Blockchain Innovation Paves Way for On-Chain Derivatives

For years, the decentralized finance (DeFi) community has been working towards creating on-chain derivatives markets that can support institutional-grade trading. However, traditional blockchain architectures had fundamental limitations when it came to handling high-volume and low-latency derivatives trading.

The problem lies in the sequential processing of transactions on most legacy blockchains. This leads to network congestion, slow transaction validation, and a lack of liquidity. To overcome these challenges, newer high-performance L1s like Sei and Monad have emerged with parallel execution capabilities that enable rapid updates and instantaneous orderbook matching.

However, even with improved scalability, Sei and Monad still faced the issue of complex derivative calculations. This is where dedicated Layer-3 infrastructure comes into play. The Orbs protocol has been integrated with both blockchains to provide a decentralized coordination layer for managing complex perpetual contract mechanisms such as funding rate calculations and dynamic margin updates.

The integration of Orbs with Sei and Monad enables the creation of high-speed, low-latency on-chain derivatives markets that can handle thousands of transactions per second. This breakthrough has significant implications for DeFi, allowing it to expand beyond retail applications and cater to the multi-trillion-dollar derivatives market.