Could Derive V3 Be "The Lighter" of Onchain Options on Ethereum? | DeFi Frontier

For options, you have these big institutions that have systems that work in a very specific way. They're not going to change their systems to onboard to a new venue, except, in our case with the HYPE markets, that was enough for a good chunk of people to make that leap and put in that work. But what you really need is to fit into their system so it's seamless to onboard.

That's what this architecture allows for. It collapses all of the integration work that used to be almost pages and pages of documentation into a half-page guide in our docs, with almost nothing custom. It should work out of the box with most systems. Anyone who's integrated with Ethereum will be able to onboard to V3 with a few lines of code.

Today's show features Nick Forster. Nick, thank you for joining us again. How are you doing?

Doing well, thanks. Thanks for having me back on.

This is an episode of our subseries called DeFi Frontier. We're going to talk all about Derive V3. We saw a tweet on July 20 that mentioned “our biggest upgrade ever,” and it says V3 is coming. We did a deep dive with you previously on V2, and we understand that even though crypto's been in a bear market, Derive has had a pretty incredible last 12 months.

There's been a ton of growth in terms of all the different metrics to measure the success of Derive onchain. We want to better understand what else you're building that will allow options to become the instrumental DeFi primitive that it should be, given how important options are in financial markets. It feels like onchain options have always lagged behind in terms of the importance they have in traditional markets.

1. Derive's building blocks for onchain options

We're excited to learn more. Truthfully, neither of us has much expertise in options. It'll probably come through in the questions we ask, but hopefully you can hold our hand here. Why don't you talk to us first about the original vision for Derive, where you are today, and maybe where the shortcomings in V2 are—or where the opportunities are to build that much more into V3 in DeFi?

The original vision for Derive was to take what I think is the most programmable financial instrument—options—and put it in the most programmable environment for capital. That creates the ability to generate any payoff structure for yield generation, hedging, or speculation. It's this idea of the infinite payoff factory: a factory that anyone can turn up to and manufacture a very specific financial outcome for themselves, or package it up and sell it on to other end users.

This was the idea that we've been building toward for the better part of 5 years. The original struggle that we had in 2021, 2022, and 2023 was that we had an AMM, and we could do this on a very small scale, but the size was limited by the lack of capital efficiency and flexibility with the AMM.

The current version that's live, V2, has done a lot better. We've done a good job, I think, of optimizing for the experience of coming on, having an idea of what options you want to trade, and clicking to trade. You might come in and buy some calls or sell some puts, deposit collateral, and interact with an order book or an RFQ. It's self-custodial. All of those things are great.

The problem is that it was built with 2023 technology. This idea of an appchain and a custom rollup meant that we had to make all of these optimizations as a team to deliver this great click-trading experience. Things like bridging, abstracting bridging away from users, but that kind of forces you into a very rigid onboarding architecture, which isn't very flexible for institutions or other people who want to do things their own way or slightly differently.

We got to this stage where we managed to scale V2 off the back of those click traders. We've managed to really grow our metrics, as you mentioned, in the last year and finally start to punch through all this liquidity. At the same time, as this liquidity has been built up, the ability to distribute the liquidity and really realize that endgame vision of any payoff on any asset, 24/7, distributed to users where they are so that they can understand it in simpler terms, is what we're about to realize with V3.

The upgrade that we're about to undertake will make us, I think, the most integrable derivatives exchange in the world. It will make it seamless for other people, teams, and builders to come and manufacture complicated, differentiated, valuable financial products off the back of Derive's unified risk engine, which has high-performance, institutional-grade capital efficiency and portfolio margin across options, perpetuals, and spot, as well as a borrow-lend market.

Out of those building blocks, you can create all these wonderful financial products. The current problem is that no one's been able to actually put those building blocks together. There's been a technical blocker around the difficulty of doing that, and that blocker is now effectively going to shrink to zero with V3.

