Inside Lighter's Plan to Overtake Hyperliquid | Vladimir Novakovski
Vlad Novakovski explains how Lighter's ultra‑low‑latency, verifiable L2 on Ethereum is built to out‑perform both centralized exchanges and existing DEXs, and why institutional partnerships, custom ZK proofs, and token economics are critical to the next wave of on‑chain capital markets.
54m·Guest Vladimir Novakovski·Host Ryan (Empire host)·
Decentralized vs Centralized Exchange Competition
Lighter believes the next frontier is a true convergence where decentralized exchanges can match or exceed the performance of centralized venues, forcing both to vie for the same pool of traders. The legacy dominance of centralized rails still limits DeFi's impact, and recent crises have shown that traders still gravitate toward familiar centralized platforms.
Hyperlid was the first DEX to match centralized exchange performance, and Lighter aims to surpass it.
- Hyperlid demonstrated that a decentralized order‑book could achieve latency and throughput comparable to a traditional broker.
- Vlad notes that Lighter’s architecture is even more advanced, targeting superior speed and cost.
- The implication is that once a DEX can truly compete on performance, all exchanges—centralized and decentralized—will fight for the same market share.
- This sets the stage for a more level playing field across the entire crypto trading ecosystem.
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00:00:00“Hyperlid was probably the first one that actually was competitive with centralized exchanges.” — Vladimir Novakovski
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00:00:06“I think lighter is even more so.” — Vladimir Novakovski
99% of digital‑asset trading still occurs on centralized rails, limiting DeFi’s impact.
- Vlad points out that the overwhelming majority of crypto trades are still settled off‑chain, using traditional centralized infrastructures.
- This centralization erodes the transparency and efficiency benefits that blockchain could provide.
- Even after high‑profile failures like FTX, the market has not shifted dramatically toward on‑chain trading.
- The gap highlights a massive upside for a truly performant DEX to capture that untapped volume.
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00:07:27“99% of the way digital assets were traded didn't actually use the rails of blockchain right like they were actually traded in a way that's centralized.” — Vladimir Novakovski
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00:07:58“In some ways like as we saw with FTX is even worse than tradfi.” — Vladimir Novakovski
After the FTX collapse, traders still prefer centralized exchanges due to perceived safety.
- The expectation that a crisis would push users to DEXs proved false; many still trust centralized venues.
- Vlad explains that the perceived risk of a DEX failing is still higher than the familiar, regulated environment of a CEX.
- This behavior reinforces the need for DEXs to deliver both performance and strong safety guarantees.
- It also underscores why Lighter’s focus on verifiability and low latency is essential to win over skeptical traders.
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00:12:44“you would rather trade on a centralized exchange.” — Vladimir Novakovski
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00:12:41“you would rather trade on a centralized exchange where you know there was maybe a one in six chance it's going to completely collapse.” — Vladimir Novakovski
Product-Market Fit and Perpetual Focus
Lighter's early product decisions were guided by direct customer feedback, which showed that perpetual contracts dominate high-frequency trading. Spot markets are still important, but the bulk of volume and capital efficiency comes from perp trading, shaping Lighter's roadmap.
Customers prioritized perpetual contracts over spot, driving Lighter’s product roadmap.
- The first iteration of Lighter was a spot‑only DEX, but user interviews revealed that most active traders wanted perpetuals.
- Perpetual contracts enable leveraged positions, which are more attractive for high‑frequency strategies.
- Lighter pivoted to focus on perps to capture the largest slice of trading demand and accelerate adoption.
- This decision illustrates the importance of listening to market signals rather than building what seems technically interesting.
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00:08:58“We actually looked at spot like the very first iteration of what we built was more spot and then just from talking to customers it's like perp it makes sense when you think about it right.” — Vladimir Novakovski
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00:09:07“Most active trading happens with perp.” — Vladimir Novakovski
Perpetual contracts enable capital efficiency and attract high‑volume traders.
- Leveraged perpetuals let traders control larger positions with less capital, a key driver for professional market makers.
- Spot trading remains relevant for longer‑term holdings and hedging, but the volume premium is on perps.
- By offering low‑cost, high‑leverage perps, Lighter can serve both retail speculators and institutional liquidity providers.
