizing order book projects like Trade for having ridiculously high funding rates on weekends.

The chart shows that Ostium founders pointed out that Trade.xyz, which is open during traditional market holidays, experiences skyrocketing funding rates on weekends.

Her theory is that the limitations of the traditional pool-based model (LPs bear unidirectional risk, and the system's capital base limits the transaction volume) have been resolved by her new design. By introducing a hybrid risk control system of A-Book and B-Book, unilateral risk is transferred in real time to the globally liquid market. Once unilateral risk is technically mitigated, the OI cap is no longer limited by the pool size, and the protocol's transaction volume cap will depend entirely on its distribution capacity (similar to the business model of top CFD brokers).

In contrast, she believes that the core function of an orderbook is price discovery, which makes sense for crypto-native assets, but is a huge waste of resources in the RWA field. This is because stock and forex prices are already perfectly discovered in real time on top global exchanges like Nasdaq and CME. Recreating an on-chain order book means competing with these trillion-dollar giants in an "anemic" environment. This kind of depth, a devastating blow from traditional exchanges, makes any large trader prefer a brokerage model that can reference global prices rather than an order book with its astonishing slippage.