What decentralized derivatives protocols have you used recently?
This is almost the awkward footnote of the DeFi derivatives track. To be frank, without Hyperliquid, which has James Wynn as the "best on-chain spokesperson", and the previously "holy grail" platforms dYdX and GMX that have rapidly declined almost to the point of termination over the past two years.
The reasons are nothing more than their long-term struggle with the identity of "CEX imitators": they copied the contract logic and leverage mechanisms of centralized platforms, but carried higher risk exposure and lower user experience, with obvious gaps with CEX in key dimensions such as liquidation mechanisms, matching efficiency, and trading depth, until Hyperliquid's emergence, relying on on-chain characteristics to reconstruct product form and user value, which barely preserved the possibility of further evolution for this track:
In the just-passed May, Hyperliquid's perpetual contract trading volume reached $248.295 billion, creating a historical monthly high, equivalent to 42% of Coinbase's spot trading volume during the same period, with protocol revenue also reaching $70.45 million, simultaneously refreshing records.
[Rest of the translation continues in the same professional and accurate manner, maintaining the specific translations for technical terms as instructed]However, existing protocols often forcibly require settlement in stablecoins, which compels users holding BTC, ETH, or even meme coins and other long-tail assets to either be unable to participate directly in trading or passively bear conversion losses (currently mainstream CEXs also use USDT/USDC as settlement currencies, with minimum trading limits), which is essentially contrary to the DeFi principle of "asset sovereignty and freedom".
Taking the decentralized coin-based options protocol Fufuture, which is currently exploring similar products, as an example, it allows users to directly use any on-chain token as margin to participate in BTC/ETH index options trading, aiming to eliminate the exchange step and activate the derivative value of dormant assets—for instance, users holding meme coins can hedge market volatility risks without liquidation, and even amplify returns through high leverage.
From the data perspective, as of May 2025, margin positions of meme coins like Shiba Inu (SHIB) and PEPE in Fufuture's supported margin trading collectively occupy a high proportion of the platform's active positions, proving users indeed have a strong demand for using non-stablecoin assets to participate in options hedging and speculation, and indirectly verifying that "coin-based" margin is indeed a significant market pain point.
The Extreme Leverage Approach of "Doomsday Options" Perpetualization
From another dimension, in recent years, people have increasingly favored high-payout short-term trades like doomsday options—since 2016, small-scale traders have been flocking into options, with 0 DTE option trades rising from 5% to 43% of total SPX option trading volume.
Source: moomoo.com
The "perpetualization" of doomsday options actually provides users with continuous opportunities to bet on high-payout "doomsday options".
After all, traditional options' "exercise date" settings severely mismatch most users' short-term trading habits, and frequent opening of "doomsday options" can be overwhelming. Still taking Fufuture's option product design logic as an example—canceling fixed expiration dates and instead adjusting position costs through dynamic funding rates.
This means users can hold put/call option positions indefinitely, only needing to pay a minimal daily funding fee (far lower than CEX perpetual contract financing rates), which is equivalent to users being able to indefinitely extend their holding period, transforming the high-payout characteristics of "doomsday options" into a sustainable strategy while avoiding passive losses caused by time decay (Theta).
An example might make this more intuitive: when a user opens a 24-hour BTC put option with USDT or other long-tail assets as margin, if BTC price continues to drop, their position can be held long-term to capture greater returns; if the judgment is wrong, the maximum loss is limited to the initial margin, without worrying about liquidation risks—meanwhile, at the 24-hour expiration, they can freely choose whether to extend.
This "limited loss + unlimited gain + time freedom" combination essentially transforms options into a "low-risk perpetual contract", significantly lowering retail investor entry barriers.
Overall, the deep value of the "coin-based perpetual options" paradigm shift is that when users discover any long-tail token in their wallet, even meme coins, can be directly converted into risk hedging tools, and when time dimension is no longer an enemy of returns, on-chain derivatives can truly break through the niche market and build an ecosystem that rivals CEXs.
From this perspective, the "new ticket" potential demonstrated by "coin-based perpetual options" might be one of the crucial weights that truly begins to tilt the on-chain and CEX competition balance.
Will On-chain Options Emerge with Noteworthy New Solutions?
However, options, especially on-chain options, are still in an extremely early stage of large-scale popularization and penetration.
Visibly, since the second half of 2023, new on-chain derivative players have been exploring novel business directions: whether Hyperliquid's native on-chain leverage or Fufuture's "coin-based perpetual options", decentralized derivative trading products are indeed brewing some seed variables of massive changes.
For these new-generation protocols, beyond achieving direct confrontation with CEXs in trading speed and cost dimensions, and releasing financial efficiency of Crypto on-chain long-tail assets including meme coins, more critically, based on on-chain architecture, they can maximize binding community, trading users, and protocol interests together—liquidity providers, trading users, and protocol architecture can form an "honor and loss shared" interest community network (using Fufuture's protocol architecture as an example):
- Liquidity providers obtain risk-stratified returns through dual-pool mechanism (private pool high returns + public pool low risk);
- Traders participate in high-leverage strategies with any assets, with clear loss limits;
- Protocol itself captures ecosystem value growth through governance tokens;
This is essentially a complete subversion of the traditional CEX "platform-user" exploitative relationship, when long-tail tokens in user wallets can directly become trading tools without relying on CEX, when trading fees and ecosystem value are distributed to ecosystem contributors through DAO, on-chain derivatives finally reveal the true face of DeFi—not just a trading venue, but a value redistribution network.
This is actually the "DeepSeek moment" the market has been anticipating for years—letting decentralized derivatives break through trading experience constraints, gradually introducing native on-chain leverage and maximizing capital efficiency to DeFi, no longer dependent on CEX as a necessary link, thereby potentially bringing a larger market leap, spawning more borderless innovations, and ushering in a new "DeFi summer".
Historical experience tells us that each narrative outbreak requires the resonance of "correct narrative + correct timing". Whoever can solve users' most painful asset efficiency problems at the right moment will grasp the scepter of on-chain derivatives.
Written at the End
I have always believed that decentralized derivative protocols are undoubtedly the "on-chain holy grail", not just a narrative pseudo-proposition.
From multiple dimensions, decentralized derivatives still have the potential to become one of the most scalable and income-potential tracks in the DeFi ecosystem, only that it must truly step out of the "centralized alternative" shadow and complete product form self-revolution through on-chain native structure and capital efficiency revolution.
The key issue is that for on-chain users, the value of decentralized derivatives lies not just in providing new trading tools, but in whether they can open a path of "asset frictionless flow—derivative hedging—compound growth".
From this perspective, when meme coin holders can directly participate in Crypto long-tail asset trading with their tokens, when multi-chain assets can become margin without cross-chain, the form of on-chain derivatives will truly be redefined, which is also the transition thinking of new-generation players like Hyperliquid and Fufuture.
Perhaps the ultimate goal of decentralized derivatives is not to replicate CEX, but to create new demands using the native advantages of chains (openness, composability, permissionless), and the market may have already taken a crucial step.