- This dual approach balances immediate adoption with broader market depth.
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00:09:31“Perp allows you to be capital efficient.” — Vladimir Novakovski
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00:09:38“Spot is important if you want to do something that's a longer term position or if you want to hedge.” — Vladimir Novakovski
Hyperlid got performance right but was limited by building on Ethereum, highlighting the need for both speed and ecosystem access.
- Hyperlid delivered a fast UI and solid performance, yet its Ethereum base imposed latency constraints.
- Vlad argues that to truly win, a DEX must combine raw speed with the composability of the Ethereum ecosystem.
- Lighter’s design aims to retain the benefits of Ethereum (security, TVL) while shaving latency through custom L2 engineering.
- This balance is critical for attracting both traders who demand speed and developers who need composability.
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00:15:38“They got a lot of stuff right on the product side, like performance that's good enough for most traders and a lot of the UI/UX features you need.” — Vladimir Novakovski
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00:00:00“Hyperlid was probably the first one that actually was competitive with centralized exchanges.” — Vladimir Novakovski
Technical Edge: Low Latency and Cost Efficiency
Lighter's architecture delivers sub-200 ms latency and processes half-billion orders per day for under $50 k, a cost structure that undercuts both other L2s and many centralized exchanges. These metrics are core to its competitive positioning.
Lighter’s sequencer achieves ~200 ms latency through extreme optimization.
- The sequencer is purpose‑built to order transactions in microseconds, allowing traders to see price updates almost instantly.
- The prover stage adds a small overhead, but the overall end‑to‑end latency stays well below 250 ms.
- This speed is critical for high‑frequency strategies where even milliseconds can affect profitability.
- Vlad emphasizes that such latency is unattainable on generic consensus mechanisms, underscoring the value of a custom stack.
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00:21:10“Our sequencer can be highly optimized and you know if you're trading from I mean there's other than you know speed of light I mean you can kind of be as efficient as possible and the idea is that because everything that's done is proved like the sequencer can go very fast.” — Vladimir Novakovski
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00:21:18“Our latency side is like 200 milliseconds.” — Vladimir Novakovski
Processing 500 million orders a day for under $50 k demonstrates ultra‑low operating costs.
- Lighter handles half‑a‑billion orders daily, a volume comparable to many centralized exchanges.
- The total cost of running this infrastructure stays below $50 k, dramatically cheaper than other Ethereum L2s and even cheaper than many CEXs.
- Low cost enables the platform to offer free trading for retail users while still being profitable.
- This efficiency creates a sustainable business model that can scale with volume without eroding margins.
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00:22:22“We're processing 500 million orders a day right now and the costs of doing all that are like under 50k USD.” — Vladimir Novakovski
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00:22:31“That's cheaper than other Ethereum L2s and probably even cheaper than centralized exchanges.” — Vladimir Novakovski
Low latency, low cost, security, verifiability, and composability are the five pillars of Lighter’s competitive edge.
- Vlad lists five essential attributes: low latency, low cost, strong security, on‑chain verifiability, and composability with existing DeFi.
- Missing any one of these makes a DEX unattractive, pushing traders back to centralized venues.
- The combination creates a unique value proposition that differentiates Lighter from both legacy CEXs and other DEXs.
- This framework guides product decisions and partnership strategies.
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00:13:20“Low latency, low cost, secure, verifiable and composable.” — Vladimir Novakovski
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00:13:24“If you don't have that, then most traders would rather forego the other advantages of DeFi and just trade on a centralized venue.” — Vladimir Novakovski
Verifiability as Trust Mechanism
Every trade on Lighter is provably correct on-chain, eliminating opaque intermediaries and giving institutions confidence that order matching follows transparent, auditable rules.
All actions are provably on‑chain, eliminating opaque intermediaries.
- Lighter generates zero‑knowledge proofs that each trade obeys the defined market rules.
- This prevents hidden manipulation and ensures that anyone can verify the correctness of the matching engine.
- Verifiability is especially crucial during volatile market events where trust in execution is paramount.
- By exposing the logic on‑chain, Lighter builds a foundation for institutional adoption.
