Comprehensive Overview of the On-Chain Options Track: From Opyn to Rysk, Who Has Navigated DeFi’s Most Difficult Track?

Original Author: Castle Labs

Original Compilation: TechFlow

Introduction: Options have become the dominant derivatives product on global exchanges, with contract volume 4 times that of futures in 2024. The daily average premium trading volume of US options reached $36 billion. However, on-chain options were one of the most disastrous failures in the crypto world, with 11 protocols like Opyn, Hegic, and Ribbon falling one after another. Now, with improved infrastructure, growing institutional demand, and prediction markets educating users, on-chain options are finally being rebuilt from the ruins, with a 30-day notional trading volume of $1.44 billion. This ecosystem overview explains why this time might be different.

Options in Financial Markets

Most people don't realize that they have been trading options their entire lives.

If you've bought insurance, you paid a premium in exchange for a conditional payout in the future. That's a put option, as you are protecting yourself against a decline in the value of the insured asset. If you have a mortgage, you hold the right to refinance early. That's a call option, as you have the exclusive right (but not the obligation) to 'call' or cancel the current debt contract.

Options now far surpass futures in global exchange derivatives trading volumes. In 2024, option contract volume was over 4 times that of futures. In 2025, US listed options broke records for the sixth consecutive year, with approximately 15.2 billion contracts traded, equating to roughly $36 billion in premium trading daily.

At their peak, 0DTE (Zero Days to Expiration) options on SPX alone had a daily notional value exceeding $1 trillion, averaging 2.3 million contracts per day and accounting for 59% of the product's total trading volume in 2025. 0DTE options expire on the trading day they are bought; they are used to chase huge, quick returns from intraday stock volatility but also carry the risk of losing 100% of the investment rapidly.

In 2024, the National Stock Exchange of India (NSE) accounted for approximately 84% of global stock option contracts. However, in terms of value, total premiums paid by US option buyers were still about 4 times that of India. This suggests that the Indian retail public trades a large volume of very small contracts, while US participants trade fewer contracts, but larger and more expensive ones.

The appeal of options is also entering crypto products, although primarily from institutions for now.

CME, the largest regulated derivatives exchange in the US, now offers 24/7 crypto options. This is an unprecedented shift for a traditional exchange aiming to retain its user base, acknowledging the appeal of the 24/7 crypto market. Furthermore, in April, open interest in BlackRock's IBIT options surpassed that of BTC on Deribit, rising from $26.9 billion to $27.6 billion, even though Deribit launched over a decade ago.

Options are extremely flexible instruments that can be utilized in a wide range of applications:

Hedging: Using options as insurance policies against price exposure (buying puts to lock in a hard floor against downside loss, or buying calls to protect against missing a sudden rally).

Income: Selling options to earn a steady stream of cash premiums from the market. This is useful for direction-neutral users who can generate passive yield on their existing assets (covered calls) or get paid upfront while waiting to buy a dip (cash-secured puts).

Speculation: Expressing a view on price or volatility without directly purchasing the asset, whether based on direction, timing, or specific price movements (achievable through a range of option strategies).

Customized Strategies: Combining multiple options into structured products, often used by banks and asset managers to create yield products or downside protection notes.

The user profile is broad across financial markets. It ranges from institutional market makers hedging risk and banks packaging yield, to volatility funds trading market swings and retail investors speculating on cheap intraday 0DTE moves.

Early On-Chain Attempts

Given their prominent role in traditional markets, options were considered a product with natural product-market fit in the volatile on-chain crypto market. It turned out to be one of its most repeated failures.

This is by no means due to a lack of experimentation, as evidenced by the products launched in previous cycles:

Opyn tokenized vanilla options on Ethereum in 2019, but was hampered by weak liquidity, high collateral requirements, and high fees on the mainnet.

Hegic attempted a peer-to-pool model in 2020, simplifying the buyer experience, but the pooled LPs assumed risks that were difficult to hedge.