2. How big is the TAM for onchain options?

As well as a whole slew of other smaller upgrades, conceptually, it will dramatically increase the velocity for people to get onboarded and start building with Derive. I think that's really the big edge we have in the long run over traditional options.

We've been—I think we even talked about this on the last podcast you were on with us—waiting for onchain options to happen and really excel. I'm sure nobody has thought about it as long as you have, Nick, but for some reason I always assumed it was more of an appetite issue. I didn't think of it as a technical blocker, but I think what you've been outlining is, no, we think there's a massive market here, but it's just been a technical problem.

It sounds like V3 is the culmination of all those efforts to finally make it happen.

I do think so.

Your current product-market fit lately, along with what we've been seeing with Hyperliquid and just this derivatives demand, makes me think the timing is right. I want you to remind listeners how big this market is. We were talking offline before we went live here just about the structured-products market, which is completely underpinned by options. Just give us an idea of the scale of what that looks like offchain and the potential that we have onchain here.

I think in terms of offchain, it's enormous. The options market has been growing year on year really dramatically since about 2018 or 2019. Things really started to turn a corner in the U.S. For exchange-listed options alone, it's something like 15 billion contracts traded in 2025. It's enormous.

There are trading desks that you hear of now trading options that are 10–15 people, pulling in $3 billion a quarter in market-making revenue alone. That's for one desk, with 10–15 people, in one shop. The revenues flowing through options markets are enormous.

That is also primarily exchange-listed. There's a whole OTC, bilateral market that's a lot less easy to monitor as well. That exists not just for equities and equity-options trading, but for FX options and other things that tend to trade more internationally and more bilaterally.

We think that all of these markets are potential targets for onchain, which is 24/7 and global by nature, and also a lot less intermediated than some of the more established options markets, like the equity-options market. That structure doesn't port as well to something like FX as I think an onchain-native market would.

Then you have the whole structured-product side, which is, I think, something like high single-digit trillions of dollars of capital being posted against structured products that get issued.

3. What is Derive V3? A new ZK application

So, $8–9 trillion worth of assets that people are trading or writing structured products on and generating yield. That is a massive opportunity as well that I think we are well positioned to really start to go after over the next few years. It's not all going to happen in year 1, but it requires a sequence of steps that we are about to embark on to really try to ascend that ladder. I think we have the most bleeding-edge technical stack for options anywhere in the world. So now it's a game of trying to press that brand, press that advantage, and find the right institutional inroads and wedges into all of these markets over the next year or 2.

So I think this leads us into V3. We don't know anything about V3 other than that teaser post, so whatever you can share here today, we're excited to learn about. Architecturally, what is going to change in V3? We did get our hands on a very short description of the mission behind V3, and I believe your team described V3 as collapsing the exchange execution layer and settlement into a single ZK application. What problem are you looking to solve with V3, and how is this additive to all of the value that we get out of V2?

Yeah. I think it kind of alludes to what the problems were with V2: this idea that you had to onboard to a custom appchain, use a custom bridge, and use all of this architecture that we had to put in place to be state-of-the-art in 2023. I will say that the endgame we have even with V2, in terms of this unified portfolio margin, spot, options, and perps, is actually still an architecture that a few of the leading teams in crypto derivatives are trying to backsolve into now. We think V3 is when they get to our level of V2, we'll have V3 up and running. V3 is this endgame state where, yes, it uses the latest sort of zero-knowledge technology to make it so that when you onboard to Derive, there is zero customer bridging work.

That lack of friction and that ease of onboarding is pretty much the zero-to-one that moves the needle for 95% of the most impactful traders in options. It's not the same as a perps DEX, where you can kind of click through a few things and most of the perp taker flow is either via an API or terminal integration, which is much easier to do for perps than it is for options, or it's by click traders. For options, you have these big institutions that have systems that work in a very specific way, and they're not going to go and change their systems to onboard to a new venue. In our case, with the HYPE markets, that was enough for a good chunk of people to make that leap and put in that work.

