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Hello readers,
As we’ve covered in recent research, Perps have become the main character of onchain derivatives.
Hyperliquid took the market by storm by proving that crypto-native traders want high-performance, self-custodial leverage.
But perps are only one side of the derivatives market.
In traditional finance, options are one of the most important markets in the world, enabling traders, funds, market makers, corporations, and institutions to hedge risk, express views on volatility, generate yield, and structure complex payoffs.
As onchain derivatives mature, the market is starting to move beyond pure directional leverage (perps). More sophisticated users want volatility exposure. Structured yield. Hedging tools. And institutional-grade liquidity.
Of course, if capital markets are truly moving onchain (as we believe they are), onchain options should eventually matter just as much as perps.
And if you squint a little, you can start to see the green shoots for why that’s the case. Why it’s taken so long. And why now might be the right time for investors to be paying attention.
That’s why we’re covering Derive, the leading onchain options platform, in this week’s edition of The Watch List.
*Please note that you can click the data citation note under each chart to access the supporting dashboard for this week’s report.
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Derive started as Lyra Finance (August of ‘21), an Optimism-based DeFi options protocol. The “pivot” came in August of ‘24, with a rebrand and product expansion designed to double down and reflect a broader derivatives stack: options, perps, structured products, and collateralized yield.
Nick Forster is the Co-Founder, CEO, and “public face” of Derive. Prior to founding Lyra/Derive, Nick spent 3+ years as an equity options trader at Susquehanna International Group.
In total, Derive Labs has 21 associated members per LinkedIn.
$3.3m seed round in July of ‘21, co-led by Framework Ventures and ParaFi Capital, with GSR among the participating investors.
$3m strategic round in November of ‘22, led by Framework Ventures and GSR.
The team added additional capital in December of ‘24 via a partnership with Ethena, and again in February ‘26 via Variant Fund, which made a significant (undisclosed) investment in DRV in the open market and via purchases from the Foundation.
Perpetuals have become the dominant crypto derivatives product (primarily serving retail) due to their simplicity, high leverage, and deep liquidity. But perps have structural constraints — liquidation risk, limited payoff design, and funding rate uncertainty.
Options are a fundamentally different product. Where perps fall short, options fill the gap via liquidation-free leverage and precise volatility exposure — making options a superior instrument for long-term positioning and structured risk transfer.
For an interesting debate on onchain perps vs options, check out the thread here.
Options are naturally the last derivative to gain adoption in new markets. It starts with a new asset (crypto). As the asset becomes popular with traders and investors, institutions enter the market. Institutions need yield. Volatility (via options) creates opportunities to earn yield, making the asset more attractive to trade with leverage and speculate.
It took roughly 5 years for onchain perps to gain adoption after Bitmex launched the product in 2016. We’re roughly 5 years out from Deribit’s launch (the CEX options leader).
Today, Deribit (acquired by Coinbase) has an 81% market share amongst centralized exchanges.
Data: The Block
The power law here comes from years of building liquidity network effects via sticky institutional customers.
Based on user preferences for onchain trading and self-custody (as evidenced by Hyperliquid’s success), we think a similar network effect can form onchain.
Today, Derive has the key infrastructure (momentum with market makers such as FalconX, retail users, APIs, assets, expiries, and programmability for 3rd-party apps) that has given it an early lead as the leading onchain provider.
v3 is expected to launch in September, giving Derive full control over the entire stack, making integrations smoother while further opening the platform to novel 3rd-party apps.
Options on RWAs.
Two-sided lending.
More integrations with market makers + 3rd parties building “on top” of the Derive protocol infrastructure.
Data: The Block
Centralized providers have generated roughly $75b in monthly volume (BTC only) in 2026. This is about 2% of the perp market today.
Derive is generating roughly $1.3b in options volume/month (1.7% of total CEX options volume).
The setup here looks similar to the Perps market roughly five years ago. Today, onchain perps account for nearly 10% of total volumes, and Hyperliquid has a $17b market cap.
We think a similar outcome could be at play for the options market. Derive currently has roughly 90% of all onchain options volumes + what we believe is the key infrastructure and momentum to scale into the next market expansion.
Over the last 90 days, the platform has generated a total of $1.01m in protocol fees, up 58% q/q and 174% y/y.
Options trading accounted for 51.3% of the total, with perps at 42.2%.
