The expansion of the RWA perpetual contract market requires innovation in market-making models—DeFi paving the way into Wall Street's leverage markets

Currently, the demand for leverage trading in the global financial markets continues to grow unabated. The US 0DTE (same-day expiration) options market records a monthly trading volume of $48 trillion, while the CFD markets outside the US reach $30 trillion per month. Behind these massive markets are not just asset holders but speculators seeking directional exposure. However, existing financial tools and market maker models are still insufficient to efficiently meet this enormous demand, creating new opportunities for DeFi protocols.

Challenges Faced by Market Makers in RWA — Structural Contradictions Revealed by Market Gaps

Limitations of Traditional Market Maker Models

Market makers sustain liquidity in financial markets by providing bid-ask spreads to earn profits. However, in the realm of RWA (Real-World Assets) perpetual contracts, this classical business model faces fundamental challenges.

In crypto markets, trading occurs 24/7, and market makers can hedge risks in milliseconds. In contrast, traditional assets—especially US stocks and commodities—have limited trading hours, with markets closed on weekends and holidays. This “physical time gap” is the biggest obstacle for RWA Perps DEX platforms. Data shows that several RWA Perps DEXs record over $20 billion in trading volume in 30 days but see trading volume drop by 70–90% during weekends.

Inability of Market Makers to Hedge During Trading Halts

Market makers need to hedge risks in real-time against user orders to profit from RWA Perps. For example, if a market maker sells a $1 million long contract on Tesla stock on-chain, they must immediately hedge this position in traditional futures markets.

However, during weekends or nights when US stock markets are closed, hedging becomes impossible. When NASDAQ or CME trading halts, market makers cannot adjust their positions and are exposed to unexpected price swings. As a result, they may refuse trades or widen spreads significantly to compensate for risk. This explains why traditional order book platforms see spreads widen multiple times and liquidity dry up during weekends.

Gap Risk and Fragility of Liquidation Mechanisms

A more severe issue is “gap risk.” When markets open on Monday, accumulated buy-sell pressure over the weekend can cause large price jumps. In crypto, continuous price fluctuations allow liquidation engines to settle positions within sufficient time. But in RWA markets, prices can jump abruptly across a “discontinuity,” making it impossible to find counter-parties before losses escalate.

Consequently, protocols and LPs face unpredictable gap risks, fundamentally threatening system stability.

Liquidity Provision and Market Maker Strategies — Evolution of RWA Protocols

On-Chain CFD: Innovation in Pool-Based Market Maker Models

To address RWA Perps challenges, DeFi protocols have developed new market maker models—essentially “smart contractified” CFD brokers.

Synthetix initially designed a model based on oracle-provided prices, eliminating the need for order books and enabling “infinite liquidity” swaps. All synthetic assets could be exchanged freely without matching with counterparties. However, this model required LPs acting as market makers to bear long-term unidirectional risks (e.g., continuous buying), threatening system sustainability. By 2021, Synthetix largely delisted its RWA assets.

Gains Network improved this with a pool-based model where an independent fund pool (gToken Vault) acts as the market maker, absorbing user P&L. They introduced GNS tokens as a “final defense,” issuing new GNS tokens to cover extreme losses. Fixed spreads are added to prices, with revenue shared between LPs and GNS stakers.

Yet, this model still retains the fundamental conflict: “trader profit = LP loss.” In markets with long-term upward trends (e.g., the S&P 500), LP pools face ongoing pressure.

Ostium: Next-Generation Model with External Hedging by Market Makers

Launched on Arbitrum mainnet in August 2025, Ostium offers a fundamental solution by fully separating “settlement” and “hedging” functions of market makers.

Ostium employs a two-layer pool structure. The first layer, “Liquidity Buffer,” consists of funds accumulated from protocol revenues, used to pay or accumulate user P&L. The second layer, “OLP Vault,” is a fund pool provided by LPs. Only when the buffer is depleted does the OLP Vault intervene as a direct market maker.

This setup allows short-term user P&L to be absorbed by protocol revenue, leaving LPs exposed only to long-term unidirectional risks. Crucially, Ostium has introduced a professional market-making team that executes millisecond multi-market hedges against traditional financial markets, covering basis risks. This external risk hedging externalizes protocol risk for the first time.

Fundamental Choices in Market Maker Strategies — Pool Model vs Order Book

Why Choose the Pool-Based Model?

Kaledora, founder of Ostium, provides clear theoretical reasons why the pool-based model is superior in RWA Perps.

First, price discovery efficiency. Top-tier exchanges like NASDAQ and CME already discover prices in real-time for stocks and forex. Rebuilding on-chain order books for RWA markets would mean competing with established, trillion-dollar vested interests—an insurmountable challenge in depth. Pool models leverage oracle prices, avoiding resource-intensive price discovery.

Second, hedging efficiency for market makers. Native crypto projects like Hyperliquid enable market makers to hedge risks in milliseconds on 24/7 centralized exchanges, making order book models viable. But in RWA, on-chain USDC and traditional fiat settlement have time mismatches. Market makers must hold large funds in traditional accounts, and bank closures on weekends prevent immediate hedging during sharp price moves. This “cross-border hedging friction” hampers order book adoption.

In practice, Trade.xyz on Hyperliquid shows abnormally high funding rates on weekends, indicating market makers cannot hedge and are adding risk premiums. Conversely, Ostium’s pool model halts trading during market closures and forcibly liquidates high-leverage positions, fundamentally blocking gap risk.

Evolution of Market Maker Models

Interestingly, existing pool projects are exploring new market maker strategies. In August 2025, GMX governance discussed a proposal called “Global Hedge Vault (GHV),” introducing external market makers and delta-neutral structures—an evolution following Ostium’s innovation.

GMX’s reluctance to separate market making stems from market differences. Crypto markets are highly volatile, and due to the law of large numbers, individual random bets tend to converge to negative expected value, making the entire pool profit from volatility. RWA markets, especially stocks, have lower volatility and are designed to compete with traditional CFD brokers, requiring different market maker approaches.

Future of RWA Perpetual Markets — Continuous Innovation in Market Maker Models

For RWA perpetual contracts to truly capture Wall Street’s leverage trading market, ongoing innovation in market maker models is essential.

Currently, pool-based protocols separate market making into “settlement” and “hedging,” delegating the latter to specialized external market maker teams, balancing system sustainability and scalability. This evolution transforms DeFi protocols from mere liquidity providers into genuine “smart contract-based CFD brokers.”

Meanwhile, order book proponents are leveraging success in crypto markets to expand into RWA through new market making strategies. Multiple approaches will compete, with the most efficient mechanisms prevailing.

How effectively market makers hedge risks and meet user needs will determine whether DeFi can truly capture Wall Street’s leverage markets. It is expected that various market maker models will coexist, each exploring different market segments as RWA markets grow.