Vladimir Novakovski Shares Vision for Lighter: The Future of Decentralized Perpetual Trading

Vladimir Novakovski, founder and CEO of Lighter, a cutting-edge decentralized perpetual derivatives exchange (perp DEX), recently shared insights into the platform’s innovative design, business model, and its potential to redefine on-chain finance during an appearance on the “Flirting with Models” podcast. Novakovski's vision for Lighter centers on bridging the gap between the performance of centralized exchanges (CEXs) and the security-focused principles of decentralized finance (DeFi), creating a balanced and transformative solution for digital asset trading.

Why Decentralized Exchanges Are Essential: Lessons from FTX

Novakovski began by addressing a systemic issue within the digital asset trading ecosystem: the paradox of decentralized financial instruments being traded overwhelmingly on opaque centralized platforms. He pointed to the collapse of FTX as a prime example of the dangers posed by insufficient transparency. He argued that some centralized exchanges exhibit even lower accountability and openness than traditional financial institutions (TradFi).

Lighter’s core mission is to resolve these problems. The platform aims to maintain the advantages of CEXs—such as low-cost trading and rapid execution speeds—while fully embracing DeFi attributes of security, transparency, and verifiability. “We set out to design a trading platform rooted in these fundamental principles,” Novakovski explained, underscoring Lighter’s commitment to reshaping the way digital assets are traded.

Lighter’s Architecture: A Technological Balancing Act

The foundation of Lighter is built upon three interconnected pillars: an Ethereum-based custom Layer 2 (L2), optimized zero-knowledge (ZK) proofs, and a private sequencer. This combination enables the platform to achieve unprecedented scalability without sacrificing security.

1. Custom Ethereum Layer 2 Integration

Lighter’s design stems from Ethereum, leveraging its position as the most secure and widely trusted Layer 1 (L1) blockchain, with a thriving $120 billion DeFi ecosystem. By building on Ethereum, Lighter inherits robust security features while introducing an optimized Layer 2 tailored to perpetual trading. This design ensures seamless integration with the existing DeFi landscape while pushing its boundaries.

2. Tailored Zero-Knowledge Proofs

Instead of relying on general-purpose ZK-Ethereum Virtual Machines (ZK-EVMs), Lighter utilizes custom ZK circuits specifically created for transaction processing. These circuits compress hundreds of thousands of orders and trades into compact proofs submitted to Ethereum L1. This approach drastically reduces network congestion and enhances throughput, addressing Ethereum’s ongoing scalability challenges while maintaining transactional integrity.

3. Private Sequencer Safeguards

One of the more controversial architectural choices is Lighter’s private sequencer. While critics often view private sequencers as a threat to decentralization, Novakovski countered that their impact becomes irrelevant due to ZK proofs. “With ZK technology, trade processes are entirely public and verifiable, making malicious actions by centralized entities impossible by design,” he explained. Additionally, the “Escape Hatch” feature allows users to withdraw their assets directly from Ethereum L1 in case of sequencer disruptions, ensuring maximum asset security.

Business Model Innovation: Community Liquidity and Zero Trading Fees

Lighter’s business model stands apart from traditional digital asset exchanges through its emphasis on community-driven liquidity and a differentiated fee structure.

Community-Powered Liquidity Pools

To bootstrap liquidity, Lighter uses its proprietary Lighter Liquidity Pool (LLP) system, which incorporates capital from the community. During private beta testing, Lighter’s LLP demonstrated significant growth, with total value locked (TVL) exceeding $100 million—a testament to early market adoption. Building on this success, Novakovski shared plans to introduce an experimental liquidity pool (XLP) to support innovative markets, including futures contracts for real-world assets (RWAs).

Zero Fees for Retail Investors

Retail traders using Lighter’s platform will pay no trading fees, a move designed to disrupt the fee-centric models that dominate existing exchanges. Instead, revenue will come from premium services tailored to high-frequency traders (HFTs), such as enhanced API access for ultra-low-latency trading. Novakovski likened this approach to business models adopted by platforms like Robinhood, emphasizing that securing the retail market first and monetizing professional users later could drive mass adoption. “Reinventing fee structures is essential for driving accessibility and reshaping market dynamics,” he noted.

Ethereum’s Future in Zero-Knowledge Rollups: Advancing On-Chain Finance

Novakovski expressed optimism about the growing role of specialized ZK rollups in transforming Ethereum and DeFi ecosystems. He explained that platforms like Lighter allow users to store assets securely on Ethereum L1 while transmitting proofs to L2 for collateral usage, eliminating the need for cumbersome asset transfers.

“Ethereum’s only real limitation has been performance, and ZK rollups are solving that challenge,” Novakovski said. He envisions a future where advanced on-chain finance extends beyond trading speculative assets such as meme coins to encompass real-world investments like RWAs. Lighter aims to develop this infrastructure, paving the way for decentralized financial protocols to rival—and potentially surpass—TradFi systems in scope and efficiency.

The Road Ahead

Lighter represents a bold step forward in decentralized finance, blending cutting-edge blockchain technology with a user-centric approach to trading. By addressing the weaknesses of centralized exchanges while enhancing the performance and scalability of DeFi, Novakovski’s vision articulates a promising future for the digital asset ecosystem. As Ethereum’s capabilities continue to expand through innovations like ZK rollups, platforms like Lighter are poised to spearhead the next generation of on-chain financial infrastructure.