The thesis: Lighter
Levior. Altior.
During EthCC in Brussels in the summer of 2024, I ran into Manu, who shilled me a perp DEX which he was working for. As usually is the case, my first reaction was to roast both him and the project, the AI background angle and the idea of using those skills to build “another perp DEX.”
After the event (and having made fun of him), we stayed in touch. He later asked me to trade on the platform, give honest feedback and if I knew some other traders. The product a year ago was ‘decent’ at best, but liquidity was thin and spreads were awful. That was hardly surprising for a perp DEX with sub-$1M TVL and something like three daily active users at the time.
Initial strategies
Once private beta went live, I deployed capital into the LLP. Within a month, my single-sided USDC position was up roughly 2× thanks to a liquidation wick from 102K to 91K on BTC. It’s one of the perks of being the counterparty to aggressively, retarded overleveraged traders, especially over a longer time period I guess.
Year to date, the LLP returned more than 250% on single sided USDC (albeit with occasional drawdowns such as the one on 10/10).
After deploying into the protocol, I started to FAFO a bit on Lighter. It really helped that in my jurisdiction most derivatives platforms are banned because my fellow countrymen behave like monkeys with a keyboard. So I had to trade on-chain, during the first few months of the private beta, there was a massive inefficiency gap on the funding rate between Lighter and other venues. These discrepancies were easy to arbitrage and led to strategies yielding at least 90%+ APR on relatively large-cap assets like ADA, DOT, LINK and many more.
The setup was straightforward: open a short position on Lighter, earn 80–120% APR in funding, while opening a corresponding position on HL (or any other random derivatives venue) at –10% to +10% APR. For the first few months, this strategy printed consistently due to the fact of me being early and the market not solving this inefficiency. What made this strategy even more successful is the fact that Lighter charges 0% fees (and slippage wasn’t much of an issue due to the fact that I rarely use(d) taker orders).
Controversies
This final point is also what makes Lighter somewhat controversial. The claim that “zero fees are unsustainable” is a common misconception, at least, in Lighter’s case. One way or another, revenue and profits still need to be generated.
Spoiler alert: Lighter generates a shitload of fees
They achieve this by charging not retail traders, but the trading firms that trade against them. The idea is that sophisticated market participants need uninformed liquidity to trade against, and Lighter allows them to trade against just that but they need to pay for access through its two-account model. The model is divided as follows:
Standard account:
Maker orders: 300ms latency
Taker orders: 200ms latency
Cancel orders 100ms latency.
0 fees on both maker and taker orders
Premium account:
Maker orders: 0ms latency
Taker orders: 150ms latency
Cancel orders: 0ms latency
Fees: 0.002 maker fees & 0.02 taker fees
The business model here is similar to Robinhood’s1: attract a large base of retail traders with zero fees, monetize that flow by allowing sophisticated participants to trade against it. The primary challenge with this approach is overcoming the cold-start problem. Based on their traction metrics, Lighter appears to have already cleared that hurdle. I’ll elaborate on those metrics in more detail later.
One could argue that Lighter includes a “hidden” fee in the form of wider bid–ask spreads, which would compensate for the absence of the fee rebates typically offered by traditional exchanges. In theory, the premium tier could incentivize market makers to quote wider spreads, negatively impacting execution quality. In practice, however, this does not seem to be the case.
According to LiquidView, Lighter consistently delivers some of the strongest execution outcomes when accounting for both fees and slippage. Across a broad range of trading scenarios, including major pairs and long-tail assets, and across varying trade sizes they frequently rank at or near the top.
LighterEVM
After trading a bit I started reading the white paper and I got intrigued by how Lighter actually works under the hood. As for this piece I’d like to stay a bit closer to the business case rather than going deep down the rabbit hole. For a more technical read I’d highly recommend “LighterEVM & Universal Cross Margin” by 0xJaehaerys. However, there’s one aspect I want to touch upon from a more technical angle though and that’s the LighterEVM as I feel like that pretty much went under the radar.
The Lighter perpetual DEX is a highly optimized trading engine that requires ultra-fast block times and very low latency, making it exceptionally well suited for this use case. Attaching a general-purpose EVM to such a system would most likely degrade the performance of the core application. To avoid this trade-off while still maintaining flexibility, the team developed a workaround to preserve:
EVM programmability
Shared atomic state
The LighterEVM is going to be ran in parallel with the application-specific rollup and will be able to read the shared state such as account balances, outstanding positions, LLP positions etc. The transactions that will occur on the LighterEVM will be settled accordingly by aggregating their corresponding proofs and proving them on Ethereum
LighterEVM will run in parallel with the application-specific rollup and will be able to read from the shared state, including account balances, open positions, and LLP positions. Transactions executed on LighterEVM will be settled by aggregating their corresponding proofs and submitting and proving them on Ethereum (most likely Succint Labs’s ZK Prover Network is going to be used for this).