But what you really need is to fit into their system so it's seamless to onboard. That's what this architecture allows for. It collapses all of the integration work that used to be almost pages and pages of documentation into a half-page guide on our docs, and almost nothing custom should be needed. It should work out of the box with most systems. Anyone who's integrated with Ethereum will be able to onboard to V3 with a few lines of code.

I think that is the kind of velocity that we really need behind our risk engine. We'll have all of this ease of integration combined with an upgraded risk engine that will allow for the full spectrum of options trading, as well as options-type strategies and structures, to be put in place. We're not just going to have the current version, which has portfolio margin for Bitcoin, where you can only post Bitcoin and US dollar collateral in that account. You can post correlated collateral in that account too. Also, having Bitcoin and ETH portfolio margin is going to be a first anywhere onchain, certainly, and possibly beat out some of the centralized competitors in terms of the sophistication of that risk engine.

It also means that we'll have much better, state-of-the-art security from day 0, really, on the V3 launch, because we have a lot more control over the end-to-end system in terms of how we design it, and we'll certainly reduce the number of dependencies on third-party service providers, bridging providers, and any of that stuff. It kind of collapses into 1 stack where you can rate-limit the rate at which collateral enters and exits the system too, and really provide our users with that control themselves. They can limit how much of their collateral is coming in and out of the system at any point in time based on their preferences.

I know that's high-level. We're trying to keep it a little bit high-level for now because, for a variety of reasons, we know there's more competition coming into the options space now. People are starting to sense the size of the opportunity and realize that they're potentially a little bit behind. But the main message I want to get out there is that we are now open for business and open for integrations.

If you want to offer users a differentiated trading product, whether it's speculation with more leverage through options or yield generation—if you're a neobank and you're staring down the barrel of 1% a year in Bitcoin, and that's not cutting it for your LPs—we can help you ideate and create these sorts of structures, which are the endgame for yield in traditional finance. It's why those industries are so big, because so much of the free yield that existed in crypto over the last 5 years is now gone. We're here to help people find that yield in a way that is sustainable at institutional scale.

4. Where will V3 launch and why Ethereum seems most likely

There's so much in there that I think we need to dive into a bit more. One of the things you mentioned was this ease of integration and how, with a few lines of code, people will be able to integrate. I think that's massively important, and I want to go back to that a bit more too. But first, you're building something new here, and I don't know, as of right now, where you're going to build this. I'm sure you and your team are going through all the trade-offs: will this be another rollup model, an L1, or ETH mainnet?

I'm just reading the tea leaves here, but I would imagine a team like Base, Robinhood, Arbitrum, or even Kraken with Ink would be looking at your current product-market fit, the success you've had in the bear market, and be like, “Huh, we could really use the main onchain options team on our chain.” So maybe speak to just whether you're being courted by some of these bigger teams. How does that weigh into your decisions of, “Hey, where's the best technical fit?” Because I feel like so many founders must go through this. You're kind of being pulled in a few different directions, I'd imagine. So, yeah, just speak to us about how you think through those as a founder.

Yeah. We're in communication with a good chunk of those teams that you mentioned. I think it's an interesting conversation and decision point for us, as well as for a lot of these other teams. My number 1 priority in making a decision like this is what is best for the user. I know that sounds obvious. I know most founders are going to say that. But at the same time, I think you can clearly see that there are a lot of teams that will say this but don't actually make that decision.

Why? Because they will take a deal where they can earn incentives to deploy on a separate chain, and that fractures liquidity. You can see it even from some of the early results. I'm sure Robinhood Chain is going to be very successful. They're doing really well already. But there are early results from some of the DeFi teams that have fractured liquidity where the experience is just much worse and the volumes are much lower.

You can't judge off the first month of performance. But the way I look at it is, if we're bringing our stack to a specific chain, we are not splintering liquidity. I think that fundamentally makes a worse experience, and it makes it orders of magnitude harder to compete with the people you need to compete with who are living offchain. They're certainly not deploying on different chains, because there's 1 database that they use. So if you really want to compete at the biggest level, I think you need to be in 1 place and find the liquidity in that place.

