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DeepChaohao Summary: RWA perpetual contracts have seen a 120-fold increase in trading volume within a year, but uncertain funding rates and liquidity bootstrapping have remained persistent challenges. Variational’s newly launched swap product directly integrates with traditional financial market makers, transforming unpredictable funding rates into predictable, annualized holding costs—a potential watershed moment for institutions and market makers seeking compliant access to on-chain RWA trading.
Perpetual contracts have become one of the most powerful tools in digital asset trading, offering high capital efficiency and allowing users to gain price exposure without holding the underlying asset.
Initially, perpetual contracts competed in the same arena, focusing on crypto assets and liquidity.
As perpetual contracts expand to more assets, particularly real-world assets, the competitive landscape broadens, giving rise to diverse strategies tailored to evolving markets.
This category is expanding into assets such as stocks, commodities, indices, forex, Pre-IPO markets, and others that are not naturally suited to the native crypto exchange model.
In fact, there is a significant difference between RWA and crypto-native assets when it comes to listing as perpetual contracts. Listing these markets through a traditional order book requires individually bootstrapping liquidity for each venue, typically achieved through subsidies, incentives, and external market maker relationships.
Essentially, to list a perpetual contract for RWA, a solution must be found that provides 24/7 trading outside traditional market hours to ensure sufficient liquidity for the newly launched market.
Moreover, perpetual contracts are not an ideal instrument for RWA trading. The unpredictability of funding rates is a major pain point for RWA perpetual contracts.
Among the teams working to solve these issues, Variational has just launched its swap product—a solution that supports an expanding list of markets without requiring each market and liquidity pool to be rebuilt from scratch, while providing traders with predictable costs.
Contrary to what the name might suggest, this is not about AMM swaps. Swaps have long existed in traditional finance. For Variational users, swaps offer a new way to trade RWA—with predictable costs and liquidity directly
This report first highlights the growth of RWA perpetual contracts and their rising market share, then delves into swaps, comparing them with perpetual contracts and explaining their unique characteristics.
Next, we translate this implementation into tangible benefits for users by comparing order execution across different perpetual contract platforms.
RWA Perpetual Contracts: From a Niche Category to One-Eighth of On-Chain Perpetual Trading Volume
RWA perpetual contracts have grown from a niche category to a structurally significant share of crypto trading in less than a year. In October 2025, trading volume in this category was under $1 billion; by August, it exceeded $120 billion, representing a 120-fold increase over just a few quarters.
Chart: RWA Perpetual Contract Monthly Trading Volume (October 2025 – September 2026), peaking at $147 billion in July 2026
This category saw its first inflection point in October last year, when TradeXYZ, as the deployer of HIP-3, launched on Hyperliquid. Since then, it has experienced sustained growth, reaching a peak of 20% of on-chain perpetual trading volume in July, with most months averaging around 12%-13%, meaning nearly $1 of every $8 traded in on-chain perpetuals comes from RWA. Additionally, over the past few months, it has established a baseline trading volume of $100 billion since June.
Chart: Monthly share of RWA perpetual contracts in total on-chain perpetual contract trading volume (October 2025 – September 2026), peaking at 20% in July 2026
Despite rapid growth in this category, it remains highly concentrated. As of now, the total open interest in RWA perpetual contracts stands at $4.9 billion, with the two leading protocols, TradeXYZ and Variational, accounting for nearly 90% of open interest, followed by GMTrade, Lighter, Ondo, and others.
Chart: Open Interest Concentration for RWA Perpetual Contracts (Top 5 Platforms + Others), with Trade.xyz accounting for approximately 75% and Variational around 14.2%
We expect this category to continue growing, with Variational Swaps serving as a major contributor. In the next section, we distinguish between swaps and perpetual contracts, and explain why swaps are the superior option for trading RWA on-chain.
Swap or perpetual contract?
This section defines swap as a new primitive, highlighting its distinction from perpetual contracts as trading instruments.
At their core, both are “linear derivatives,” meaning their payouts are a linear function: changes in the asset’s price translate directly into dollar values generated by the contract.
However, perpetual contracts and swaps differ fundamentally in their underlying assets.
Perpetual contracts were created to closely track the index price of the underlying asset. Therefore, they use funding rates to encourage rebalancing and maintain close alignment with the index price of the spot asset.
Swaps are used to “track the total return of an asset over a period of time.”
This is reflected in the funding rate difference. Unlike traditional perpetual contracts, swaps charge a fee only once per day on open positions, collected at close (5:00 PM Eastern Time).
Unlike perpetual contract funding rates, which depend on supply and demand, swap fees are better understood as a holding cost, calculated based on the “actual cost of financing the underlying asset in traditional markets.”
For stocks, this means the overnight interest rate of the index currency (e.g., SOFR for the US dollar). For forex, it is the overnight interest rate differential between currencies, adjusted for the spread. For metals, it is the implied cost of borrowing or lending in US dollars overnight.
These rates are closely tied to traditional finance, as they represent actual financing terms from Variational’s traditional finance liquidity partners based on market rates.
Lastly but equally important, swaps also allow users to receive dividends: long positions receive dividend payments, while short positions pay dividends.
