Opinion by: Annabelle Huang, co-founder and CEO of Altius Labs
For centuries, the world’s traders and speculators have pursued one thing above all else: alpha. Not just returns, but an edge — a structural advantage that lets them capture value before everyone else. In modern times, they’ve achieved this through speed and precision, often beating the competition by mere nanoseconds.
As markets migrate to blockchain rails, however, the nature of alpha itself is shifting. Future alpha won’t come from co-locating servers next to an exchange or shaving nanoseconds off fiber routes. Rather, it will emerge from using onchain infrastructure in unique ways.
High-frequency trading (HFT) firms built empires out of physical ingenuity. Jump bought real estate near the Chicago Mercantile Exchange’s data center in Aurora so it could receive and transmit faster than its competitors. Beyond location, FPGA chips, custom hardware and private fiber networks have all served the same purpose: to give trading firms as many extra advantages as possible.
In that world, alpha was a hardware arms race. The companies that engineered faster connections and smarter routing dominated. As trading increasingly moves into blockchain-based environments, physical constraints dissolve. There is no co-location in decentralized finance, given the decentralized setup. You can’t build your firm right next to, say, a Uniswap server, and even if you could, it wouldn’t matter.
Mastering the digital infrastructure
Today’s validators, sequencers and block producers are the blockchain equivalents of the old matching engines at the CME or Nasdaq. The firms that can influence or optimize this layer will gain the kind of structural edge that once came from owning customized trading hardware.
Mastering the new onchain mechanics can take various forms. For example, using the same HFT tricks on a centralized exchange (CEX) and running validators for a decentralized exchange (DEX) enables you to take advantage of price gaps between the two platforms before the public even has a chance to spot them.
Latency arbitrage also has its blockchain analogue in the form of maximal extractable value (MEV), meaning the profit opportunity created by reordering, including or excluding transactions within a block. We’re speaking, in both cases, about a kind of front-running, but the methods rely on completely different infrastructures. Protocols like Flashbots and Skip have formalized MEV into structured, auction-based systems that look eerily similar to the smart order routers of equities trading.
The upshot is that high-frequency trading firms have the opportunity to own the rails themselves. In traditional markets, they had to rent access to exchanges, paying fees for co-location and data feeds. Onchain, they can upgrade the entire system’s mechanics by running validators, designing low-latency remote procedure call nodes, participating in governance or creating sequencers for rollups, to name a few ideas.
Related: Institutional adoption faces blockchain bottleneck
The alpha comes from building and optimizing the infrastructure that everyone else depends on, rather than just exploiting it.
In many ways, this could blur the old boundary between market maker, exchange and infrastructure provider. The firms that understand how to operate across all three layers will shape onchain market microstructure for decades to come. This is an area where high-frequency trading firms really do have an advantage because they already possess the engineering culture, the capital and the risk frameworks to navigate this kind of terrain.
Early movers are experimenting
The bridge between high-frequency trading and blockchain infrastructure is already forming, and the names involved are familiar.
Jump has already leveraged its HFT expertise to build a high-performance validator client for Solana called Firedancer. Another project backed by Jump, DoubleZero, is aiming to monetize a global private fiber-optic and subsea cable network that Jump has built in-house to reduce latency and increase blockchain bandwidth beyond what the public internet offers.
Meanwhile, Cumberland is contributing real-time crypto market data for the Pyth Network, a decentralized oracle network. The firm also supports crypto infrastructure projects through its Web3 incubator, Cumberland Labs.
Jane Street recently hired crypto unicorn Copper’s former head of infrastructure architecture, Paul Smith. This may be a hint that the HFT firm — which purchased and sold more than $110 billion in cryptocurrencies (including stablecoins) in 2024 — is interested in developing its own blockchain infrastructure capabilities.
It may look like HFT firms are tip-toeing around the edges, but these efforts hint at a profound shift: Instead of waiting for the blockchain space to “grow up,” Wall Street’s most technically sophisticated firms are actively helping it mature.
Why go through the effort?
Of course, there’s still one major obstacle: size. For all of crypto’s innovation, its markets remain small compared to traditional finance. Nasdaq alone regularly processes over $500 billion in daily volume. The entire crypto spot market, at its October peak, touched $230 billion. For a trading firm that turns over tens of billions daily, the economics of redeploying significant capital into onchain markets is hard to justify…at least for now.
That limitation is temporary. Stablecoins are steadily injecting real liquidity into blockchain systems, and tokenized real-world assets (RWAs) promise to bring much more. Bond settlements, cross-border payments and corporate cash management — when real financial activity moves onchain, the liquidity ceiling disappears. We could be looking at trillions in daily value transfer within the decade.
Skeptics will argue that blockchain still lacks the maturity, compliance and reliability that institutional finance demands. They said the same thing about electronic trading in the 1990s. Back then, floor traders mocked early algorithmic systems as toys. Two decades later, nearly all trading is electronic, and the firms that dismissed the shift no longer exist.
You know what they say about history rhyming. The smartest players on Wall Street recognize the tune already. The next frontier of alpha isn’t hidden inside a data center in Chicago or a cable running under the Atlantic. It’s embedded in blockspace — in how it’s produced, ordered and monetized.