I very much take a strong view on that relative to most teams. It's why you haven't seen Derive deploy, except maybe once when we did it just to test with an AMM, which was very different back in 2022. But since then, we really haven't deployed in multiple venues, because we just found that it's not worth fracturing the liquidity when that is ultimately your core product.

For me, what I look at when I think about where this next version is going to live is how we can build the best product, reach the most users, and also service them and meet them where they are. For a lot of reasons, I guess the last consideration is longer-term strategy—what makes sense for us strategically. Do we outsource our core dependency at the very bottom of the stack to a team that may or may not compete with us down the line? I think you can strike off some of those names in terms of the desirability of deploying on those chains based on that criterion alone.

You don't want to deploy where, if you get big enough, you're probably going to get your head chopped off. I think that's a fundamentally limiting proposition, and it makes me wary of some of the bigger exchange-based chains. I think that is what Ethereum, candidly, really has going for it: they're, in a way, so non-visible on the deployer side. It's not a bug; it's a feature.

Even when I look at Solana, I'm like, they're just picking winners. You see them talking about a specific perp that goes through their order book, which to me is just trying to make too many decisions for builders. The hands-off approach for Ethereum is: I know for sure they're not going to compete with me. I know for sure they're not going to pick up another project in 6 months and start shilling it.

I know for sure they're not going to try to rob me of my core economics, or really try to have an opinion on how we should design and bring our order book on-chain versus off-chain. That credible neutrality is something that is impossible to replicate, I would say, at this point. I really do think that network effect is so entrenched.

I don't have a view on how that translates into the ETH price long term. But I would certainly say that it would take a really compelling reason for us not to deploy this on L1. The final decision has not been made yet, for a variety of reasons. One is because it can be left open; we want to have as much information as possible before making that decision.

But it really is the default, in the best way, for Ethereum. I think it's just impossible to replicate at this point in 2026, and I don't see that changing for a long time.

5. Could Derive V3 be a zkRollup like Lighter?

For anyone listening who's trying to wrap their minds around what it would look like if Derive were to ultimately end up on Ethereum L1, are we talking about a similar setup to the ZK rollup that Lighter uses? At the end of the day, are we banking on the fact that there's an escape hatch back to Ethereum mainnet?

When you talk about the security that you would look to with Ethereum—the benefit for users—is that part of the decision-making process? I have no idea what else you guys are considering. Are you talking to teams like Etherealize, the new ETH Labs team, or Ethereum Institutional? I'm curious if those sorts of advocates are helping to weigh in on a decision like this.

Yes, I think you can conceive of it in that similar vein. There are strong cryptographic guarantees around self-custody that will exist in Derive V3. We already have some in V2, but obviously it's a lot less efficient with optimistic rollups versus zero-knowledge rollups.

I will say that this is one example where on-chain really does shine against the traditional system. I think a lot of people assume that if something is regulated and even has US licenses—like FCMs, DCMs, and DCOs—it can't go belly-up or go bust because of bad collateral management or margin management. That's just not true.

It has happened 15–20 times over the last 20 years, as recently as 2011 with MF Global, and obviously there was a spate of them around 2008. You can verify the collateral in the system on-chain with these sorts of ZK rollups in real time. It's mathematically provable that the collateral exists and that people are being margined according to the same set of rules. That's a massive advantage for transparency and safety over the traditional system.

A lot of people just haven't seen it. Obviously, the traditional system is incredibly good at what it does, but I speak for myself, as well as a lot of people in crypto, when I say that we have not seen a 2008-style event really unfold in markets during our careers. These sorts of risks actually do come up a lot over time, and these guarantees are a huge value-add and upgrade to how markets work globally.