Ribbon, Friktion, and Dopex launched vaults in 2021, creating simple deposit-and-earn structured products for users seeking yield without managing positions, but volatility was sold into thin cyclical demand, compressing yields until premiums could no longer justify the risk.

Lyra, Premia, Pods, and Siren experimented with options AMMs, attempting to provide continuous liquidity across strike prices and expiries, but struggled with pricing and hedging. LPs inherited complex volatility and inventory risk while organic flow remained thin.

In 2022, Opyn launched Squeeth, a perpetual contract tracking squared ETH exposure, allowing users to gain convexity without managing periodic options. Launched with high fees on Ethereum, the product was difficult to explain and expensive to hold when funding rates were high.

The industry was repeatedly hindered, primarily limited by structural constraints. Weak market maker participation left trading venues with thin two-sided liquidity and pushed unhedgeable risks onto passive LPs. Capital inefficiency accompanied unreliable volatility surfaces, while user experience was stuck in no-man's land: too complex for retail, yet lacking the professional architecture required by institutions.

New Infrastructure and Improvements

Conditions have been continuously improving since these early attempts:

Rollups and Ethereum scaling have reduced gas fees, making complex on-chain operations cost-effective while improving execution and settlement.

CLOBs and RFQs have begun replacing AMM models, creating a more natural environment for professional traders and market makers, allowing them to quote specific strike prices and maturities, update prices in real-time, and control risk more effectively.

Simplified products target narrower audiences, as venues focus on launching specific products for specific users.

Prediction markets have made option-like payoffs accessible to mainstream retail through binary outcomes, normalizing conditional payoff trading.

Institutional demand for crypto options has been steadily growing, primarily through Deribit, and more recently through IBIT and CME.

On-chain conditions have also improved. More robust options markets are forming, with approximately $1.44 billion in 30-day notional volume. Premium trading volume hit all-time highs this year.

The resulting landscape looks vastly different from the first DeFi options cycle. Protocols are no longer simply trying to become an on-chain Deribit. The ecosystem involves many participants, ranging from institutional trading venues and ETF wrappers to on-chain vanilla options, new exotic options, and binary options operating through prediction markets.

In the following sections, we will delve into the current options landscape, focusing on what's happening on-chain.

The Crypto Options Ecosystem

The crypto options landscape is a set of adjacent markets with different settlement and payoff types. The map below divides the ecosystem along these two dimensions:

Settlement: On-chain vs. Off-chain

Payoff: Vanilla vs. Exotic

Off-chain vanilla options remain the clear leader, led by Deribit, IBIT, CME, and CEXs like Binance and OKX. On-chain vanilla trading venues are beginning to rebuild liquidity around CLOBs, RFQs, and more simplified, user-centric products, while settling trades on-chain.

More experimental products reside within on-chain exotic options, using options or option-like payoffs as building blocks rather than simple listed calls, puts, and spreads. Examples include:

Perpetual Options: Replacing fixed maturity with a streaming premium mechanism. This allows traders to hold a volatility position indefinitely without the friction and gas costs of manually rolling contracts.

AMM-Native Options: Creating option-like exposure from AMM liquidity positions rather than listed calls and puts. This enables advanced yield farmers to hedge against impermanent loss and allows long-tail asset speculators to buy calls and puts on newer, unlisted tokens.

Short-Term Touch Options: Providing instant fixed payouts exactly when an asset hits or breaks through a specific price target. This structure is heavily used by retail day traders, scalpers, and event-driven news traders chasing fast feedback loops during brief bursts of extreme intraday momentum.

The fourth quadrant – off-chain exotic options – is more opaque, dominated by OTC desks, market makers, and structured product providers rather than transparent public trading venues.

This report focuses on the on-chain side of the map, covering vanilla option trading venues and exotic option primitives, then moving to binary-like options markets, most commonly expressed as prediction markets.

On-Chain Vanilla Options Trading Venues

Recent on-chain vanilla options have made clear progress, not by changing the payoffs themselves, but by refining the surrounding infrastructure, product design, and user experience. These platforms have generally moved from passive LP pools to CLOBs and RFQs, making room for portfolio margin and yield-bearing collateral, while also launching more targeted yield products that simplify outcomes for users.