Initially, swap markets will use isolated margin with set opening and closing times. Variational expects these markets to gradually transition to 24/7 operation and fully cross-margin within the platform.
The initial swap markets launched are US100, US500, XAU, XAG, and USOIL. Since their launch at the beginning of this month, these markets have generated $3.8 billion in trading volume, with a peak open interest of $245 million.
For Variational, transitioning from perpetuals to swaps is a necessary step, given that just two months after launch, traditional finance perpetuals already account for over 50% of its trading volume and open interest.
Instead of relying on supply and demand dynamics and frequent funding rates, Variational focuses on direct access to traditional financial liquidity, transforming volatile funding rates into annualized, easily predictable holding costs, making RWA more accessible to institutional investors.
In summary, both swaps and perpetual contracts provide exposure to the underlying asset.
Swap obtains liquidity from a network of traditional financial partners, replacing funding rates with a daily fee, analogous to a stable holding fee, “primarily anchored to the cost of borrowing USD.”
Typically, in established swap markets, this results in long positions paying 4%-6% annually and short positions receiving 2%-3% annually.
Before continuing, an important reminder: swaps do not operate in isolation. To fully understand them, the next section delves into Omni liquidity providers and how they work symbiotically with swaps.
Omni and Swap
Most perpetual contract exchanges need to cultivate liquidity within their own platforms. This works for mainstream assets, but problems emerge when the platform attempts to list additional assets. Each new market requires market makers, inventory, incentives, risk limits, and sufficient two-sided demand to support a deep order book.
A key differentiator of swaps is how they acquire liquidity, which enables them to offer better execution.
Variational avoids liquidity shortages by executing through request-for-quote (RFQ) and integrating vertically with liquidity provider Omni.
Omni Liquidity Provider (OLP) is Variational’s proprietary integrated market maker.
Diagram: How OLP (Omni Liquidity Provider) Works: Hedging venues provide inputs to the pricing engine, and the OLP acts as the counterparty on Omni
OLP directly interfaces with liquidity providers in the Variational RFQ, bringing this liquidity on-chain. Since OLP acts as the counterparty to all trades on Omni, the initial open interest limit for the Swap market is set at $10 million (to be rapidly increased afterward), allowing the team time to test OLP’s hedging strategies. OLP utilizes external liquidity from centralized exchanges, decentralized exchanges, and TradFi
Variational aggregates swap liquidity from TradFi venues, so these instruments will initially follow traditional market trading hours. As more liquidity venues are aggregated and traditional markets continue to transition toward 24/7 trading, 24/7 trading is expected to be implemented.
The benefits of this approach are clear: Variational can launch new markets without building an order book from scratch. Instead, they only need a priceategy
This design does not absorb liquidity risk, but rather involves a trade-off between pricing transparency and risk management.
In the next section, we will test whether this is indeed the case by comparing the order execution costs of Variational Swap with those of other perpetual contract trading venues.
Swap has significantly reduced execution costs on Variational, with TradFi perpetual contract costs being 8 to 12 times lower than the most liquid on-chain venues.
If you’ve been following our research, you know this is the most critical aspect for anyone trading RWA. While RWA offers many advantages—including transparency, global accessibility, and execution efficiency—these on-chain assets ultimately must match or exceed the performance of their traditional finance counterparts.
Comparison of Execution Costs Between Swap and Perp
Perps are better suited for 24/7 crypto-style markets, where funding rates are determined by supply and demand on the exchange. In contrast, swaps are more appropriate for traditional assets, as financing costs, dividends, and external liquidity are more significant.
The strongest claim about Variational Swap is not just that it offers more markets, but that it provides better execution.
To carefully measure this, we compare the execution cost of Variational Swaps with major on-chain venues offering TradFi perpetual contracts. Our platform sample includes leading on-chain perpetual contract trading venues such as TradeXYZ, Lighter, and Ostium.
Methodology
In our market sample, we analyzed and compared the US100, US500, XAU, and XAG markets, along with their corresponding products on other exchanges. Due to differences in how orders are executed across venues, the measurement of execution costs varies accordingly.
For order book-based venues like TradeXYZ and Lighter, we retrieve the order book in real time, sort it, and iterate through each level to reflect the market order conditions on the order book. For quote-based venues like Variational and Ostium, we analyze the quoted prices at various sizes.
We measure execution cost by taking the average of the cost of both long and short positions. This provides a more comprehensive view of the actual state of the quote and order book.
Analyze
Some venues, such as Lighter and Variational, charge no trading fees, so their execution costs are entirely calculated based on the spread. Other platforms charge fees, which increase the execution cost.
The first market we analyzed is US100.
Chart: Execution cost (in basis points) for the US100 index across different trade sizes.s, September 7, 2026; Castle Labs
For smaller sizes such as $1,000 and $10,000, Lighter is the cheapest venue at 0.18 basis points, but its execution costs rise rapidly, increasing from 0.36 basis points at $100,000 to over 9.94 basis points for a $1 million trade. Due to its fee structure, Ostium and TradeXYZ are the most expensive venues for small trades, at 5.32 and 4.67 basis points respectively.