And to your second point, with the newer Ethereum institutional-style outfits that have emerged over the last couple months, we are in communications with Ethereum Institutional, like, early. It's just early communications. I think both of those organizations are still kind of finding their feet. I would strongly encourage them to be aggressive and really hands-on with trying to push the ecosystem. And that's true for a lot of the big ETH players top to bottom who control ETH, who vote ETH, who have a say, who have a business interest in Ethereum working. The only way Ethereum works and has any value whatsoever is if it wins the application layer in DeFi. I do think taking a more aggressive, hands-on approach and doing deals with teams and being commercial with teams—we're certainly not asking for charity. We think we can offer a great product in ways to enhance their business as well. Not just the new institutional outfits, but also the DATs and whoever is involved in Ethereum.

The other thing is, you only really get a sense of the product if you try. If you're trying to sell Ethereum to institutions, you're an Ethereum institution. You should be using apps on Ethereum. How else are you going to be able to convince them, or at least give feedback to the apps themselves on what they need to change to be institutionally ready? I do think there is still a little bit of this error of, Hey, we're just going to be a conduit between Ethereum and these institutions who are actually going to do something, but I don't think that role is possible to do unless you actually have some hands-on experience yourself. So that would be my two cents and thoughts for those new outfits coming up, but we are certainly open to chat to them and very supportive of their efforts.

6. What is the advantage of onchain options over TradFi?

Nick, whenever we get this transition from a TradFi asset coming on-chain, I think there's always this natural question for people: Why do stocks need to be on-chain? People might think the same about why options need to be on-chain.

You gave a quote for a piece I wrote maybe 6 months ago, but it stuck with me. One of the structural advantages that you outlined when I asked you this same question was that it takes many months or years to integrate a TradFi options offering into a front end. With DeFi, it can be as simple as an API.

This gets back to what we were talking about earlier. It's composability again, and it's ease of integration. To me, that's the crux of why this can win. I would love for you to expand on that point, because I think it's pretty important for the proliferation of on-chain options. Why are they competitive, and maybe even better, than the traditional format?

I think this is a very interesting and somewhat nuanced point. The first thing to note is that there's the technical lift, which is a lot more difficult when you introduce some of the traditional components around moving money without using blockchain, interfacing with and hooking into an Interactive Brokers API, and dealing with the permissions and legal aspects of all of that. It's very difficult.

I would also like to get into the legal side of it. There's a concept, certainly in the US—and I think it exists in various other jurisdictions—around custody and intermediaries that hold your funds. You work with an FCM on the futures side or an introducing broker on the brokerage side in the US. They take your funds, post them to the exchange or clearinghouse, and execute on your behalf.

You have this intermediate step where you lose custody, and there's a whole set of regulations and difficulties involved in managing the flow of money between those 3 different counterparties: the user, the introducing broker or FCM, and the end-game exchange.

I think this is an unresolved question to some extent in the CFTC's new US regulatory framework and whatnot. But I do think there are real structural advantages to self-custody within that framework, where you can remove the entire second step of having to give your funds to an intermediary.

First, it costs more money. Second, it introduces the risk of that intermediary misusing those funds as well. Again, that's been responsible for some of the blowouts we've seen 15–20 years ago.

Self-custody is a major advantage for these workflows because you can go directly to the exchange and directly to the clearinghouse. That's effectively how Hyperliquid works, as well as how Derive V3 works: you're interfacing with smart contracts. It's locking funds in your wallet according to a set of smart contracts and rules, which abstracts away the intermediary and provides built-in protections and transparency that a lot of the regulations try to achieve.

I think that in itself makes these integrations much simpler over a longer time frame than they would be in the traditional system.

And then you also have this question of, to your point, why do we need tokenized equities? What benefits are there? Yes, they are going to be 24/7 tradable in crypto. We're already seeing that. Yes, you can trade perps on them. That's kind of useful.

But that's about it. You can maybe borrow against them a little bit more easily in crypto as well, which is a value unlock, but for most protocols and most teams, that's the bulk of the benefits.

