Sep 14, 2026 · 46 min
Onchain options challenge crypto’s perp-first market
Crypto is Ready for Onchain Options | Nick Forster, CEO of Derive
Defined-risk instruments could make crypto markets more resilient while giving DeFi new infrastructure for structured and consumer-facing products.
- 1Crypto options lagged because they require deeper liquidity, specialized participants, and more sophisticated market infrastructure than perpetuals.
- 2Perpetuals simplify short-term trading, while options offer defined risk, precise exposure, and protection from liquidation and contagion.
- 3Derive’s architecture combines off-chain matching with on-chain margin and settlement to make options more transparent and composable.
Don't miss
Nick Forster’s comparison of an Ethereum call with a perpetual shows how options can preserve leverage while defining the trader’s downside.
The brief
Nick Forster explains why crypto options remain far smaller than perpetuals: they need diverse traders, institutional yield seekers, hedgers, and better market-making infrastructure.
The 10/10 crash sharpened the case for defined-risk instruments. Compared with perpetuals, options can provide leverage and precise exposure without the same liquidation and contagion risks.
Derive pairs off-chain Rust order books and RFQ systems with on-chain margin clearing and settlement, allowing faster execution without giving up verifiable risk and solvency state.
Its planned V3 upgrade aims to make the protocol easier to integrate, more flexible across collateral and markets, and more composable across DeFi.
The larger bet is that options become embedded in structured products, neobanks, and automated yield strategies, expanding crypto finance beyond speculative trading.
What was said on this episode
28 statements · 21 positive · 2 negative · 1 mixed · 4 neutral
Options mature later than other financial-market verticals.
“Options are always the last vertical to mature.”
Listen at 0:52
Crypto options market share will continue growing over the next couple years.
“I expect options to continue. They've started to really grow as a market share in crypto. I expect that to really... you know, kick on over the next couple of years.”
Listen at 2:08
On-chain options technology now meets institutional trader requirements.
“The tech is finally good enough on that front.”
Listen at 5:14
The October 10 crash sharply increased interest in crypto options.
“There was a step change on October 10 last year, the 10-10 crash.”
Listen at 6:25
Perpetual contracts expose traders to path-dependent outcomes.
“perps are very path dependent”
Listen at 6:41
The Ethereum call spread would pay about $20 million if ETH reaches $7,000 by March.
“If ETH goes to 7K by March, that cold spread will pay out about $20 million”
Listen at 10:03
Perpetuals cannot replicate the example Ethereum call-spread payoff.
“You just can't express that view in any way, shape or form using the perps.”
Listen at 11:06
Options can provide better short-term speculation than perpetuals.
“you can still speculate better on the short term with options too”
Listen at 13:13
Options and perpetuals serve complementary rather than conflicting roles.
“They're completely complementary.”
Listen at 14:48
Perpetuals are simple instruments suited to price discovery and short-dated speculation.
“perps are, yeah, like more of a blunt instrument that's simple to use. You have a leveraged slider that good for price discovery and short dated speculation.”
Listen at 15:07
Options support more varied financial payoffs than perpetuals.
“Options are much more like a Swiss army knife.”
Listen at 15:13
Perpetual markets will become very large over the long run.
“I am very bullish on perps in the long run.”
Listen at 18:12
Crypto options represent approximately 3–4% of perpetual-market size.
“We're like 3% or 4% of the perp market”
Listen at 22:15
Crypto options could grow roughly 30–40 times to match perpetual-market scale.
“So that's like 30 or 40x to go to equalize to where we are.”
Listen at 22:22
Options exchanges have stronger network effects than perpetual exchanges.
“there are stronger network effects around options exchanges”
Listen at 25:48
Deribit controls approximately 70–75% of the crypto-options market.
“Deribit, I think, is still like 70, 75% of the market.”
Listen at 28:05
Derive became the globally most liquid venue for Hyperliquid options.
“we became the most liquid venue globally for it”
Listen at 29:04
On-chain options provide self-custody and real-time verification of margin and risk state.
“it is self-custodial. You can verify the state of the risk engine and the margin in real time.”
Listen at 30:38
On-chain options encode margin, liquidation, and settlement rules in smart contracts.
“all the rules are written in smart contracts”
Listen at 31:09
Derive’s current risk and settlement system has performed well through nearly three years of production.
“It's been in production now, this version, for almost three years. We've seen some pretty crazy market conditions with it. And yet, like, you know, we're always very kind of monitoring the risk parameters, you know, the system itself. But it's worked very well in practice.”
Listen at 35:38
Derive V3 will become the most integratable and composable exchange protocol.
“we think this is going to be the most integratable exchange and protocol and composable protocol in existence”
Listen at 36:20
Greater liquidity in options markets generally reduces volatility.
“when our options markets become liquid, volatility actually generally comes down”
Listen at 38:54
Options will become mandatory offerings for many crypto exchanges.
“I do think options will become a mandatory offering for a lot of the exchanges.”
Listen at 39:34
Many exchanges will white-label or integrate external options infrastructure.
“I would expect to see a lot of white labeling, a lot of integrations.”
Listen at 39:56
Options will increasingly be embedded in trading products and neobank offerings.
“we're going to see a lot of options as a back ended into both like just a trading experience, but also... You know, you can imagine options, our options integrated into like a neobank offering”
Listen at 40:12
Democratized, transparent, lower-fee options products will form a large market.
“We think democratizing them, bringing them out in the open, making them transparent, reducing the fees, making all of that more competitive is going to be a huge market”
Listen at 40:45
Large options volume can increase underlying-asset prices, but does not necessarily do so.
“It can be. It's not necessarily.”
Listen at 42:43
Large options activity can reduce spreads, improve execution, and lower volatility over time.
“It does reduce spreads, trading execution quality, reduces volatility in the market over time”
Listen at 43:47
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.