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00:23:30“Verifiability means all actions are provable on-chain, preventing opaque intermediaries.” — Vladimir Novakovski
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00:23:40“If you have a component that you have to trust because there's no code on chain, that creates risk.” — Vladimir Novakovski
Proofs enforce FIFO, price‑time priority, ensuring fair trade execution.
- Lighter’s ZK circuits encode classic exchange rules such as first‑in‑first‑out and price‑time priority.
- When a batch of orders is processed, a proof is generated that confirms every order was handled according to these rules.
- This guarantees that no participant can be disadvantaged by hidden logic.
- The approach mirrors traditional exchange compliance while leveraging blockchain transparency.
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00:29:44“We can generate a proof that all of that followed the rules of the trading which are public and kind of open source.” — Vladimir Novakovski
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00:29:12“The rules are things like first in first out, right? Or like you know like time, price, priority.” — Vladimir Novakovski
Verifiability is crucial for institutional confidence and regulatory compliance.
- Institutions need auditable trails to satisfy internal risk and external regulator requirements.
- Lighter’s on‑chain proofs provide an immutable record of how each trade was matched.
- Vlad mentions that KYC logic can be baked into the proof system, allowing compliant trading without sacrificing decentralization.
- This bridges the gap between traditional finance expectations and DeFi’s open architecture.
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00:40:52“If you have on‑chain KYC you can have certain rules around that and those are all made public so like you're going to have price discovery recovery happen.” — Vladimir Novakovski
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00:23:30“Verifiability means all actions are provable on-chain, preventing opaque intermediaries.” — Vladimir Novakovski
Custom ZK Proofs for Finance
Instead of using generic zero-knowledge virtual machines, Lighter builds purpose-made circuits that encode financial logic, delivering performance comparable to specialized hardware while retaining on-chain security.
Lighter builds custom ZK circuits tailored to finance, unlike generic ZKVMs.
- Vlad compares Lighter’s approach to Nvidia’s GPU: a chip built for a specific workload (graphics, now finance).
- The circuits encode risk management, order handling, and liquidity constraints directly, avoiding the overhead of a universal VM.
- This specialization yields orders‑of‑magnitude speed improvements while keeping proofs succinct.
- The result is a DEX that can handle high‑frequency trading with cryptographic guarantees.
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00:30:28“Similarly we created zero knowledge circuits that are specifically for finance.” — Vladimir Novakovski
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00:30:09“It's like what Nvidia did for graphics, they created a chip that was highly optimized for that specific application.” — Vladimir Novakovski
In‑house team with Olympiad medalists combines cryptography and quant expertise.
- About 20 team members hold medals from international math Olympiads, providing deep theoretical knowledge.
- The team also includes veterans from high‑frequency trading and machine‑learning backgrounds, bridging the gap between finance and cryptography.
- This rare blend enables Lighter to design proofs that are both mathematically sound and market‑relevant.
- Vlad stresses that few other projects have this dual expertise, giving Lighter a competitive moat.
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00:27:02“We have about 20 of our team members with a medal in one or more of the Olympiads.” — Vladimir Novakovski
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00:27:18“We have experience both on the cryptography side and the quant side.” — Vladimir Novakovski
Future sidecar EVM will allow generic contracts to run alongside optimized circuits.
- Lighter is adding a ZKVM sidecar that can execute regular Solidity contracts while the core trading engine runs on custom ZK circuits.
- This hybrid model lets developers build new DeFi products without sacrificing the low‑latency guarantees of the trading layer.
- The sidecar shares the sequencer, preserving ordering and proof consistency across both environments.
- Vlad sees this as a way to broaden the ecosystem while keeping the performance edge.
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00:31:16“We're going to announce the ZKVM sidecar where now other developers can kind of any Ethereum DApp can now work on top of lighter.” — Vladimir Novakovski
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00:31:31“You can have a sidecar EVM to run generic contracts alongside the optimized circuits.” — Vladimir Novakovski
Strategic Positioning on Ethereum L2
Lighter deliberately stays on Ethereum rather than launching its own L1, leveraging the security, decentralization, and composability of the world's most trusted blockchain while delivering a high-performance L2 for trading.
Staying on Ethereum L2 provides security, decentralization, and composability with existing DeFi.
- Ethereum is the most secure L1 with over a decade of battle‑tested code and a massive validator set.
