Original author: @castle_labs
Original translation: zhouzhou, BlockBeats
Editors Note: This article analyzes the main derivatives protocols on the Solana chain, including GMX-Solana, Jupiter Perps, and Drift, and compares their liquidity, trading volume, capital efficiency, and risk management. Jupiter and Drift have shown sustained growth but low capital efficiency, while GMX-Solana has high capital efficiency and less liquidity. As Solana introduces better features and incentives to the protocol, market competition will intensify, and the ratio of derivatives trading volume between DEX and CEX has reached an all-time high, and Solana will benefit from it.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
BitMEX launched perpetual contracts in 2016 and has since become an important part of the crypto derivatives market. Perpetual derivatives are futures contracts with no expiration date, meaning users will not be liquidated until they are margin called. It allows users to go long or short on their chosen assets and offers the best leverage opportunity to define their risk tolerance.
The on-chain derivatives market has been developing for many years and has successfully achieved product-market fit, first appearing on Ethereum and then expanding to other ecosystems. In these ecosystems, Solana perpetual contracts have achieved great success, with @Jupiterexchange and @Driftprotocol becoming the most important trading platforms.
Recently, GMX, one of the most important perpetual trading platforms on Arbitrum and Avalanche, also launched on Solana, running under the name @gmx_sol, which is another sign of the growing maturity of Solana DeFi ecosystem. This study will analyze Solanas rapidly developing perpetual contract ecosystem, focusing on the two major perpetual protocols on Solana, Jupiter and Drift, as well as the important EVM perpetual protocol GMX that recently landed on Solana.
1. Platform Overview
This section will compare the working methods, key data and product offerings of the above protocols.
1.1 GMX-Solana
GMX-Solana is a decentralized leveraged perpetual trading platform that recently launched on Solana, continuing its position as a leading trading product in the EVM ecosystem.
GMX-Solana is a slightly modified version of GMX V2, optimized specifically for the Solana blockchain. Users can perform leveraged trading, provide liquidity, and exchange tokens. When it was launched, it introduced a unique feature - the Trade-to-Mint model, where traders receive GT tokens based on the transaction fees paid. These GT tokens can be exchanged for stablecoins through the vault, thereby offsetting the users transaction costs.
The GT token economic model is similar to Bitcoin: the more GT tokens in circulation, the higher its price and the difficulty of minting. In addition, once the minting of GT tokens exceeds 82.53 million, GMX-Solana may conduct a TGE of GT tokens after governance approval.
Liquidity providers can choose to provide liquidity to the Global Liquidity Vault (GLV) or the GM pool.
GLV consists of SOL/USDC and will dynamically adjust liquidity to support various synthetic markets based on SOL/USDC; GM is an independent pool suitable for LPs who want to gain exposure to specific assets.
As of now, the total transaction volume of GMX-Solana has exceeded US$2.4 billion, and the TVL is approximately US$6.5 million.
1.2 Jupiter
Jupiter is a spot aggregator on Solana and one of the largest leveraged trading platforms on the chain, providing perpetual contract trading services through its product Jupiter Perpetuals.
Similar to GMX-Solana, Jupiter adopts a pool-based design, where the liquidity pool acts as the counterparty of the trader. Under this design, when the trader loses money, the liquidity pool makes a profit, and vice versa.
Jupiter allows traders to open positions with up to 100x leverage on major assets such as SOL, ETH, and wBTC. In Jupiter perpetual contracts, long positions are collateralized by the same token as the index asset, while short positions are collateralized by stablecoins to ensure efficient settlement.
Liquidity providers provide liquidity through JLP, which operates similarly to GMX-Solana’s GLV. JLP consists of five major assets: SOL, ETH, wBTC, USDC, and USDT.
As of now, JLP has a market capitalization of approximately $1.4 billion, which is equivalent to the total liquidity available for Jupiter perpetual contracts. The platform’s total trading volume has exceeded $268 billion.
1.3 Drift
Drift is also one of the largest on-chain perpetual contract exchanges on Solana. Since the launch of V2, the platform’s TVL has approached $900 million and its total trading volume has reached $59.2 billion.
Drift offers trading with up to 20x leverage, while supporting liquidity provision, spot trading, and lending markets.
Drift adopts a hybrid design, obtaining liquidity through multiple channels to ensure efficient transaction execution, deep liquidity and appropriate profit and loss settlement mechanism.
Its liquidity sources include:
Just-in-time auction (JIT): managed by market makers (MM), matching orders in a short-term auction format;
On-chain Orderbook: Managed by off-chain robots, interacting with AMM to provide liquidity for orders;
Automated Market Maker: A liquidity pool of different assets used to match trades.
Liquidity providers can provide liquidity to multiple channels, including Strategy Vaults, Insurance Funds, Lending Pools, and Backup AMM Liquidity (BAL). Among them, the liquidity in the lending pool can not only be used for lending, but also as margin to open trading positions. This flexibility attracts more traders to participate.