Over the last 90 days, the platform has generated $6.1b in volume, up 47% q/q and 326% y/y.
63% of volumes came from onchain options, with 37% from perps.
After peaking at over $2.1b in early May, Open Interest is down 65% over the last 30 days (currently at $737m)
Over the last 90 days, Derive has averaged 235 active traders/day, up 34% q/q, but down 1.6% y/y.
33% of the DRV circulating supply is currently staked, down 8% q/q and 17% y/y.
100,000 DRV ($9,600) is currently emitted to the staking pool each week (subject to change per governance).
The team incentivizes holders to stake their DRV for the following utility: 1) governance rights/voting, 2) weekly staking rewards, 3) platform discounts.
Through year-end, 37.7m DRV tokens will unlock across the ecosystem, foundation, and original team tokens ($3.5m).
An additional 28.8 million tokens could unlock for the team over this period as well, but only if the 30-day TWAP market cap of DRV is> $150m after vesting is fulfilled (the market cap is currently $68.9m).
Investors should note that existing Lyra holders were diluted 33% via the minting of an additional 500 million DRV in September of last year. 46% was allocated to the team (4-year vesting, with transfers gated unless the $150m market cap level is hit over 30-day TWAP).
The remaining tokens are for “strategic partnerships” with market makers and institutions, which are needed to build the liquidity network effects for long-term success. 25% of these tokens were unlocked immediately, with the remaining 202.5m DRV unlocking on a 3-year vesting schedule.
The protocol currently repurchases DRV off the open market with 35% of protocol revenues.
Since the program's inception, the team has repurchased over 25 million DRV ($2.3m at the current DRV price of $0.095).
Deribit (acquired by Coinbase) is currently the dominant centralized crypto-options venue.
Derive seeks to be the leading high-performance, self-custodial/onchain alternative (similar to Hyperliquid vs Binance for Perps). It has a roughly 90% market share today. But we should expect a flood of competition to chase the opportunity if Derive’s momentum continues.
The key question is whether that competition can overcome the “early lead” that Derive has established over the last 5 years.
From our perspective, this requires:
Building the infrastructure and battle testing it (for a very complex product).
Onboarding assets, expiries, users, market makers, vaults, RFQ systems, and institutions.
Building APIs and making the infrastructure “programmable” for 3rd party apps.
Key partnerships with DeFi protocols such as Ethena (seeking to integrate USDe with basis trading, options, futures, structured products, and vaults), and wallets and portfolio mgmt solutions such as Fireblocks.
It’s our view that the Derive team may have already established a significant moat in these areas (despite relatively low levels of active traders, trading volume, and open interest today).
DRV currently has a 365-day price-to-sales ratio of 39x.
The buyback yield over the last 365 days was 1.4%. Weekly buybacks began in January of last year and were recently increased to 35% of protocol revenues.
As we can see, the DRV token has traded independently of BTC during the 2026 bear market and is up 260% against BTC over the last year.
Team execution. Complexity of options + onchain risks related to smart contracts and leverage.
Demand for onchain options vs perps. Perps are the dominant product today. While we think there could be similar demand for options in the future, that future remains unknown.
Competition & user preferences. Deribit owns the market via centralized exchanges today. Will Derive be able to incentivize large players to move onchain to build the required liquidity network effect?
DRV is currently trading at $0.95, within our “fair value” range.
We like the team. The early traction (options & perps on the same platform). The integrations (market makers, Ethena, Fireblocks). The programmability and the ability for 3rd-party apps to build “on top” of Derive. The buybacks. And the valuation (small cap, despite what we think is an early moat).
Finally, the conviction and vision to double down on building the leading onchain options platform after five years of “chewing glass” says a lot to us.
We also believe that onchain options are a growth sector for the next cycle. And that the time to identify the (potential) winner of the category is now.
That’s why we’ve initiated a position in DRV.
If you’d like to access the portfolio to see the allocation and other holdings + receive alerts when we make changes, you can sign up for TDR Pro and get one month free here.
If you’re an existing Pro member and would like to lock in on the annual plan at a 20% discount ($16.67/month), you can do so here.
Nick Forster (Derive CEO) recent interview
Onchain Options, Why Now? by Elijah Fox of Variant Fund (invested in DRV in February of this year)
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.