- By building as an L2, Lighter inherits this security while adding its own performance layer.
- Composability with existing DeFi protocols (e.g., lending, derivatives) is essential for liquidity and network effects.
- Vlad argues that abandoning Ethereum would sacrifice these critical advantages.
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00:18:42“The point of being on Ethereum is the security aspect, you're on the most secure L1 that's been around for over 10 years.” — Vladimir Novakovski
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00:19:05“Being composable with those existing DeFi protocols is huge unlock.” — Vladimir Novakovski
Choosing L2 over building a new L1 avoids reinventing security and network effects.
- Building an L1 would require creating a new validator set, consensus, and economic security from scratch.
- Lighter would lose the massive TVL and developer ecosystem already present on Ethereum.
- An L2 lets the team focus on the hard technical problems of trading performance rather than consensus design.
- Vlad notes that the effort to build a new L1 would discard years of hard‑won engineering.
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00:18:27“If you build a new L1 you throw out all the hard and interesting things we've built.” — Vladimir Novakovski
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00:18:31“You would lose the security and composability that Ethereum provides.” — Vladimir Novakovski
Technical stack alignment, not just relationships, drives competitive advantage.
- While having investors and partners in traditional finance helps, the core advantage lies in the technology stack.
- Vlad stresses that without a working, performant L2, relationships cannot translate into market share.
- The stack includes the custom sequencer, ZK circuits, and sidecar EVM, all built to solve the specific trading problem.
- This focus ensures Lighter can deliver on its promises regardless of who is on the cap table.
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00:42:19“I think fundamentally it's around the technical stack and how we're approaching things.” — Vladimir Novakovski
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00:43:34“If the tech actually works and is being used, then relationships are just a bonus.” — Vladimir Novakovski
Institutional Partnerships and Compliance
Robinhood and Coinbase have invested because Lighter offers a bridge between traditional brokerage services and DeFi, but institutional participation requires on-chain KYC and regulatory-friendly designs to overcome the cold-start liquidity problem.
Robinhood and Coinbase invested because Lighter bridges traditional brokerage and DeFi.
- Both firms see Lighter as a way to bring tokenized equities and other traditional assets onto chain.
- Their participation validates Lighter’s product‑market fit and opens doors to a broader user base.
- The partnership also signals confidence that a compliant, high‑performance DEX can coexist with legacy broker‑dealers.
- Vlad expects future collaborations to deepen tokenized‑stock offerings and shared liquidity pools.
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00:35:08“Robinhood and Coinbase both participated because you guys are the world's moving on chain, a competitor to brokerages and centralized exchanges.” — Vladimir Novakovski
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00:36:24“They see us as a potential partner in achieving the merge between DeFi and Tradfi.” — Vladimir Novakovski
Institutions require on‑chain KYC and compliance rules to trade on DEXs.
- Vlad explains that KYC logic can be encoded directly into ZK circuits, allowing regulated participants to trade while preserving privacy for others.
- This on‑chain compliance satisfies US regulator expectations without sacrificing decentralization.
- The approach also enables institutions to trade with counterparties that share the same compliance framework.
- Such features are essential for unlocking the large institutional liquidity pool.
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00:40:52“If you have on‑chain KYC you can have certain rules around that and those are all made public.” — Vladimir Novakovski
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00:41:48“Institutions need compliance and regulation side as well.” — Vladimir Novakovski
Liquidity bootstrapping needs both retail and institutional participants; cold‑start is a major challenge.
- Retail users provide order flow, but without deep liquidity they experience slippage.
- Institutions bring capital but need sufficient retail depth to justify participation.
- Lighter must solve this chicken‑and‑egg problem through incentives, tokenomics, and partnerships.
- Vlad sees the token’s growth and the upcoming institutional integrations as key levers to overcome the cold‑start barrier.
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00:39:23“Retail needs liquidity and institutions need liquidity; it's a cold start problem.” — Vladimir Novakovski
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00:39:45“Institutions want to trade on DEXs but they need KYC and compliance built in.” — Vladimir Novakovski
Token Economics and Growth Metrics
Since the token launch, Lighter has seen heightened market focus on price action, prompting the team to track TVL, volume, open interest, and revenue while pursuing a 1000x YoY growth trajectory and aligning token holder incentives through staking and buy-backs.