In contrast, the cost of Variational Swap increases gradually, rising from 0.26 basis points for a $1,000 trade to 0.47 basis points for a $1 million trade—12 times cheaper than TradeXYZ (5.74 basis points) and nearly 21 times cheaper than Lighter (9.94 basis points).
Similar trends have also been observed in other markets, such as US500.
Chart: Fill cost (in basis points) for the US500 index across different trade sizes.s, September 7, 2026; Castle Labs
In this specific case, Variational is the cheapest venue at every scale, including $1,000 and $10,000 (0.415 basis points compared to Lighter’s 0.433 basis points).
The gap between the two platforms is smaller at smaller scales but widens to five times at $1 million, resulting in a significant cost difference: $79 versus $395 in execution costs. TradeXYZ and Ostium charge 5.84 basis points and 4.60 basis points, respectively.
Next, we analyze silver (XAG) on various platforms.
Chart: Slippage (in basis points) for Silver (XAG) across various trade sizes.s, September 7, 2026; Castle Labs
Variational is the cheapest venue at $1,000 (0.12 basis points) and $10,000 (0.38 basis points), but its execution cost rises at the $100,000 scale, surpassing Lighter and becoming even higher at larger sizes. The most recent $500,000 order on Variational cost 5.14 basis points, compared to 4.31 basis points on Lighter—a difference of approximately 20%. XAG currently has the shallowest depth among all live Swap markets and lacks the smooth quote profiles seen in other markets. We expect these results to generalize to other markets as XAG grows.
Next is the gold (XAU) market, which has performed similarly to the US100 and US500 indices.
Chart: Execution cost (in basis points) for Gold (XAU) across various trade sizes.s, September 7, 2026; Castle Labs
For smaller orders of $1,000 and $10,000, Lighter is the most cost-effective option, with opening costs of just 5 cents and 60 cents, respectively. Variational leads on larger orders above $100,000, with fees as low as 0.68 basis points—65% lower than Lighter’s. Variational also maintains its lead on orders up to $1 million, charging 1.66 basis points, significantly below competitors: Ostium is closest at 4.63 basis points, TradeXYZ charges 6.54 basis points, and Lighter surges to 8.74 basis points. Across most markets, Variational is the cheapest venue for larger orders, while Lighter leads on smaller orders—such as $1,000 and $10,000—for assets like Gold and US100.
Chart: Comparison of the lowest execution costs across markets for different trade sizes (XAU, XAG, US100, US500).s, September 7, 2026; Castle Labs
The on-chain transaction landscape continues to evolve.
The share of RWA and TradFi assets in perpetual contract trading volume is continuously increasing.
Although demand from on-chain native users is strong, the novelty of these assets and the accessibility advantages brought by tokenization mean the market has not yet reached the efficiency level needed to attract large institutional traders.
The perpetual contract protocol must carefully balance the ongoing introduction of new, attractive assets with ensuring sufficient liquidity to enable efficient execution. Additionally, perpetual contracts are not trader-friendly for RWA assets, as funding rates are unpredictable and can impact the final profit or loss of a trade.
Variance swaps offer an interesting way to address both issues, benefiting both retail and institutional investors.
The former can benefit from predictable funding fees and a clear understanding of the true cost of holding exposure through swap positions. The latter can rely on low execution costs, predictable funding rates, and tight alignment with the underlying market.
The rapid growth of swaps demonstrates this: they have accounted for over 50% of Variational’s daily trading volume, with open interest exceeding $220 million.
This is primarily driven by the US100 market, which accounted for over 50% of all swap trading volume and 30% of open interest as of September 7.
Among the initially launched markets, the funding rate shows that longs pay an annualized rate between 4.6% and 5.7%, while shorts earn an annualized yield of approximately 2.4%.
Chart: Initial markets launched for Variational Swap (US100, XAU, US500, XAG, USOIL) showing price data, 24-hour trading volume, open interest, and annualized funding rates (long/short)
So far, it has been difficult to execute large trades across most RWA markets with good execution. Swaps bypass the need to bootstrap liquidity, providing TradFi-level depth to any market, redefining perpetual trading venues as on-chain derivative protocols that can aggregate liquidity where it already exists and transparently settle those exposures.
This model offers clear advantages: it can support more markets, avoid slow liquidity ramp-up, and provide users with exposure to assets that are difficult to list on on-chain order books, all at predictable costs.
The cost is that this model places higher demands on OLPs. Users do not rely on broad public order books but instead depend on Variational’s pricing, hedging, risk management, and its ability to maintain competitive quotes across hundreds of markets through RFQs. All of this makes execution quality a core requirement that must be proven.
Our analysis confirms that, for most trade sizes, Variational is the most cost-effective venue for currently listed assets. For example, trading $1 million in US100 costs as little as $47. However, in certain cases, such as silver, lower trading volume results in higher execution costs—up to $787 for a $1 million trade, which is 20% higher than Lighter.
Since the platform charges no fees, this further reduces execution costs, making it one of the most cost-effective venues for on-chain trading in the TradFi market.
Source: www.kucoin.com