I do think Derive V3 is going to be extremely well positioned to add the most functionality possible to real-world assets that come onchain because, as I said, it's that infinite-payoff-factory idea. You can create structured products and yield products that you can present to users—not in terms of strikes, Greeks, and whatever, but in terms of, “You're giving up your upside on your Apple stock above $200, and you're earning 10% a year for doing so.”

7. New era of tokenized stocks and RWA markets

You're thinking in percentage terms and trade-offs and payoffs, and that is how most traders think. Having the ability for anybody who is skilled at crafting those desirable payoffs and translating them into language users understand—which there are massive analogous businesses in TradFi that exist on this front—is going to make these products so useful onchain in a way that simply cannot be replicated offchain. It also gives us a huge edge in terms of competing with other offerings onchain because we can do more with the collateral that we list than any other exchange.

Actually, Nick, this ties in really well to another somewhat recent tweet that I saw you put out in July. You said, “After 5 years of supporting crypto-native assets only, it feels really, really good to go live with gold markets via XAUt.” Maybe describe a little bit about the importance of this.

You go on to mention that it's going to be nice not to just be correlated entirely to crypto. If we're in a bear market, you're going to have—you know, this is the beginning, I guess, of other assets that you can have where you're not just at the mercy of how the crypto market is doing, because that's how Derive is going to be doing, too.

I love crypto. Don't get me wrong; I've been invested since 2016. But it does get a bit boring sometimes, particularly in certain markets where you're just sitting there with ETH and Bitcoin and they're not moving.

Intellectually as well, it's fun. But ultimately, crypto has a long tail of assets that just aren't suitable for options because they come and go every 2 or 3 weeks. People are interested in trading them for 2 weeks, and then they go away. You can't build an options market with 2 weeks of interest or intrigue in an asset.

For some of the longer-term assets, they're just too small in market cap to really support a big options market, too. You're stuck in this situation where you've got just a few tokens, and HYPE is the most recent one that's really started to fit the bill where you can build an active, vibrant, dynamic options market around that asset.

In the traditional world, there are so many more assets worth multiple billions of dollars, with long-term holders, that fit all that criteria. We can now build unique, new, and interesting products on top of those.

From my perspective as someone who's been building in the space, we were always set up to build fintech. My thesis was that all of finance was coming onchain. It's taken longer than I would have liked, but it's happening now in real time, and we have a chance to shape what that world looks like when we see the merger of TradFi and DeFi.

It's a nicer feeling knowing that your total addressable market is the entire financial market. That doesn't mean we can be unfocused and undisciplined and try to be one of those teams that takes 1% of a massive market and therefore succeeds. That's not how it works. You have to be better, raise your standards, and work harder to make inroads into those markets. It's not going to be trivial, but at the same time, it's more intellectually interesting and more stimulating than just having crypto.

It's nice not having your entire flow and revenue source be dependent entirely on one asset class that's super volatile and has existential moments a little more often than some of the other asset classes out there. But crypto is not unique. That's true of every other high-growth industry that goes through these boom-bust cycles, from friends who are founders in robotics and even AI to some extent.

8. Onchain options still in the early innings

Nick, we hear a lot of talk about tokenized stocks coming onchain. There's been a lot of excitement with the Robinhood Chain, the Ethereum L2 of Robinhood, going live. If you recognize that your thesis is that all of finance is going to come onchain, we're definitely behind that thesis as well.

If you recognize that's the future, I think you start to think about what else will benefit from more of these tokenized assets coming onchain, specifically something like stocks. Then we start to think about onchain options. What do you think people are underestimating here in terms of the opportunity for onchain options?

You just alluded to this idea that if someone holds Apple stock but maybe they want to earn 10% per year, they could sell some covered calls or use some other strategy related to options. I'm imagining that with more trade volume onchain and tokenized stocks, it just creates a richer DeFi economy for Derive V3 to plug into.

We're seeing the foundation of trading activity coming onchain from something like Robinhood stock-trading activity, so I can't imagine that we won't have these rich opportunities for onchain options to plug in.