Token launch shifted focus to price action, highlighting the need for revenue stability.
- After the token went live, investors began scrutinizing daily revenue fluctuations more closely than before.
- Vlad notes that even a single low‑revenue day now triggers market chatter, whereas previously it was ignored.
- This heightened sensitivity underscores the importance of consistent earnings to support token price.
- The team therefore emphasizes building sustainable revenue streams alongside token incentives.
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00:44:34“People pay a lot more attention to the price action now than we would have thought.” — Vladimir Novakovski
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00:44:51“If you have a low revenue day that used to be ignored, now people freak out about it.” — Vladimir Novakovski
Lighter tracks TVL, open interest, volume, and revenue; growth has been ~1000× YoY.
- The team monitors multiple on‑chain and off‑chain metrics to gauge health and guide product decisions.
- Over the past year, Lighter’s TVL and trading volume have exploded, delivering a thousand‑fold increase.
- This rapid scaling validates the market demand for a high‑performance, verifiable DEX.
- The multi‑metric approach helps the team balance short‑term revenue with long‑term network effects.
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00:45:00“We look at TVL, open interest, volume, and revenue as our health metrics.” — Vladimir Novakovski
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00:47:35“We've grown a thousand‑times in a year and there are a lot of opportunities for growth ahead of us.” — Vladimir Novakovski
Staking, buybacks, and product value aim to align token holder interests with platform success.
- Token holders can stake LIT to earn a share of platform revenue, creating a direct link between usage and token value.
- The team also conducts periodic token buybacks, reducing supply and supporting price.
- Future product launches (options, prediction markets) will generate additional utility for the token.
- This alignment strategy is designed to keep token holders invested in the long‑term growth of the ecosystem.
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00:45:42“We create value for the token holders with staking, buybacks, and new products.” — Vladimir Novakovski
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00:46:01“If we build the right things, the price will take care of itself over the months and years to come.” — Vladimir Novakovski
Future of On-Chain Capital Markets
Vlad envisions a convergence where DeFi protocols and traditional finance merge, bringing tokenized equities, on-chain hedge funds, and other real-world assets onto blockchain, a shift many crypto builders still underestimate.
DeFi and Tradfi will merge, bringing on‑chain capital markets to the mainstream.
- Vlad predicts that as institutions adopt crypto infrastructure, the distinction between traditional finance and DeFi will blur.
- On‑chain assets such as tokenized stocks and derivatives will become standard investment vehicles.
- This merger will unlock new liquidity sources and enable seamless cross‑market arbitrage.
- The shift will also force legacy players to build on‑chain capabilities to stay relevant.
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00:53:01“DeFi and Tradfi will merge and capital markets will just be on‑chain.” — Vladimir Novakovski
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00:53:14“It's not that crypto people are rebuilding finance for the sake of it; institutions already understand the tech and want to use it.” — Vladimir Novakovski
On‑chain hedge funds and tokenized equities are emerging as new asset classes.
- Vlad cites examples like on‑chain hedge funds and tokenized stock offerings as early signs of this transition.
- These products combine the speed and transparency of blockchain with the regulatory frameworks of traditional assets.
- Many crypto participants are still unaware of the scale of institutional interest in these assets.
- Lighter aims to be the infrastructure layer that supports such products at scale.
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00:53:24“On‑chain hedge funds and tokenized equities are going to happen.” — Vladimir Novakovski
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00:53:27“People in crypto don't realize that institutions already want to use these technologies.” — Vladimir Novakovski
Understanding institutional appetite for crypto is a blind spot for many crypto builders.
- Vlad notes that after the FTX collapse, many assumed institutions would retreat, but they are actually looking for efficient, verifiable infrastructure.
- The lack of awareness leads to under‑investment in compliance‑ready solutions.
- By educating the community about institutional needs, Lighter hopes to attract the right partners and capital.
- This insight drives the team's focus on KYC‑compatible proofs and partnership outreach.
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00:52:30“People don't realize how much institutional players have come in and want to incorporate these technologies.” — Vladimir Novakovski
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00:52:45“That's a blind spot for many crypto people; they think it's all about rebuilding finance from scratch.” — Vladimir Novakovski
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