Encoding trading rules into circuits has allowed Lighter to take a different "path" from other perp DEXs.
Written by: Eric, Foresight News
Starting from August 20th, LIT, the token of perp DEX Lighter (backed by ex-Citadel quantitative team members), has continuously hit new highs. By August 26th, LIT reached a peak of $3.8, which is nearly 5 times its low of around $0.78 set on March 30th this year.
First, it's important to note that currently, the circulating supply of LIT is only about 25% of the total supply. The team and investor portions are locked up until December 30th, 2026. The current selling pressure on LIT only comes from staking rewards, which are not significant. During the price uptrend, users have stronger incentives to stake and tend to hold.
Given the limited circulating supply, LIT's buyback and burn efforts are also substantial. According to the official dashboard, the number of LIT repurchased so far has reached 17.3 million, accounting for 1.73% of the total supply and 6.92% of the circulating supply.
In July, in our article "Expanding Territory with Robinhood: Is Lighter Playing a Big Game?" (https://foresightnews.pro/article/detail/98462), we analyzed the reasons for LIT's continuous rise, including the buyback and burn mechanism and the partnership with Robinhood. Beyond these business-level catalysts, Lighter has also made unique innovations at the chain level.
Before Lighter, on-chain derivatives basically faced an impossible trinity: General-purpose L2s like Arbitrum have fees and latency unsuitable for high-frequency order placement; independent chains like dYdX v4 and Hyperliquid sacrifice security to some extent; and StarkEx-style hybrid order books rely on centralized matching, which carries censorship and MEV risks.
Hyperliquid's self-built L1 runs the matching engine directly on the validator set using HyperBFT consensus, achieving sub-second finality and a throughput of over 200,000 transactions per second. The cost is that its security model is entirely self-reliant—dozens of validator nodes support the entire chain, and cross-chain asset transfers depend on bridges.
Lighter chose a different path. It is a ZK Rollup built solely for trading—matching, liquidation, and risk control are all encapsulated in its self-developed Lighter Core. It uses a customized proof engine to generate zk-SNARK proofs, then submits the compressed state to the Ethereum mainnet. Compared to general-purpose zkVMs, this solution sacrifices generality but gains proof speed, latency stability, and execution efficiency for high-frequency order books. The official metrics are a matching latency of less than 5ms and the ability to pack 20,000 orders and cancellations per block.
According to L2BEAT data, as an independently developed L2 that does not use existing ZK Rollup stacks, Lighter's TVL exceeds $1.1 billion, ranking fifth, behind Base, Arbitrum, OP Mainnet, and Mantle.
Lighter's system consists of three roles: The sequencer sorts transactions FIFO and provides soft finality; the prover generates proofs for each block; and smart contracts on Ethereum custody user funds, store the state root, and verify each proof.
The real differentiation lies in the content of the circuit proofs. Most Rollups only prove the validity of state transitions, but Lighter's circuits encode the exchange rules themselves into zk constraints. It uses a binary prefix tree structure called Order Book Tree to encode the price-time priority principle into leaf indices, resulting in logarithmic proof complexity. This means the protocol can cryptographically prove that the highest-priority orders are filled first, funding rate caps are correctly enforced, and liquidations use the right formulas.
This is especially important for perpetual contracts. Leveraged positions are margined, and liquidations are automatic and mechanical. If you can't verify whether liquidations are executed correctly, you're trusting the platform at the moment when it has the least incentive to be honest with you. Verifiable liquidation is not a marketing slogan; it's the core meaning of this architecture.
As an Ethereum L2, Lighter inherits two things that independent L1s can't provide.
The first is exit protection. If the sequencer continuously censors transactions, users can directly submit transactions on L1. If not processed for more than 14 days, the system freezes into Desert Mode, and users can withdraw funds by reconstructing the state using on-chain data and submitting balance proofs—no operator cooperation is needed throughout. L2BEAT even actually reproduced this process, reconstructing the state root from L1 blob data and verifying it up to the chain head. All state data required to build proofs is published on-chain, which is the premise for the escape hatch to work.
The second is liquidity network effects. Lighter's funds are custodied in Ethereum contracts. Users can deposit directly from multiple chains like Ethereum, Arbitrum, Base, Solana, etc., and can reuse assets from the Aave, Uniswap, and Ethereum stablecoin ecosystems without complex cross-chain bridges. Hyperliquid's composability is limited to HyperEVM, and it can't directly access the hundreds of billions of dollars in TVL on Ethereum.
Also worth mentioning is the horizontal architecture of LighterEVM. The core trading engine runs on custom ZK circuits, while general-purpose smart contracts run in a parallel zkVM environment. The two are logically separated but can share state atomically. No matter how congested on-chain lending protocols are, the matching speed of the core order book is not affected, and developers can build structured products that directly read the order book on the EVM side.
Just today, Lighter released an article introducing its latest progress in the verification system. Over the past month, Lighter's average block verification time has dropped from about 5.3 minutes to about 1 minute, achieved through two independent improvements: First, "Heavy/Light Decomposition"—splitting the verification circuit based on transaction complexity, so that over 98% of simple transactions only need to pay lower verification costs, which halved the verification time. Second, the results of the prover optimization competition co-hosted with Eigen Labs, which optimized the Plonky2 prover at the pure infrastructure level; the first batch of results went live on August 23rd, cutting the verification time in half again.
A little-known fact is that when tokenized RWAs first emerged, ZKsync had the most on-chain RWA assets.
The reason is simple: security.
Even today, ZKsync still ranks in the top ten, higher than chains like Arbitrum, Polygon, and Base, which seem stronger on paper. The advantage of ZK proofs is that although finality strictly requires confirmation from the Ethereum mainnet, the credibility of transactions is already verified on the L2. For institutions, even if it's a bit slower or more expensive than other L2s or self-built L1s, it's completely acceptable.
Compared to general-purpose ZK Rollups like ZKsync and Starknet, and even dedicated L2s built on these general-purpose ZK Rollup stacks, Lighter's biggest advantage is that it directly encodes transaction, liquidation, and other logic into circuits. Coupled with Ethereum mainnet-level security, this mechanism—even safer than traditional clearing institutions—allows it to firmly establish itself in the highly competitive perp DEX market.
The partnership with Robinhood is a case in point. In addition to using order flow payment and having a strong team background, Lighter's mechanism gives it unique advantages in security and compliance. The market is willing to pay a premium for this architecture, and the logic is clear. For projects that want to sell perpetual contracts to Robinhood users and traditional financial institutions, the story of "matching rules written in circuits, fund security backed by Ethereum" is one that can be told to compliance departments and audit firms.
Hyperliquid proved that performance can come from consensus; Lighter is proving that trust can come from proof. Unlike other perp DEXs that rack their brains on operations and business, Lighter has taken a new "path."