Tradfi Integration Path: Tokenized Equities, Distribution, And Compliance Design
Key takeaways
- Novakovski argues crypto-native participants underestimate how far TradFi institutions are in understanding blockchain's value and pursuing integration, implying TradFi and crypto capital markets will merge.
- Novakovski claims Lighter processes about 500 million orders per day with operating costs under $50,000 and offers free trading for retail while monetizing market makers and HFT firms.
- Novakovski claims Lighter grew by about 1000x over the last year and expects further growth from deeper access to the Ethereum ecosystem and increased institutional participation.
- Novakovski argues Hyperliquid's key strategic weakness is not being built on Ethereum because he expects TradFi and DeFi composability to concentrate on Ethereum rather than a non-Ethereum L1.
- Lunch Club's growth plateaued because the total addressable market for non-transactional, open-ended professional networking is small beyond founders, investors, and entrepreneurs.
Sections
Tradfi Integration Path: Tokenized Equities, Distribution, And Compliance Design
The corpus outlines a near-term narrative centered on tokenized stocks, institutional use cases, and possible U.S. market access. It presents distribution hypotheses via Robinhood partnership pathways and an incumbent-hedging rationale for Coinbase investment. It also names regulation/compliance uncertainty as the primary blocker for U.S. equities expertise to engage on DEXs, and proposes a combined on-chain KYC plus ZK rule-logic order-book design to bridge institutional constraints with broader participation.
- Novakovski argues crypto-native participants underestimate how far TradFi institutions are in understanding blockchain's value and pursuing integration, implying TradFi and crypto capital markets will merge.
- Novakovski claims Robinhood is actively working on tokenizing stocks and views Lighter as a partner, with partnership details expected to be announced in coming weeks.
- Novakovski describes two possible directions for a Robinhood partnership: tokenized equities on Lighter for crypto-native traders and/or decentralized perpetuals delivered to Robinhood's TradFi customer base.
- Novakovski claims institutional market makers tend to follow retail flow, so institutional participation in on-chain equity perps depends on solving a retail-liquidity cold start problem.
- Lighter envisions using on-chain KYC and ZK-based rule logic to allow institutions to trade under public matching constraints in one order book while enabling price discovery to flow through to non-KYC retail participation.
- Novakovski claims traditional firms with U.S. equities expertise have avoided trading on DEXs primarily because of regulation and compliance uncertainty rather than doubts about profitability.
Performance Via Specialized Zk Exchange Architecture
The technical story is that specialized ZK circuits and a highly optimized sequencer enable low latency while proofs are generated asynchronously and posted later. The corpus links verifiability to fair execution in volatile markets and to the willingness of sophisticated market makers to provide liquidity. It also states an explicit extensibility limitation of custom circuits, motivating an EVM sidecar plan.
- Novakovski claims Lighter processes about 500 million orders per day with operating costs under $50,000 and offers free trading for retail while monetizing market makers and HFT firms.
- Novakovski believes ZK-enabled on-chain rails can achieve TradFi-level performance without sacrificing verifiability.
- Novakovski argues verifiability is necessary because non-verifiable off-chain matching can lead to unfair execution during fast market moves, and sophisticated market makers require verifiable fairness to provide deep liquidity to retail.
- Lighter uses finance-specific custom ZK circuits to prove only the rules needed for trading and risk management (including time/price priority and liquidation correctness), which Novakovski claims is more efficient than proving a general-purpose VM.
- Novakovski claims Lighter achieves roughly 200 ms trading latency using a highly optimized sequencer while proof generation occurs asynchronously and is later posted back to Ethereum.
- Novakovski claims Lighter's ZK stack has been built entirely in-house so far by a team combining cryptography and quant expertise, including roughly 20 members with Olympiad medals.
Token Dynamics And Governance/Value Accrual Claims
The corpus reports a post-token-launch shift toward short-term price and revenue attention. It also states intentions to pursue staking and buybacks for token-holder value and claims token-centric expectations in hypothetical M&A. Comparative and growth claims are included, but the corpus provides no independent measurement methodology.