This sidecar model enables optimization without compromising the performance of the core application. When combined with universal cross-margining across Ethereum L1, it unlocks a wide range of powerful and creative use cases.
That the Lighter team came up with such an elegant solution isn’t that surprising if you look at their background. As I’ve mentioned on a multiple occasions, great tech is built by great people.
Team & backers
The first and foremost person to look into is the founder, and if you do, it should trigger the urge to take Lighter seriously.
Vladimir Novakovski founder and CEO
Graduated Harvard at 18
Got recruited by Ken Griffin to join Citadel
Head of ML at Quora
VP of Engineering at Addepar
23 out of 28 engineers are international winners of math/physics olympiads
The backers that are supporting Vlad on this endeavor are multiple funds including (but not limited to):
A16Z
Coatue
Coinbase
Craft Ventures
Dragonfly Capital
Founders Fund
Haun Ventures
Lightspeed Ventures
Ribbit Capital
Robinhood
High profile angels include:
Alex Carp (CEO of Palantir)
Arthur Hayes (Founder of BitMEX)
Ken Griffin (Founder of Citadel)
Peter Thiel (Founder of Founders Fund)
Vlad Tenev (Founder of Robinhood)
The most recent funding round valued the company at $1.5 billion, raising a total of $68 million. Notably, the round was oversubscribed by a factor of 5–6×.
Beyond its world-class backing, Lighter benefits from strong institutional and regulatory relationships. Vlad has been in direct contact with U.S. regulators and political figures, including multiple meetings with Senator Tim Scott. To me, this suggests that Lighter’s ambitions extend well beyond the traditional Web3 niche.
Traction Metrics
Lighter’s growth can simply be described as “up and to the right,” driven largely by organic adoption—though it’s worth noting that a portion of the trading volume was/is likely incentivized by the points program. Let’s take a closer look at the traction metrics.
According to Vlad, the most important metric to track is TVL, which has shown a consistent upward trend and currently appears to be consolidating around $1.5 billion. The majority of this consists of USDC that’s being used as collateral for perpetual trading. Since the launch of spot markets a few weeks ago, spot ETH has also been added, with a current value of approximately $32 million.
I expect this figure to grow over time as additional assets are introduced, including BTC, LRTs, other blue-chip assets, and stablecoins.
Fun fact: Lighter spent more time in private beta than in public release, having launched publicly in early October.
Trading volume increased steadily, peaking during the historic liquidation event on 10/10. Since then, volumes have declined across the broader derivatives market, affecting both CEXs and DEXs alike. This trend has been further amplified by the holiday season, which typically sees reduced activity as many traders step away from their screens.
Even with the (temporary) decline in volumes, Lighter’s revenue has remained relatively resilient. According to DeFiLlama, annualized fees stand at approximately $132.5 million. Notably, Lighter has overtaken Hyperliquid and now ranks as the largest perpetual DEX by trading volume.
Last but not least, one of the other most important metrics for derivative exchanges is the OI. Lighter currently has 1.55B in OI and overtook Aster’s second place in terms of OI.
There are some other cool community dashboards as well that look at things such as the fees on a more granular level such as:
https://lightalytics.com
https://www.lighter.gg
https://artemisanalytics.com
Some of them have cool distinct features. For example, lighter.gg allows people to see their account number on the platform.
Tokenomics
As of the time of writing, not all details have been fully disclosed. However, the airdrop has taken place, with 25% of the total token supply allocated to eligible users from Seasons 1 and 2. An additional 25% of the supply is earmarked for future incentives, partnerships, and growth initiatives. It is currently only confirmed that Season 3 has just begun.
The remaining 50% of the total token supply is allocated to the team and investors, subject to a one-year cliff followed by a three-year linear vesting schedule.
A buyback program is likely to be implemented, though it will probably not be as aggressive as a 97% buyback.
I interpret this as a buyback program executed at the team’s discretion. Ideally, buybacks would be deployed during price drawdowns rather than via a continuous TWAP. The rationale is straightforward: as the price rises, a fixed amount of capital translates into progressively less buying power.
Side note: Burning (almost) all of your revenue generally doesn’t make sense, since that capital could be better used to reinvest in the company especially for an early-stage tech startup in my opinion.