This section introduces several of the most prominent platforms currently operating.

Derive

Derive is a prime example of this architectural shift. It evolved from Lyra, an options AMM, into the CLOB-based platform we see today. Now running on its own OP Stack L2, Derive offers cross-margined options and futures through a professional order book interface. Derive does not attempt to hide the complexity of options from its users; therefore, its target users are professional traders, market makers, institutional players, and other sophisticated volatility traders. It looks much like a traditional options exchange, offering a range of assets, strike prices, and maturities that can be combined to create customized payoff structures.

Using an off-chain matching engine for instant execution while settling trades on-chain via the L2 allows institutional allocators to trade at speeds comparable to centralized exchanges (CEXs) like Deribit, while maintaining non-custodial ownership of their assets. Derive also offers a range of vault products. Unlike previous attempts, these utilize the underlying exchange to execute predefined option strategies, aiming to earn yield for depositors.

Derive currently accounts for the majority of on-chain options activity, with a 30-day notional value of $1.142 billion and premiums of $44.3 million, representing 79.2% and 87.2% of the respective category. It's important to note that Derive uses market maker incentives, OP incentives, DRV rewards, and rebate programs to support liquidity.

Despite the incentives for liquidity and participation, Derive still demonstrates the industry's evolution over the years. Mature options exchanges now operate on high-performance app chains, accessible to both institutions and market makers.

Rysk

Rysk takes a completely different approach from Derive. It is built around covered calls and cash-secured puts, using options as a prepaid yield product while keeping strike prices and maturities optional, unlike past options vaults. It routes user demand through an RFQ system where market makers quote on specific requests, buying the option flow and managing their own risk elsewhere. Rysk focuses on simplifying the complexity of options products, making them appealing to both retail and institutional investors through robust asset selection, well-defined outcomes, and a seamless user experience.

For the user, the product is simple: earn a yield on your assets while agreeing on a price level at which you are willing to sell or buy. This is reflected in the diverse real-world user base. They all want to earn yield, but in different ways and with different strategies. Treasuries, DAOs, and funds are long-term holders who already have a view on the price level at which they are willing to buy or sell an asset; even if they don't want to do so, they can still earn yield on further-away strikes. On the other hand, institutional users, like Hyperion, a Nasdaq-listed HYPE treasury company, run select vault strategies on Rysk's infrastructure. Their mandate is to accumulate HYPE, making the cash-secured put strategy a natural choice, earning them yield while placing orders at lower price levels.

In the past 30 days, Rysk generated $136.3 million in notional value and $1.94 million in premiums, accounting for 9.5% of the category's notional value. Rysk's monthly notional volume grew from $50 million in January to $182 million in May, maintaining levels above $175 million in March and April.

Unlike Derive, TVL is more relevant for Rysk because the product is based on collateralized option selling strategies. To earn premiums, you need to deposit the entire collateral, whereas in Derive, users can buy cheap options with low premiums to chase large payoffs.

Rysk has found a different product-market fit in the options space, repositioning options from a trading tool to a yield product based on selling volatility. As yields compress across the industry relative to lending, staking, and basis products, this has become highly competitive, as evidenced by its strong and sustained growth since launch.

Aevo

Like Derive, Aevo evolved from an early options product into an order book exchange. It evolved from Ribbon Finance, one of the earliest major DeFi options vault (DOV) products, before pivoting to a broader derivatives platform. Today, Aevo offers options alongside futures, pre-launch markets, OTC, and automated strategies on a custom L2, utilizing off-chain order matching and on-chain settlement. Orders are matched in microseconds via an off-chain central limit order book (CLOB) to replicate a CEX user experience, but user funds remain safely stored in on-chain smart contracts held on a custom OP Stack Ethereum L2 rollup.

Launched in 2023, Aevo experienced its most vibrant options activity during 2024. Since then, reported TVL and visible options activity have declined from early highs, although options premium trading volume has recently started to pick up again.

Aevo's main unique selling point is