Navigating DeFi Derivatives

With DeFi forecasted to gross US$231.2B in revenue by 2030, decentralized derivatives are poised to become a significant and fundamentally important part of DeFi's future, playing a crucial role in its growth and development.

Crypto-native perpetual futures overwhelmingly dominate the market, contributing over 90% to DeFi derivatives TVL. Meanwhile, despite being relatively nascent, the options sector possesses substantial growth potential, as highlighted by the recent emergence of innovative protocols.

dYdX and GMX remain household names in the perpetual futures landscape, collectively capturing an impressive 64.9% of the trading volume. The forthcoming releases of dYdX V4 and GMX V2 signify key milestones for both protocols this year.

This year also marked a notable shift in the perpetuals market, with emerging protocols such as Kwenta, MUX, and Level Finance gaining traction. Each showcases remarkable growth, especially Kwenta, which captured 11.6% of market share.

In the options market, Lyra stands out with over US$580M in YTD trading activity, while Dopex and Opyn maintain a notable presence. Ribbon Finance's Aevo has gained traction, representing an interesting development in the space.

A key distinction among competing protocols lies in their underlying models, such as CLOB- or AMM-based. The emergence of concentrated liquidity pools is paving the way for a new generation of protocols in the options market.

Layer-2s have emerged as the networks of choice for DeFi derivatives. Arbitrum has grown to top the charts by hosting 42 derivatives protocols, while Optimism and zkSync also demonstrate promising growth.

To compete effectively, decentralized derivatives must prioritize continuous innovation in infrastructure and UI/UX design for more familiar trading experiences.

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