If 2024 was the year Ellipsis Labs proved on-chain spot markets could rival centralized exchanges, 2025 is the year they attempt the same coup for derivatives. At Solana Breakpoint, CEO Eugene Chen unveiled Phoenix Perpetuals, a fully on-chain exchange designed to solve the lingering inefficiency of DeFi derivatives: cost. While SolFi successfully compressed spot execution costs to ~5 basis points (bps)—reaching parity with Binance—on-chain perpetuals still suffer from roughly 15bps of price impact on large trades. Phoenix Perpetuals aims to close this gap, targeting the 3-5bps standard set by centralized venues.

The core innovation lies in the migration of the "Prop AMM" (Proprietary Automated Market Maker) model from spot to perps. Unlike passive AMMs that expose liquidity providers to adverse selection, the Prop AMM structure allows professional market makers to keep pricing logic off-chain while settling on-chain. This hybrid approach enables makers to distinguish between informed (toxic) flow and retail flow, allowing them to quote tighter spreads without the fear of being run over. By filtering out toxic flow, Ellipsis Labs argues that liquidity providers can offer execution quality that purely on-chain, passive models mathematically cannot match.

Critically, Phoenix Perpetuals is built as infrastructure rather than a walled garden. Chen emphasized the protocol's composability, noting that its risk engine and liquidity are fully accessible to third-party developers. This invites a new layer of financial engineering on Solana, where teams can build non-custodial options, yield vaults, or gamified trading interfaces directly on top of Phoenix’s order flow. With the underlying tech stack supported by Anza, Firedancer, and Jito, the protocol represents a shift from simple trading apps to robust financial primitives capable of supporting institutional volume.