Hello!
In the previous episode, we explored how LI.FI is tackling fragmentation in a multichain world. This time, we zoom out and ask what happens when crypto’s favourite derivative meets the $100 trillion traditional futures market?
Robert Shiller published a paper proposing perpetual futures as a way to create derivative markets for illiquid assets like housing back in 1993. The idea sat in academic journals for nearly two decades. Traditional exchanges never picked it up. About two decades later, BitMEX and a group of crypto exchanges turned the perpetuals into an actual product that people could trade.
It caught on because perpetuals solved real problems. People did not have to bother with monthly rollovers or the logistical overhead of physical deliveries. Funding rates kept prices anchored to spot. Within a few years, perpetuals accounted for over 90% of all crypto derivatives volume. The concept that traditional finance invented became crypto’s signature instrument.
Brett Harrison, founder of Architect and its exchange AX, is running the playbook in reverse. AX is a regulated centralised exchange offering perpetual futures on traditional asset classes: gold, silver, currencies like the Indian rupee and Mexican peso, single stocks like Apple and Tesla, and GPU compute power. The settlement rails are crypto native. Customers can post USDC as collateral and move money in seconds rather than waiting days for a wire to clear.
You might wonder why incumbents like CME never did this themselves. The answer lies in regulation, infrastructure and incentives.
US regulation does not clearly classify perpetuals as futures. They might be swaps, which would restrict retail access entirely. CME’s clearing architecture runs on fixed daily settlement cycles incompatible with continuous funding rate mechanisms. And CME earns substantial revenue from customers rolling expiring futures every month and every quarter. Each roll creates two transactions, and both are charged. Launching a superior product that cannibalises that revenue is a textbook innovator’s dilemma.
Traditional futures still win in specific contexts: regulatory clarity under CFTC oversight, central clearing that eliminates counterparty risk, and predictable costs without ongoing funding payments. $19 billion was lost collectively during the 10/10 liquidation event across crypto markets. A lot of it could have been avoided if the exchanges had safeguards like price bands, circuit breakers, and margin calls rather than automatic liquidations. Traditional finance built these failsafes over decades, and AX incorporates them all.
The bet Harrison is making is that for a very large class of participants, from CFD brokers hedging exposure to crypto native firms branching into equities, perpetuals on crypto rails are simply better. CME alone supports more than $8T in average notional daily volume compared to all of crypto at $250B. The overall futures market is estimated to turn over at least $15T per day, and AX wants a piece of that.
It is clear to me that the whole of finance will meaningfully change in a few years, and crypto rails will play a major role. Traditional assets coming on-chain and traditional finance using crypto rails to cut costs and time will likely be a secular trend going forward.
Thinking about new markets,
Saurabh Deshpande