In addition, Drift incentivizes traders through FUEL tokens. Users can earn FUEL by creating trading volume on the platform, which can then be exchanged for the platform governance token $DRIFT.
2. Comparative analysis
This section will cover all the above platforms and compare their KPIs.
To provide a good perpetual contract trading experience, a DEX needs to meet the following conditions:
Low fees (opening/closing fees exchange fees)
Excellent UI/UX (fast RPC and backend servers)
Low-latency price oracle/anti-manipulation mechanism (avoid malicious liquidation)
High liquidity (reduced slippage)
Convenient mortgage method multi-market support (improving transaction flexibility)
2.1 GMX-Solana
Fees: Opening/closing and exchange fees are approximately 4-7 bps (0.04% -0.07%), and the specific rate depends on the impact of the transaction on the market balance. If the transaction improves the market balance, the fee is lower; if it exacerbates the market imbalance, the fee is higher. Currently, traders can also offset part of the fees through GT token incentives.
Oracle: Using @Chainlink to provide price data.
RPC service: adopted by @Heliuslabs, which is an industry standard.
Market support: Supports 25+ markets, including BTC, ETH, SOL, DOGE, etc. Users can trade long and short, and can use a variety of tokens as margin (depending on the liquidity of the pool).
2.2 Jupiter Perps
Fee: A fixed transaction fee of 6 bps (0.06%) is charged for opening/closing a position.
UI/UX: Jupiter Perps is a part of Jupiter spot aggregator, with a user-friendly interface and easy operation.
Market support: Currently only SOL-PERP, ETH-PERP, and WBTC-PERP are supported, with relatively few tradable assets.
Oracle: Similar to GMX-Solana, it relies on external price oracles to provide data.
2.3 Drift
UI/UX: Compared to other platforms, Drift is more feature-rich, so the interface is relatively more complex.
Fees: The fee range is 3 bps - 10 bps (0.03% -0.1%), and the specific fee depends on the user level (related to 30-day trading volume the amount of $DRIFT staked in the insurance fund).
Market support: Provides 50+ perpetual contract trading pairs, far exceeding GMX-Solana and Jupiter Perps.
Risk control mechanism: Drift classifies perpetual contracts by risk level and decides which trading pairs can use the insurance fund to protect LPs from losses.
Oracle: @PythNetwork and @Switchboardxyz are used to provide price data.
3. Liquidity Trading Volume
Liquidity is critical for any perpetual swap exchange. As the on-chain derivatives market grows, liquidity and trading volumes on these platforms continue to rise.
Perpetual Contracts TVL on Solana
7-day TVL and volume moving average
Since the TVL and trading volume ranges of these protocols vary greatly, a better comparison indicator is capital efficiency, which is usually measured by trading volume (24 hours) / TVL. This value reflects the utilization rate of the protocols TVL on the exchange, that is, how much funds are generated through transactions. Fees and liquidity providers income. If capital is not fully utilized, the efficiency is low.
The higher the value, the more efficient the protocol’s liquidity is. While this value will fluctuate based on market conditions and trader interest, a capital efficiency above 1 is generally considered ideal.
Currently, GMX-Solana has a capital efficiency of approximately 0.59, while Jupiter and Drift are 0.38 and 0.15, respectively. GMX has a higher capital efficiency than Jupiter and Drift, in part due to its lower current liquidity.
Additionally, when calculating Drift’s capital efficiency, we exclude the platform’s Strategic Vaults TVL, as funds in these vaults are not necessarily used directly for trading. However, these funds are still included in Drift’s total TVL.
Note: In order to avoid data deviation caused by single-day performance and market fluctuations, the above calculation uses the 7-day moving average of trading volume / 7-day moving average of TVL as the calculation formula for capital efficiency.
7-day TVL and Fee Moving Average
Another metric that can be analyzed is the handling fee (24 hours) / TVL, which is calculated as the 7-day moving average of handling fees / 7-day moving average of TVL. This value indicates how much of the protocols handling fees are generated through locked liquidity.
The value for GMX-Solana is 0.0002, for Jupiter it is 0.00097, and for Drift it is 0.00003.
In this indicator, Jupiter generates the highest proportion of transaction fees compared to the locked value.
3.1 GMX-Solana
GMX-Solana gets liquidity from GLV (Global Liquidity Vault) and GM pools. The GLV pool is yield-optimized and rebalanced based on market conditions, and liquidity is allocated based on demand. Not all markets get liquidity from GLV. Instead, GM pools are segregated pools for users who want to focus on specific assets. These pools earn fees through perpetual trading and spot markets. As it stands, GLV offers a yield of about 6% APY.
Most of the platform’s active liquidity comes from GLV, as the APY of specific GM pools is much lower than this range, typically 1-5%, and liquidity is thin.
Additionally, GMX-Solana currently fails to capture the majority of on-chain volume on Solana due to insufficient liquidity, reduced trader interest, and market volatility.