I think a lot of people are unimaginative when they think about what the onchain landscape for finance looks like. A lot of people are stuck in this paradigm—certainly VCs and many participants in the ecosystem—of thinking, “People like to gamble with perps, they crowd out options, and people want to click-trade perps. That means there's nothing else really to do. We're done here. We have lending, cool; we have spot; we have perps. That's all we're ever going to be—a giant casino online, maybe with some lending going on as well.”

I think that is really dull, unimaginative, and boring. If I thought that's how crypto would end up, I never would have gotten started in the first place. I still don't believe that's true.

For us, as you said, it's a rich opportunity. Users want payoffs. They have trade ideas. They think, “HYPE is going to $80 in a week.” They think, “There's no way it goes above $100.” Or, “I'm worried that HYPE is going to drop,” or “Google is going to drop because of the AI trades unwinding,” or whatever. Maybe I need to hedge my position because I own a ton of the index and I don't want to sell it for tax reasons.

There are lots of different things you can do. People just aren't thinking in options terms, and there are 2 tailwinds here. Often, the best way to express those views—not always, but often—is through options because you can be more specific. When you're more specific, you get a better hedge, more yield, or more upside in terms of a speculative, leveraged trade.

One tailwind is simply being onchain. As I've said already a few times, you can build, and integrators can build, experiences that do that translation for you. Those integrators can make a lot of money making that translation because you can take the building blocks of options and perps and turn them into something like, “You earn 8% yield if Bitcoin finishes in this range at this time.”

We want to be the venue where you can come and build that business, and we're very commercially friendly and ready to help people build those businesses. At the same time, you have that side of things with respect to the total addressable market.

There's also this big tailwind of AI on 2 fronts. The first is AI simply helping users do this translation for themselves and being able to come and execute the trades themselves. If you have a trading opinion, I would encourage you to ask an AI agent—not financial advice—but just say, “How would you frame this in options? What does my payoff look like versus putting this on via a perp, and what are the trade-offs here?”

There are trade-offs. You might find you want to take a perp position after doing that research. But certainly, there are other options out there that aren't path-dependent, that don't have scam-wick liquidations, or might make you more money depending on how your thesis plays out in the market. So there's the ease of understanding, which I think is just being tailwinded by AI.

At the same time, there's also this whole agentic finance economy that's beginning to develop. These things don't just spring up in 1 day and take over. In the same way that the tokenization of everything is going to take time, the trend and the sustainability of that march are undeniable.

These things are going to take time, and it's just about setting up all of these pieces—all the unsexy stuff, the integrations. That's kind of what V3 is about. It's not going to be this huge, flashy new product launch that you're going to click on day 1 and be like, “Oh shit, it's completely different.”

It's all of the small details that add up, and all these rails that we're constructing that can take advantage of these tailwinds to move faster. Over time, as those users onboard, those trades go through, and the liquidity builds, you look up one day and realize, “Hey, we've actually built an incredible network here.” And it's really, really difficult to unsee.

Yeah, we had Paul from Morpho on just recently to talk about Morpho Midnight. Just a reminder that they're building infrastructure, and it's very neutral, and their whole goal is to have everyone plug into them. That's the way I'm starting to see Derive.

I think before I thought about it as an exchange where people would come to, but I think the vision for V3 is much more like infrastructure: all these different people can plug into it, whether it's trading desks, AI agents, maybe fintechs, or maybe people that want to build vaults on top of V3, sort of what we were talking about.

9. V2 settled billions, V3 is about trillions

I want to wrap on something I saw in your V3 announcement. It said, “V2 proved DeFi options could settle billions. V3 is about proving they can settle trillions.” That's obviously an ambitious statement. Can you paint that path—what needs to happen, what needs to fall in place—for that future to be realized?

Yeah. I can't stress enough how gone the days are of being able to say, “We're on-chain, so come trade on us,” and everyone's going to come trade on us. That's a view that I think, whether or not consciously, a lot of teams, including us for a little while, were guilty of.

