Onchain perpetuals exchange Ostium has unveiled a major overhaul of its backend infrastructure on Tuesday. 

According to the team’s announcement, Ostium has introduced a new real-time decentralized execution layer, representing a novel application of onchain liquidity pools with offchain hedging.

Ostium is a decentralized perpetuals trading platform that was one of the first to offer leveraged trading in traditional assets, like stocks, indices, commodities, ETFs, forex, and other assets directly using a non-custodial crypto wallet. The platform has processed over $50 billion in cumulative volume and across more than 26,000 traders, according to the announcement. 

Like many DeFi perps platforms, Ostium previously relied on a public liquidity pool that both priced trades and absorbed all net directional risk. Serving both purposes capped scale, execution quality, and open interest, according to the announcement. 

On Tuesday, however, Ostium rolled out a new model that taps institutional participants, including Jump, alongside other unnamed prime brokers and "major institutions," to serve as hedging partners, taking over the directional exposure of trades. 

"Rather than recreating order books for assets that already trade trillions in volume offchain, Ostium routes to existing liquidity and focuses on execution," Delphi Consulting wrote in an email. 

For example, under the old system, if many users went long on gold, the pool took the exposure, spreading liquidity thin. Ostium’s upgraded backend instead connects onchain traders directly to traditional markets for deeper liquidity across equities, FX, commodities, and indices.

In some sense, Ostium now sits at a "decentralized execution layer" for global markets.

"Programmatically hedging onchain flow with traditional market participants required building a new kind of infrastructure, a translation layer between smart contracts and institutional-grade messaging protocols, with sub-100-millisecond latency across every step," Ostium co-founder and CTO Marco Antonio Ribeiro said in a statement. 

While Ostium now acts as a kind of TradFi-DeFi bridge, its users remain fully self-custodial while benefiting from the institutional-grade liquidity, pricing, and depth from offchain venues. 

It did this by transforming its existing onchain public liquidity pool into a kind of "intraday lending buffer," according to the announcement, that interacts with a new separate capital pool that "hedges net exposures offchain through a network of institutional partners."

"This enables the protocol to dramatically scale open interest and more closely match the depth of underlying markets," the announcement reads.

Kaledora Kiernan-Linn, co-founder and CEO of Ostium, compared the upgrade to stablecoins, noting Ostium now "extends the reach of the world’s most liquid global markets to anyone with a wallet," just like "stablecoins extended the reach of the U.S. dollar."

Ostium, founded by Harvard alums Kiernan-Linn and Ribeiro, has raised $27.8 million to date, including a $20 million Series A co-led by General Catalyst and Jump Crypto, disclosed in December.