Lighter ready for launch: why the PFOF model sets it apart from Hyperliquid

In recent days, the market has shown converging signals regarding the upcoming generative event of Lighter. Addresses believed to be connected to the development teams have immobilized significant resources (125,000 dollars) in bets on the TGE timing on Polymarket, while Coinbase has confirmed the platform’s inclusion in its listing roadmap. These indicators suggest that the token debut is imminent. However, the crypto community continues to perceive Lighter mainly as an alternative version of Hyperliquid, making the same mistake many made in ignoring the importance of derivative DEXes in on-chain markets.

The business model behind zero fees

Contrary to Hyperliquid’s tiered system based on traded volume, Lighter has chosen to offer zero commissions to capture the retail base. Community analysis—particularly the contribution of user @ilyessghz2—reveals that for traders with capital between $1,000 and $100,000, the total execution cost (slippage included) is lower on Lighter. Hyperliquid’s fee advantage only emerges for accounts with holdings exceeding $500,000. For high-turnover retail segments, Lighter thus offers a significantly more competitive structure.

Behind this absence of direct costs lies the transplantation of a model already validated in traditional finance: Payment For Order Flow (PFOF), the famous Robinhood strategy. Lighter monetizes retail order flow by forwarding it to market makers, who profit from bid-ask spreads and pass on commissions to the platform. This transformation converts explicit trading costs into implicit costs, such as slightly widened spreads.

The economic basis of PFOF resides in market makers’ perception: retail orders are considered “uninformed liquidity” with respect to adverse selection compared to institutional orders. Retail traders tend to make more frequent prediction errors, driven by emotion and short-term oscillations, expanding market makers’ profit margins and reducing their adverse selection risk. As volumes grow, Lighter can negotiate higher retrocessions, similar to Robinhood—hundreds of millions of dollars per quarter through this channel.

Technical architecture: the supremacy of ZK-rollup

The provocative statement by founder Vladimir Novakovski—“L1 is a bug, not a feature”—was not empty rhetoric but a targeted critique of Hyperliquid’s limitations. When JellyJelly attacked the HLP, the protocol resorted to a “cut-off” to safeguard funds, revealing governance limitations through validators. Hyperliquid’s spot trading relies on HyperUnit, a multisig bridge that inevitably centralizes control. The history of cross-chain bridges—Ronin, Multichain—demonstrates that any multisig design retains vulnerabilities from social engineering and 51% attack risks.

As a monolithic application on Ethereum L2, Lighter eliminates this distrust. Bridging nodes and chain security require additional trust assumptions that pose an almost insurmountable barrier for institutional compliance. Once migrated to L2 Phase 1, even if the sequencer malfunctions, users can still force withdrawals via contracts on the ETH mainnet.

The most significant technical innovation is the “universal asset guarantee” system based on zero-knowledge proofs mappable to the Ethereum mainnet. DeFi liquidity remains fragmented—deposits on Aave, LP tokens on Uniswap, stETH in staking—without direct utility as collateral. Lighter allows traders to lock assets on Ethereum mainnet (stETH, LP tokens, even tokenized futures) in L1 contracts, directly mapping them as collateral on L2, without relying on separate L1↔L2 bridges. A trader can thus hold stETH to earn staking rewards while simultaneously using it as margin, enabling “yield stacking” and maximizing capital efficiency. This mapping capability provides Lighter with unparalleled security robustness among L1 Perp DEXes, becoming a key factor in attracting institutional liquidity.

The iron triangle and convergence toward institutionalization

An emerging ecosystem is forming around “Robinhood-Lighter-Citadel.” Novakovski gained experience at Citadel, the world’s leading market maker, and consults for Robinhood. Robinhood is the main retail stock broker, Citadel is Robinhood’s primary market-making partner, and Robinhood is a direct investor in Lighter. The ideal scenario envisions a circular cycle: Robinhood manages front-end acquisition, introducing tens of millions of stock traders into crypto; Lighter acts as the backend engine, providing Nasdaq-level matching and clearing with ZK-rollup protection; Citadel manages the order flow. When Citadel designates Lighter as the main venue for coverage of tokenized stocks, perpetuals on stocks and RWAs, all brokers dependent on Citadel liquidity will inevitably converge on Lighter.

Meanwhile, Hyperliquid has fragmented liquidity via HIP-3, allowing third-party teams to deploy markets. While this has brought prosperity to the ecosystem, it has caused liquidity dispersion—Felix and Trade.xyz both support TSLA, creating inefficient duplications. HIP-3 models also present blurred and non-centralized compliance responsibilities. Lighter, backed by top-tier capital (Founders Fund, a16z, Coinbase Ventures), has strategically positioned itself within the regulatory landscape, a move aligned with Citadel’s appeal to the SEC for uniform regulation of tokenized assets.

Institutional privacy and the TGE curse

Hyperliquid’s on-chain transparency exposes entry prices and liquidation levels of large positions, making whales vulnerable to front-running. Lighter enables concealment of transactional and positional data. For funds and institutional investors, anonymity is a prerequisite—no one reveals their cards to the counterparty. As on-chain derivatives markets mature, platforms that effectively protect privacy will be preferred for core liquidity gathering.

However, the TGE remains a critical moment for Perp DEXes. Hyperliquid succeeded in maintaining volumes post-incentives, escaping the “mine and dump curse.” Lighter, with an explicit VC unlock schedule, faces an even tougher test. Once the airdrop expectations are met, will users migrate to the next Perp DEX? Post-TGE liquidity loss worsens slippage, deteriorating the experience and triggering the “death spiral.”

Conclusion

The rivalry between Lighter and Hyperliquid is not a zero-sum game but a convergence toward the institutionalization of on-chain derivatives. Both fight the same enemy: centralized exchanges. The real war of Perp DEXes against CEXs has just begun, and 2025 will determine which architecture—modular or monolithic, transparent or private—prevails in next-generation decentralized finance.