Could Ostium Be the Next Hyperliquid? Exploring the Potential of This RWA-Focused Decentralized Exchange

As the decentralized finance (DeFi) landscape continues to evolve, a new contender emerges in the form of Ostium, a decentralized exchange (DEX) specializing in real-world asset (RWA) trading. This platform aims to bridge the gap between traditional finance and blockchain technology by offering seamless access to tokenized real-world assets. With Hyperliquid having set precedents in perpetual futures trading, market observers are now examining whether Ostium’s RWA-focused approach could position it as the next breakout platform in the DEX space. The project’s unique value proposition lies in its potential to unlock liquidity for traditionally illiquid assets while maintaining the transparency and efficiency of blockchain-based trading systems.

What sets Ostium apart from competitor perps DEXs is its ability to long or short popular market indices (S&P500, Nikkei 225, Dow), commodities (gold, silver, copper, crude oil) or forex (GBP, EUR, JYP) – with up to 100-200x leverage.

Unlike tokenized RWAs, tradable assets on Ostium are synthetic assets, so they’re not actually backed by actual collateral. Instead, asset prices are tracked by oracles. A custom-made pull-based oracle system was built for RWAs, and Chainlink Data Streams are used for crypto assets.

Despite its RWA niche, actively-traded assets on Ostium are generally varied. On its highest trading volume day (April 16), crypto assets formed the largest percentage of assets traded (53%), foreign exchange was 22%, commodities was 18%, and indices was 7%.

In the last seven days, Ostium has generated $938 million in trading volume, which translates to about $411k in fees. For context, total trading volume on all Arbitrum DEXs was ~$3.6 billion in the last seven days, based on DefiLlama.

Is Ostium the next Hyperliquid?

Both began as perps DEXs on Arbitrum. But here’s where they differ.

Ostium uses a two-tiered liquidity layer structure consisting of a “liquidity buffer” and a market making vault.

This market making vault works similar to Hyperliquid’s HLP vault, where the relationship between liquidity providers and the platform’s traders is of an adversarial nature, i.e. if traders win, LPs lose and vice versa.

(This is the same vault that Hyperliquid recently, controversially bailed out in the JELLYJELLY memecoin debacle.)

Ostium’s two-tiered design, however, is meant to thwart this zero-sum relationship. Its “liquidity buffer” allows LPs to benefit from growth in trading volume and open interest instead of only trader losses. This way, Ostium LPs and traders are in a win-win relationship (see docs for a fuller explanation).

Ostium’s OLP vault is currently offering an above average 28.69% APY on USDC deposits to compensate for the risk of LPs potentially having to act as a counterparty.

The second key difference in protocol design lies in Ostium’s rejection of a central limit orderbook (CLOB) design, popularized by perps DEXs like DYDX and Hyperliquid. This is probably due to the fact that Ostium does not exist on its own L1 protocol, but I may be wrong.

Instead, Ostium opts for a pool-based design. This design solves the obvious problem of liquidity fragmentation and mirrors the price of RWAs offchain using oracles.

Ostium is an exciting project, but it’s still early days for the DEX in terms of trading activity. I’ve heard it described as the next Hyperliquid poised to ride the tailwinds of the burgeoning RWA narrative. That’s a neat mental model, but whether or not crypto traders want to abandon traditional exchanges to trade commodities and forex onchain is a whole other story.

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