The Biggest Crypto Market Nobody Is Paying Attention To

**Nick Forster** (0:00)
We're kind of one of the only teams that's equipped to build the sort of product that we're building, and the market is just so much bigger. It's more subtle, it's gonna take more time, but that's exactly why we're putting so much time into it.

**John Gill** (0:11)
On-chain products have been taking off in a big way recently, but why are options finally seeing adoption? How big is the market for these, and what do investors need to know about all of this? Hello and welcome to The Milk Road Show, the podcast that knows that nothing says out of the money like selling your whole portfolio to Ken Griffin before your wedding day.
I'm your host, John Gill, and today is Tuesday, August 4th, and today we are joined by Nick Forster. Nick is the co-founder and CEO of Derive, formerly Lyra, and the leading on-chain crypto options platform that he has been building since 2021 Nick is a former equity options trader from Susquehanna with a mathematics degree who is working hard to bring traditional market making expertise to decentralized finance. Nick is going to share a ton of alpha with us today about on-chain derivatives products and options. So if that all sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. A reminder that our podcast today is free and that would not be possible without our wonderful partners at Securitize, the regulated rails for tokenization. So keep an ear out for more information about them later on in the show. But for now, welcome to The Milk Road Show. Nick Forster, how are you, sir?

**Nick Forster** (1:13)
Hey John, doing well. Thanks so much for having me on.

**John Gill** (1:17)
I'm really excited to talk to you. I want to start with the basics. Derive has been around for a long time, but what is Derive and what are the products you all offer? Just lay out the basics for our audience so everybody's on the same page.

**Nick Forster** (1:27)
Yeah, Derive is the largest on-chain options exchange.
So the way it works, we support trading for options, perpetual spot and a borrow land market all within the same risk engine. The predominant markets on Derive right now, particularly for options are Bitcoin, Ethereum and hype. We also have markets listed for some of the other altcoins like Solana and Zcash, and recently just listed Gold or XAUT markets for the first time. So we've been at it, as you mentioned in the intro, like five years. We have an architecture that settles and has strong guarantees on cryptographic guarantees on chain, as well as some off-chain components for order matching. So that's it from top to bottom.

**John Gill** (2:14)
Okay. I saw on Twitter, you described this in a different way. So I wanted to ask you about this. You said, we are building the infinite payoff factory, any payoff, any asset 24-7. I thought that was a really sizzling way to describe this. But what do you all mean by that? And how do you differentiate yourselves from other players, like a Deribbit, who are also offering options? Talk to me about that.
Yeah.

**Nick Forster** (2:37)
So I think the reason we're on chain in the first place, and the reason we got started in 2021, we wanted to be the largest liquidity source for options on chain. The reason is, you can create any payoff for yield generation, hedging or speculation out of a different combination of calls and puts. They're kind of like these money legos, like in the purest sense, you can recombine, repackage and build at an institutional scale for any of those use cases. So you put those money legos in a programmable environment like the blockchain, it just makes a ton of sense to expand the time of the whole product and really create new and interesting and efficient products and business lines on top of it. And that's where the Infinite Power Factory comes from. Because they are, in some ways, payoff complete as a financial primitive, and within this risk engine, you can build any of those products. That's what we're trying to do, is manufacture those payoffs in a way that no one else can. You can't do it with the perpstacks, you can't do it with just a borrowed land market. It requires this level of granularity and specificity and some of the other properties that our options have to really get to that vision.
And so we're getting closer than we've ever been to realizing that vision. I think it's all kind of coming together now.

**John Gill** (3:54)
Why do you think it is that you have such a dominant market share of the on-chain options space? Because is it just because most people are not trading options? Is it because most people are doing this on, you know, centralized competitors like Coinbase and Deribbit? What's giving you the dominance here and how are you defending that market share?