Backpack Season 2 Kicks Off With All-Time Highs Across Key Metrics

Backpack’s Season 2 blasted off on July 3, and in less than a week, the protocol has reached several all-time highs.

As of July 8, open interest rose to a record $298 million. Total lent volume reached $276 million, while total borrowed volume stood at $126 million. On the same day, daily trading volume was recorded at $924 million. While notable, this figure remains below the protocol’s peak of $1.4 billion set on June 12.

Total assets under custody (AUC) have held firm at all-time highs since the launch of Season 2. On launch day, CEO Armani Ferrante stated on X, “Season 2 starts in 15 minutes and assets under custody is back at an all time high, even as prices are down.” That momentum has not slowed. By July 9, AUC climbed to $273.6 million, reflecting a net inflow of over $10 million within 24 hours.

In the lead-up to Season 2, Backpack introduced new features aimed at improving functionality and user engagement. On July 2, Backpack rolled out DeFi Positions in Backpack Wallet, enabling users to monitor their liquidity, lending positions, staking activity, and rewards across more than 40 Solana-based DeFi protocols. The feature helps users discover assets they may already hold, similar to the functionality found in the OKX Web3 wallet.

A week later, on July 9, Backpack launched a new achievement tracking platform aimed at boosting user engagement. Through this feature, users can earn achievements by trading, referring friends, hitting volume milestones, maintaining streaks, and more. It is now available on the web, with mobile support coming soon.

Backpack Season 2 Launch Faces Early Hurdles

However, the launch of Season 2 was not without turbulence. Just hours after going live, Backpack experienced a major service disruption. Within two hours, the team was forced to temporarily disable deposits and withdrawals while rolling back a recent update. Trading and core platform functions remained unaffected, and full operations were restored in under 24 hours.

In a detailed post-mortem shared in the Backpack Discord channel, Ferrante explained the root causes. The first issue stemmed from a third-party provider responsible for connecting Backpack to multiple blockchains. Due to surging user activity and record-high deposit volumes, the provider was unable to handle the load, causing a temporary pause in deposits and withdrawals. Although disruptive, this was not the root cause. The team has since implemented scaling solutions to prevent future overloads.

The more critical issue involved a state inconsistency among validator nodes. A code update meant to adjust spot market permissions was mistakenly deployed to only one node. As a result, a transaction was accepted on that node but rejected on others, triggering network-wide desynchronization.

The problem was detected around 2:00 UTC. While a live fix was initially considered, the team concluded that synchronizing all nodes in real time would take over 24 hours, which was not acceptable. Instead, they initiated maintenance, rolled back the updated node, and reprocessed all user transactions to restore consistency.

The rollback resolved the issue. While some users noticed changes to their balances or positions, the team clarified these were deterministic, based on the same inputs processed under the unified code.

On that day, a total of 5,000 users participated in trading. Approximately 500 users made profits, while another 500 incurred losses due to the platform error. Backpack stated that users who suffered losses would be fully compensated. Those who profited during the incident will retain their gains, and all users who traded during the affected period will receive double reward points as compensation.

A CEX with DEX DNA

Speaking in the context of the recent incident and the exchange’s underlying architecture, Ferrante offered a broader perspective on Backpack’s design philosophy.

“The line between CEX and DEX becomes very blurry," Ferrante stated. "The reason we call ourselves a CEX is because we take compliance seriously. It's the role we're trying to play in the exchange landscape, offering the ability to bridge traditional finance into the on chain economy, which requires not only extremely rigorous engineering, but also following the rules and regulations in the countries where we operate.”

A key architectural feature of the platform is its ability to evolve from a centralized exchange (CEX) to a decentralized exchange (DEX), enabled by its blockchain-inspired infrastructure. Backpack is built as a private, permissioned blockchain focused on performance, transparency, and verifiability. It supports a custom ledger that runs on top of wallets for each supported native chain, allowing real-time definition of user balances.

To maintain consistency, each transaction, whether an order, transfer, or liquidation, is signed and processed through a matching engine. The system functions like a private blockchain and was developed entirely in-house.

Wallet security is reinforced through multi-party computation and cold storage. Even in the event of a node compromise, live wallets remain secure. The exchange ledger is also kept separate from wallet balances, ensuring user funds remain safe. Its deterministic architecture and validator-based structure support accurate, real-time balance tracking and promote transparency across the platform.

Commenting on the system’s integrity, Ferrante added, “One of the super powers of this setup is that we can have traditional ‘validators’ for the entirety of the exchange ledger,” Ferrante said. “This will be something no other CEX has ever done before in history and in my view should be the future of exchanges.”

Inside Backpack: The Strategy Behind Its Rapid User and Volume Growth

Backpack integrates a wallet, trading platform, and the Mad Lads community to form a complete Web3 ecosystem, designed to support a seamless end-to-end user experience.

• Backpack Wallet functions as the entry point to Web3, supporting multiple chains and platforms. Its xNFT integration offers added flexibility and functionality.

• Backpack Exchange features tools such as cross-margin trading and auto-lending, aimed at enhancing capital efficiency.

• Mad Lads connects users to the ecosystem through identity, community, and engagement. Holders can access exclusive features and rewards across the wallet and exchange. The community contributes to organic growth through active content creation and social engagement.

Backpack’s product design emphasizes functionality and efficiency. Its exchange infrastructure supports auto-lending, real-time PnL settlement, and a tiered liquidation system to maintain platform stability. The absence of in-house market making is intended to promote transparency.

This approach is reflected in lending market activity, where users provide assets to earn yield or borrow assets to support their trading strategies. As of the latest data, Solana (SOL) offers the highest Lend APY on the platform at 8.17%, with 654.8K SOL lent (valued at $100.2 million) and 289.4K SOL borrowed (valued at $44.3 million), reflecting a utilization rate of 44.20%.

On July 8, a notable shift occurred in SOL perpetual funding rates on Backpack. The contracts recorded an extreme negative funding rate ranging from -168% to -175% APR, meaning short positions were paying a substantial premium to long positions. This unusual condition presented arbitrage opportunities, as pointed out by Ferrante and community traders. Common strategies included borrowing and selling SOL on the spot market while going long on perpetuals, or going long on Backpack while hedging with short positions on other exchanges.

The platform has also placed an early focus on regulatory compliance. With several team members having legal experience at FTX, Backpack brings relevant expertise to navigating international regulations. It has secured licenses in multiple jurisdictions and aims to operate in regions covering 95% of global GDP by 2025. In April 2025, Backpack officially completed its acquisition of FTX EU. Since then, former FTX EU customers have been able to claim their Euro funds through Backpack EU. Additionally, its fiat on/off ramp provides a compliant bridge to traditional finance, supporting potential future integrations with banks and financial institutions.

Backpack’s Position in the Exchange Landscape

As the lines between centralized and decentralized platforms continue to blur, Backpack occupies a unique middle ground. Compared to DEXs, Backpack holds an advantage through its compliance with regulatory frameworks, offering stronger institutional accessibility. In contrast to well-established CEXs that have already proven themselves in the market, Backpack is still in its early stages but shows significant potential for growth. Its strong performance and reception in just the first week of Season 2 highlight that momentum. As a rather new entrant, it continues to develop its capabilities and refine its role within the broader ecosystem, supported by strong engagement with its global community. The team remains closely connected with users, including those in the Chinese market, led by a CEO who is actively involved, communicative, and grounded in day-to-day interactions.