GMX-Solana’s TVL
GMX-Solana daily trading volume
3.2 Jupiter Perp
Jupiter Perps liquidity comes from the JLP token, an index fund consisting of SOL, ETH, wBTC, USDC, and USDT. JLP accumulates value through the fees generated by Jupiter Perps. JLP is a good choice for providing liquidity because it provides liquidity providers with the flexibility to easily provide or remove liquidity.
At the time of writing, JLP offers an annualized return of 10%.
Jupiter Perp TVL
3.3 Drift
Drifts liquidity comes from multiple sources, as described in the overview section. Since users can provide liquidity in different ways, the annualized rate of return for each method is different.
The highest APY offered by the platform through Strategic Vaults is 338%, which are managed by external parties. Other pools, including lending pools and insurance funds, offer 10-15% APY.
LPs can also provide liquidity through BAL, in which they automatically open opposing positions for traders and earn fees from the markets funding rate. In addition, 80% of the order-taking fees collected are distributed to BAL providers, giving them an annualized rate of return of 10-25%, depending on the market they provide liquidity in.
Drift’s daily trading volume
4. Risk Management
Risk management is critical in every perpetual contract exchange. Although the risks associated with smart contracts generally still exist, an ideal risk management protocol should be able to efficiently settle positions in highly volatile market conditions and reduce damage to liquidity providers.
4.1 GMX-Solana
GMX-Solana has two types of markets: fully collateralized markets and synthetic markets.
Each GMX-Solana market consists of 3 tokens:
Index Tokens
Long Tokens
Short Tokens
Long and short tokens work together to support the market. Long tokens support long positions, while short tokens, which are usually stablecoins, support short positions.
Index tokens are tokens that users use to go long or short. However, it is worth noting that GMX-Solana also supports collateralizing only one token in a specific market, which may pose risks to short positions.
When the long and index tokens are the same, the market is fully collateralized, which means that in highly volatile market conditions, traders’ PL can be settled quickly. In synthetic markets, the long and index tokens are different, which can cause PL settlement issues in times of high volatility.
To ensure efficient settlement of profits and losses, GMX-Solana uses an automatic deleveraging (ADL) mechanism, which partially or completely closes certain profitable positions to maintain the solvency of the market.
To manage risk, protect liquidity providers, and maintain pool balance, there are multiple fees involved, including:
Price Impact Fee: Fees paid when LPs or traders cause an imbalance in the pool
Dynamic borrowing fee: The fee traders pay to LPs for borrowing assets from the liquidity pool
Funding fee: The fee that incentivizes the other side of the market to trade in the opposite direction
These fees are crucial to incentivize liquidity providers and protect exchanges in the event of solvency issues.
4.2 Jupiter Perps
Jupiter Perps works similarly to GMX-Solana, the only difference being that it does not allow synthetic markets where the long backing token is different from the index token. This further protects exchanges and positions, allowing them to remain stable even in highly volatile situations.
4.3 Drift
Drift takes a different approach as it uses a hybrid liquidity model. Drift utilizes an insurance fund to manage risk and efficiently keep the exchange solvent. The insurance fund accumulates funds through the protocols revenue, liquidations, and trading fees. Since BAL is an automated market maker (AMM), LPs may be prevented from burning their share when there is a pool imbalance.
5. Current status and future trends
Currently, most of the derivatives liquidity is concentrated on Solana, with the main contributors being Jupiter and Drift. As of now, Solana accounts for about 52% of the total liquidity of on-chain derivatives, about $2.7 billion, and the total liquidity is $5.2 billion.
7-day cumulative trading volume: Solana perpetual contract platform
Currently, the trading volume of Solana perpetual contracts is led by Jupiter, followed by Drift. GMX-Solana still has a long way to go to challenge existing competitors in the market.
DEX to CEX futures trading volume, source: The Block
The on-chain derivatives market is booming unprecedentedly, competition between protocols is becoming increasingly fierce, and many outstanding products have been launched. The DEX to CEX trading volume ratio is rising and is currently around 7%, which means there is still a lot of room for growth in the future.
Top 10 blockchains by 1-month transaction volume
Solana is the second largest chain by volume in the on-chain derivatives space. Hyperliquid’s volume is far behind other chains. As the industry grows, this gap will eventually close as the Solana protocol introduces better features and incentives. With the increased throughput of the Firedancer validator client, the Solana protocol can achieve speed and efficiency comparable to its competitors.
6. Conclusion
Jupiter and Drift have demonstrated consistent growth patterns but lack capital efficiency. While GMX-Solana has a slight advantage in capital efficiency, in part due to lower liquidity, it still has work to do to catch up.
Jupiter promotes simplicity through its JLP token, which LPs can purchase and hold to provide liquidity to the platform. While GMX and Jupiter follow a similar model in processing transactions, they differ in their approach to liquidity, with less similarities between GLV and JLP.
Drift offers a cross-margin account for advanced traders seeking better risk allocation. It allows lower leverage and focuses on risk management by incentivizing an insurance fund.
Currently, the ratio of DEX to CEX derivatives trading volume is at an all-time high. Since Solana is the most important liquidity contributor to the on-chain derivatives market, its ecosystem will benefit from this part of the generated trading volume.
