Crypto’s Next 30X Market Is About to Explode! | Nick Forster

Nick Forster (0:00)

Derive is the largest on-chain options exchange. I think we do like 92% of the volume on-chain.

Ran (0:05)

How big are options in Trad 5 versus Crypto options?

Nick Forster (0:09)

Futures and options volumes are similar, like options are actually slightly bigger. In Crypto, it's like 3% of the market. So putting them on-chain, making them liquid, opens up this sort of box for developers, people to come build all sorts of different products on top.

Ran (0:22)

What is V3? What's so exciting about it?

Nick Forster (0:25)

V3, you can think of it as like a stripe for derivatives. It's like an API call.

Anybody can use.

Ran (0:31)

And what does that represent in terms of the totals? Deribit plus the exchanges have some small options placed.

Nick Forster (0:36)

Yeah, so we've gone from about like a year ago, 0.1% of Deribit's volume to 4 or 5 in the last 30 days.

Ran (0:43)

That is insane. And if I were to speak to you in 12 months and your forecasts go according to plan, what percentage of Deribit's volume do you think you'll be doing?

Nick Forster (0:51)

I think we could match them.

Ran (0:53)

In a year?

Nick Forster (0:53)

I think we're going to be fastest to list on all of the new markets.

Ran (0:57)

So let's look at the derived token. What is this token? What does this token do?

Nick Forster (1:01)

We've never raised funding until an equity entity. It's always been the one instrument in the ecosystem.

Ran (1:06)

So all the value accrues to token.

Nick Forster (1:08)

That's right.

Ran (1:08)

Let's talk about the big question of the cycle. So tokens that have succeeded the cycle are tokens that have found a way to return revenue back to the users. What's the token model? So you guys obviously charge fees on every action that happens on the chain. What happens to those fees?

Nick Forster (1:22)

At the moment.

Ran (1:26)

Nick, this is one of the interviews that I've been waiting for, like for a long time. I've been anticipating it for a long time. I'm very excited about what you guys are doing, but maybe for the audience that don't know who you guys are, maybe just tell us a little bit about who Derive is and what you guys are building.

Nick Forster (1:38)

Yeah. Derive is the largest on-chain options exchange. I think we do like 92 percent of the volume on-chain. We've been at it for almost six years, kind of waiting for this moment in the market where people are starting to recognize the potential for on-chain options.

Ran (1:52)

So, I mean, when you talk about options, I know in TradFi, options are like the biggest instrument by far. Yeah. And when you look at crypto, like options are like relatively small. I think if you think about options players, Derive is really the only centralized player that's really made an impact. Like first of all, how big are options in TradFi versus crypto options? I wanted to get a scale for how much the upside is.

Nick Forster (2:16)

Yeah. I mean, in the very short term, at the moment, in TradFi, futures and options volumes are similar. Options are actually slightly bigger. In crypto, it's like 3% of the market. So that's just to normalize with the ratio in TradFi, like a 30 or 40X in the size of the market.

Ran (2:34)

That's before crypto actually starts growing.

Nick Forster (2:35)

Yes.

Ran (2:36)

With all these real world assets coming online and whatever else. Wow.

Nick Forster (2:39)

Yeah, that's right.

Ran (2:40)

And so in crypto, why do you think that we've only had one really successful player, which is Deribit? I mean, if you think about the options landscape here, really there has been one really successful player.

Nick Forster (2:51)

Yeah, that's right. I mean, I think what Deribit did really well is they were the go-to options marketplace for ETH and Bitcoin, and specifically Bitcoin with the Bitcoin miners. And those are the only two viable options markets in crypto for a long time, because to have a viable options market, you need sophisticated long-term holders of these assets, like Bitcoin and ETH, with some structural hedging needs. So Bitcoin miners buying puts, big Bitcoin funds and holders selling options, writing options for yield in dollar terms. We saw a lot of those flows, and they were the two real interesting assets for years. And the lock-in effects and the network effects for liquidity and options is orders of magnitude stronger in my opinion than even futures or spot markets or lending markets for a variety of reasons we can get into later. But there wasn't enough of a differentiator for any new exchange coming in trying to wedge users away from Deribit until higher quality assets started coming online, like hyperliquid, the hype token options market. It's been a big driver of new users and volume for us, as well as Zcash and a few of the other new higher quality crypto assets with bigger holders as the industry is kind of converging on a fewer select higher quality tokens.