We think the stack that we're building is the best stack for derivatives anywhere, on- or off-chain, in the world, and we need to prove that by acquiring the liquidity and distribution around it that I think it deserves. It means that you can't have excuses that we've rested on, or that a lot of teams in DeFi can sort of rest on, for the last 5 years.

Things like smart-contract hacks. We need to make sure that security is as tight as it possibly can be, and that we offer institutions the sort of solutions that we have going live in pilot mode at the moment, where funds and institutions that want to trade options in size can use qualified custody and have that used as collateral on Derive to come and trade options.

Those are the kinds of unlocks that don't make big, sexy headlines, but it's all that plumbing that suddenly flips the switch for an institution to go, “Hey, I'm now looking at Derive, and they have great liquidity for Bitcoin, ETH, and HYPE. Maybe I want to put on a big trade. I can do so with very limited smart-contract hack risk, and I can do so at the best fees in the market. Also, if there's another token that I want to trade, they can list it quickly and are responsive.”

Those are the kinds of things that add up over time. It doesn't happen in a day. It takes 6 months, 12 months, relentlessness, BD work, relationship building, backend integrations, and infrastructure work. All of that has been work that we've been doing over the last 12 months that's starting to come to fruition, and it's all these little pieces that add up over time.

Then you layer on top of that the tokenized stocks, the quality of assets, the RWAs that are coming on, and the ability to build new, innovative products that can be instantly distributed around the world 24/7 and tailored to local markets and local preferences. I think those are massive, massive opportunities, both for us to grow volume and for other people to come in, build businesses, and make a lot of money doing so as well.

From the perspective of reaching trillions, I think it's higher-quality assets, gold-standard security and onboarding, and also looking at the regulatory frameworks and how we can better fit into those frameworks. We can take the best of what we've built in our stack and how it works and fit it into existing regimes, which do a good job of protecting and promoting markets that are stable and secure over time.

I think there is a lot of fit between what we're trying to do and what we do with verifiable, transparent, real-time margin and collateral, and the fairness that ZK stacks like the ones that V3 is based on provide out of the box, along with a lot of the goals that regulators around the world are trying to achieve.

10. Closing

We think we can build a global marketplace for options and derivatives in that way that's extremely integrable and extremely easy to use for all of the assets in the world, and do so in a way that gives institutions really no choice but to use us down the line. But it's a series of steps to get there, and launching V3 in the next month, month and a half, is going to be the very first step.

I think this podcast did its job. I am once again asking myself, why am I not using on-chain options? I talk all day and night about how DeFi is so powerful for being this programmable finance, and I feel like one of the most programmable building blocks is on-chain options.

So, hopefully this is a call to action for more folks to dig in. I think more of us should be using them in portfolio construction. If anything, we should be looking to the types of builders that are ultimately going to build easier products for us to use, powered by on-chain options on Derive.

If you want to learn more about Derive, we would recommend going to derive.xyz. If you follow Derive on Twitter, it's derivexyz. That's the handle. And then Nick's handle is Nick Forester, F-O-R-S-T. We'll put that into the show notes so you can easily find it.

Nick, thanks so much for coming on and again giving us an early look at what we might expect in V3. We would love to have you back once it's actually live. Again, we're really excited for what you guys are building.

I love the story of Derive, just toiling through building on-chain options for the past 5 years. It's a remarkable story of being ahead of the times in the market and then willing your vision to work here. We see it—we definitely see it—that on-chain options are going to be very, very important to the tens of trillions of value that should be coming on-chain here.

But Nick, any final word before we go, and keep up the great work?

No, thank you guys, and thank you for having me on again. I would just say the last call will be: we have testnet live. So if you're a builder who is interested in building a differentiated product, getting ahead of the next vertical—not just perps and prediction markets, but also structured products, yield-generating products, or an options trading experience—reach out to us. It will be so easy to integrate and add it into your existing product. I promise. And we will do everything to make sure that we support early launch partners. So, please get in touch.