As of the time of writing, the token is not listed on any centralized exchange, as it can currently only be traded on its native platform. That said, some token transfers have been observed going to Coinbase Prime, Coinbase’s institutional custody arm.
Since the tokens cannot yet be withdrawn from the Lighter platform, any versions trading on other platforms (such as Binance, Bybit, or MEXC) are likely derivatives or IOU representations rather than the spot asset. This is expected to change once withdrawals are enabled, but initial caution is required.
A particularly bullish signal is that the team has stated on multiple occasions that they are not going to pay for exchange listings, suggesting confidence in organic demand and long-term alignment. Coinbase added LIT tot the roadmap a while ago, on a voluntary basis.
Circle’s recent acquisition of Axelar’s team and IP sparked the debate about the rights of token holders vs equity holders. This debate got even more heated by Aave’s recent discourse around value accrual. The Lighter team ultimately decided against a dual structure in which equity captures value while the token does not. Instead, the token remains the primary vehicle for value accrual and ecosystem expansion. Additionally, Lighter is registered as a U.S. C-Corporation, a distinction that sets it apart from roughly 99% of Web3 projects. As a result, the company operates in full compliance with U.S. laws and regulatory frameworks while ensuring that the value flows back to their token holders. The LIT token will be having multiple utilities which include:
Access to risk-adjusted financial products
Improved execution
Greater capital efficiency
Tier-based staking
For verifying fairness and correctness
Market data access
Financial data subscription (and provisioning)
Incentivization of verifiable trading and risk management
Besides the token, Lighter has other plans of (vertically) expanding. Let’s take a closer look at all of them.
Protocol expansion
I find the idea behind Hyperliquid’s HIP-3 intriguing, but I’m not convinced it makes sense in practice. Why would users choose a third-party front end that offers no meaningful advantage over Hyperliquid itself, aside from early access? I would much rather see a single protocol capture this value than have it fragmented across multiple protocols where Protocol A “captures” RWAs while Protocol B “focuses” on commodities.
In reality, when one of these asset categories gains traction, other perpetual DEXs tend to list it shortly thereafter. This dynamic limits the long-term defensibility of such fragmentation.
Lighter’s zero-fee model appears to discourage this behavior. With little economic incentive to launch yet another perpetual DEX, ecosystem projects are instead incentivized to build differentiated, idiosyncratic products such as structured products, lending, and borrowing especially as Lighter plans to expand beyond crypto-native assets into areas such as:
Commodities
FX
Treasuries
Equity
I genuinely like Hyperliquid’s Builder Codes. These codes function as on-chain identifiers that attribute routed transactions to a specific application or protocol. In return for routing liquidity, the originating application receives a share of the revenue generated by Hyperliquid.
That said, from a rational economic perspective, Lighter’s zero-fee model is superior. Let’s do some napkin math:
Scenario 1:
Hyperliquid charges 0.0144% trading fee
Fully rebate the fees that are set via the builder codes (0.1% on perps and 1% on spot)
An application generates 10M in perpetual trading volume per month
Result: Application earns $10K and Hyperliquid earns $1.440.
If you would have a 0-fee platform like Lighter a builder could capture the fees that previously would have gone to Hyperliquid.
Scenario 2:
Lighter charges 0 fees
Application charges 0.1%
An application generates 10M in perpetual trading volume per month
Result: Application earns $10K and Lighter earns as well2.
Scenario 3:
Lighter charges 0 fees
Application charges 0.1%
Application charges additional 0.0144%
An application generates 10M in perpetual trading volume per month
Result: Application earns $10K + $1.440 and Lighter earns as well.
From an application’s perspective, it would make sense to integrate Lighter’s alternative to builder codes once it launches. Assuming the fee structure remains unchanged, revenue would increase from $10,000 to $11,440. A 14.4% increase simply by switching service providers, assuming integration or migration costs are minimal.
To be fair, this does not only apply to to Lighter; it would apply to any perpetual DEX offering a zero-fee model.
Roadmap
The roadmap is quite ambitious, but let’s take a look at some of the key milestones on the horizon for Lighter. I’ll outline them below in no particular order:
1. Tokenized Equity
This one is fairly self-explanatory. Lighter already enables stock trading on its platform, albeit in a synthetic form. Lighter has reportedly been in talks with Robinhood about expanding this offering. Given that both Vlads serve as advisors to each other’s companies and that Robinhood is an investor in Lighter the likelihood of this materializing appears to be quite realistic.