- Novakovski claims Lighter grew by about 1000x over the last year and expects further growth from deeper access to the Ethereum ecosystem and increased institutional participation.
- Since Lighter's token launch, Novakovski observed increased fixation by market participants on token price action and stronger reactions to day-to-day revenue fluctuations than pre-launch.
- Novakovski asserts Lighter's team, customers, and investors are aligned around token-based value accrual, contrasting with some acquisitions that leave ecosystems unhappy when decisions benefit individuals or equity holders.
- Novakovski claims Hyperliquid's and Lighter's current revenues differ by roughly a 10-to-1 ratio.
- Novakovski says that in a hypothetical acquisition of Lighter, the acquirer would need to buy up the tokens rather than only buying the equity.
- Novakovski says Lighter intends to create token-holder value through mechanisms such as staking and buybacks while largely ignoring short-term price swings.
Ethereum Alignment As Distribution And Composability Strategy
Ethereum is presented as the anchor for security, asset access, and DeFi composability, with an asserted preference by TradFi for Ethereum as the base architecture. Competitively, the corpus challenges a non-Ethereum approach as a strategic weakness, and product-wise it describes plans for an EVM sidecar and broad Ethereum-collateral support to expand what can be built and traded.
- Novakovski argues Hyperliquid's key strategic weakness is not being built on Ethereum because he expects TradFi and DeFi composability to concentrate on Ethereum rather than a non-Ethereum L1.
- Novakovski argues that Lighter's core advantage versus competitors is technical alignment, especially building on Ethereum, which he claims TradFi will prefer as the most secure L1.
- Novakovski argues that being an Ethereum L2 provides security and immediate access to much of DeFi TVL and protocols, and he claims TradFi largely trusts Ethereum as the underlying public-chain architecture.
- Lighter's vision is to let users use any asset on Ethereum (L1 or other L2s) as collateral on Lighter natively, enabling perps and later products such as options or prediction markets.
- Lighter plans to add a ZKVM/EVM sidecar so existing Ethereum DeFi apps can run on Lighter alongside custom high-performance trading logic.
Market Selection And Pmf Gating Constraints
The corpus emphasizes that adoption is constrained by market size choice and trader requirements. The stated lesson is that non-transactional networking has limited reach, while perps capture most active trading demand. It also frames DEX-perps churn and weak migration from centralized venues as a product-market-fit problem, with latency and cost presented as binding prerequisites.
- Lunch Club's growth plateaued because the total addressable market for non-transactional, open-ended professional networking is small beyond founders, investors, and entrepreneurs.
- Lighter initially explored spot trading and then pivoted to perpetuals because most active trading demand is in perps due to leverage and capital efficiency.
- Novakovski attributes DEX-perps market-share churn to weak product-market fit versus centralized exchanges, citing that spot/perps volume did not meaningfully shift to DEXs after the FTX collapse.
- Novakovski claims low latency and low cost are prerequisites for most traders to choose DeFi venues; otherwise traders will stay on centralized exchanges.
Unknowns
- What is the verifiable methodology and source for the reported 200 ms latency figure, and under what conditions (order types, matching environment, peak load) is it achieved?
- What is the precise definition of 'orders' in the reported 500 million orders/day metric, and what infrastructure and proof-posting costs are included in the under-$50,000 operating cost claim?
- How frequently are proofs posted back to Ethereum, what guarantees do users get during the asynchronous window, and what are the failure modes if proof generation is delayed?
- What are the concrete technical specs, timeline, and deployment plan for the EVM/ZKVM sidecar, and what limitations will remain versus generalized execution environments?
- Which Ethereum assets will be accepted as collateral, by what mechanism will cross-L1/L2 assets be made natively usable, and what are the risk and liquidation implications of expanded collateral types?