Partner Spotlight: Derive

What is Derive?

Derive is an on-chain trading platform built to integrate options and perpetual futures under one protocol, enabling traders to hedge risk and manage exposure seamlessly. Unlike most DeFi venues that silo products' collateral, Derive’s architecture offers embedded perps with cross-margin support and provides institutional-grade execution within a single environment.

Beyond integration, Derive supports block RFQs for large and multi-leg trades, leverages a Rust-powered ultra-low-latency orderbook, and is composable with vaults, perps, and other DeFi primitives, extending its reach across the ecosystem.

The traction is already clear: as of September 2025, Derive processed over 2.86M trades, and facilitated $16.5B in cumulative trading volume, with $108.6M in TVL and $5.3M in fees generated.‍

Challenge:

Building Healthy Markets On-Chain

For on-chain options to become institutional-grade, two structural challenges must be solved:

Liquidity depth

Options can’t stand alone. Without delta-1 instruments like perps, traders must hedge their options exposure elsewhere, locking up more collateral and paying extra fees. The result: shallow books, wider spreads, and higher execution costs.

Derive’s orderbook, by contrast, is already deep enough to support multi-million-dollar trades with limited slippage,  a baseline for professional participation.

Capital efficiency

Fragmented margin systems silo collateral across every position, leaving traders with dead weight when they need to rebalance. Just as perps are essential for liquidity, cross-margining is essential for efficiency: pooling collateral across perps and options so strategies scale without drag.

The bottom line

Until both liquidity and collateral efficiency are solved together, on-chain options will remain niche. Derive is one of the few protocols tackling both head-on. 

Solution:

Integrated Perps + Cross-Margin

Embedded perpetuals
Traders can hedge options risk with perps inside the same protocol, without leaving the ecosystem. Real-time Greeks show delta exposure, and perps can be applied immediately to neutralize directional risk.

Explicit cross-margining

• All supported assets in a subaccount (USDC, WETH, WBTC, USDe, stETH) are pooled as collateral for both options and perps.
  
  
• Margin requirements are calculated across the full subaccount, enabling efficient hedging and capital reuse.
  
  
• Multiple subaccounts can be created to isolate strategies and risk.
  
  

This structure directly enables collateral pooling between perps and options, maximizing capital efficiency within the protocol.
Together, these mechanics deliver not just capital efficiency but also portfolio-level risk management, mirroring institutional standards while remaining native to DeFi.

Results & Impact

• Seamless Delta Management: Traders view and adjust exposures in real time at both position and subaccount levels.
  
  
• Capital Efficiency Through Cross-Margin: Shared collateral supports multiple strategies without siloed margin, unlocking healthier trading conditions.
  
  
• Liquidity & Execution: Deep perp and option pools support multi-million-dollar trades with limited slippage.
  
  
• Professional-Grade Strategies: Enables advanced plays like delta-neutral carry or volatility arbitrage within a single trading environment.
  
  

Crucially, Derive’s block RFQ system allows large or complex trades to clear on-chain with minimal footprint, while the low-latency Rust engine delivers execution speeds expected by professional desks.

Why It Matters

Derive is building an end-to-end trading infrastructure where options and perps co-exist and interact directly. This level of on-chain composability is rare in DeFi and establishes Derive as a complete market venue for both institutional and retail participants.

Our Partnership

At Kappa Lab, we’ve partnered with Derive since its inception, united by a shared vision of bringing institutional-grade infrastructure to on-chain trading. From day one, we have helped shape and accelerate Derive’s mission of building the most comprehensive on-chain options and trading suite.

We committed liquidity, helped design incentive structures, advised on coin positioning, and grew together in a win-win spirit. Today, we remain deeply invested and actively involved, committing technology, trading expertise, and capital resources toward what we believe is the right long-term vision for on-chain markets.

Derive’s transition from AMM to CLOB architecture resonates strongly with our ethos. At Kappa Lab, we specialise in delivering deep, reliable liquidity across order-book markets. By aligning with Derive’s move toward scalable, order-book-based trading, we help ensure the platform can meet the demands of institutional participants while remaining open and efficient for the broader market.

‍