2. Mobile application
There is a meaningful difference between a simple web application and a highly optimized trading experience. By building a purpose-built, high-performance application, Lighter can deliver lower latency, greater reliability, and a more professional trading environment. These factors substantially improve user engagement and long-term retention.
3. Universal margin
As of now, cross margining is enabled at the account level. To run isolated positions, users must separate them via sub-accounts. As mentioned earlier, universal margining across the entire account is planned and will be composable with positions held on L1.
4. Options
Options are something that have been in the works and represent a logical evolution, given the team’s extensive trading experience. Introducing options would not only broaden the product suite, but also unlock more sophisticated hedging, yield, and risk-management strategies for advanced users.
5. Prediction Markets
This has been one of the main narratives, particularly following the fundraising announcements from Kalshi and Polymarket. While details remain scarce for now, the growing institutional interest suggests this could become a meaningful expansion area over time.
Regulatory landscape
Earlier in the article, I noted that Lighter is incorporated in the United States and that economic value accrues to LIT holders rather than equity holders. The company is actively engaging with regulators to ensure full compliance with U.S. laws, and it remains in ongoing dialogue with policymakers. This has been confirmed by Vlad himself, including multiple meetings with Senator Tim Scott, who has publicly expressed support for clear and constructive digital asset regulation.
In addition, David Sacks often referred to as the “Crypto Czar” participated in Lighter’s previous funding round through his firm, Craft Ventures, which he co-led alongside Haun Ventures. Under the Trump administration, Sacks is now responsible for shaping U.S. crypto policy and strategy, placing Lighter in close proximity to the ongoing regulatory process.
Thesis
With the TGE having taken place recently, this is an appropriate moment to articulate why I remain bullish on Lighter going forward.
At its core, investing in strong products is ultimately an investment in strong teams. In my view, Lighter’s team has clearly demonstrated exceptional technical capabilities, which are already reflected in the quality and performance of the product. In addition, the (angel) investors backing Lighter have strong track records and reputations, with portfolios that include multiple blue-chip companies.
The composition of the most recent funding round is particularly notable. A significant portion of the investors were non–Web3-native funds. As a result, Web3-native funds that seek exposure may have to acquire it through the open market rather than via private allocations. This dynamic could act as a structural (initial) source of demand post-TGE. On the day of the TGE, one of the leading Web3 OTC platforms, FalconX, stated:
The launch has seen strong institutional demand from the outset
This aligns with the fact that the last funding round was reportedly oversubscribed by approximately 5–6x, implying buy demand in the range of $340–408 million. While it is unlikely that all of this capital will translate directly into token purchases, it nevertheless signals meaningful interest that could materialize over time.
Lighter airdropped 25% of its total token supply at an FDV of approximately $2.8 billion at the time of writing, corresponding to roughly $750 million worth of LIT tokens. Given that many recipients are likely to perceive the airdrop as “free money,” an initial wave of selling pressure is to be expected. However, over time, this process should enable a transfer of tokens from short-term sellers to longer-term holders, including institutional participants a transition that appears to already be underway. How airdrop recipients interact with their airdrop can be seen on this dashboard.
Considerations
Even though I am bullish, I do reckon the importance to look at the potential downsides and invalidation of my thesis.
Buyback
There is going to be a buyback program in place, however much of it is unknown as of now. It can be a bummer if the % that is going to be burned is going to be on the low side.
OTC Demand
This strong institutional demand that happens on an OTC platform can signal strength but the structure of this demand makes an impact (e.g. options or forwarding agreements). On top of this, a lot of this supply for exchanges can be received from market makers.
Metrics
The metrics were pretty solid pre-TGE and now the question remains how much of it will be sticking around over an extended period of time post-TGE. Especially since more new perp DEXS will be coming up (and launching their own respective token).
Closing thoughts
Despite these concerns, I do remain very bullish on Lighter, mostly due to the team, their backers, connections and in general, their positioning as a U.S.-based compliant trading venue. This is something that should not be underestimated and is a unique feature that other similar protocol don’t have as far as I know. With this said, I want to close off the article on a positive note, I’d like to thank Lighter for the airdrop and wish everyone a blessed, prosperous and LIT 2026!
Thanks to the Lighter team for feedback on this article.
Lighter is exploring other ways of generating revenue such as introducing other account tiers
Due to the lack of public numbers it’s hard to quantify the exact revenue that is being generated which by Lighter
Disclaimer: Nothing in this article is financial advise and solely serves educational purposes. As of the time of writing, the author is in possession of LIT tokens however this will change in the future. This article is not sponsored content.