A Brief History of Crypto Options

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Deribit was the first options platform I used, and they recently got acquired by Coinbase in 2025 for about $2.9 billion. This shows how valuable and important a mature options market is in crypto and I thought it would be a great time to revisit the history of crypto options and see where we are at.

The First Option: Olive Presses

The concept of an option (a contract granting the right, but not the obligation, to engage in a future transaction) is not a modern invention.

One of the earliest recorded instances dates back to ancient Greece (1100–146 BC), where a philosopher called Thales of Miletus, used his knowledge of meteorology (a science that forecast weathers, not a spell to cast meteors unfortunately) to predict a bountiful olive harvest.

He paid a small deposit to obtain the exclusive rights to use the local olive presses. When the harvest materialized as predicted, demand for presses soared, and Thales rented out his presses at a significant profit. He had, in essence, purchased call options on the olive presses, demonstrating the timeless human desire to speculate on future events and manage risk.

Fast forward to today we now have options for crypto. Options are incredibly important tool, they allow users to know the implied volatility and thus the market's skew (what the market thinks), and can be used for hedging, speculation, and income generation.

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor. - Jesse Livermore, American Stock Trader

Over the past several years, the landscape of crypto options has evolved from centralized exchanges to onchain. Let's explore some of them.

Genesis of Crypto Options: Centralized Players

The first entry into crypto options mostly copied traditional finance. CEXes led the way because onchain infrastructure just wasn't ready plus it was way easier to manage complicated risk systems in a centralized manner.

• BitMEX: Founded in 2014, most folks don't know but BitMEX actually offered an options-like product. They called it "limited loss" futures around its launch. These were designed to act a bit like options, mainly by capping the potential downside risk for traders while still allowing leveraged bets on Bitcoin's price. Traders could set their maximum loss upfront, similar to paying a premium for an option. These Bitcoin-settled futures had an option-like payoff but weren't true options (e.g., no choice of strike prices). While innovative, these limited loss futures faded as BitMEX launched the revolutionary XBTUSD inverse perpetual swap in 2016, where you used BTC as margin to long or short BTC and it became hugely popular due to its simplicity and high leverage, overshadowing earlier products.
• Deribit (The options king which just got acquired by coinbase): Launched in 2016, Deribit became the clear leader in crypto options. By focusing only on derivatives (futures and options) and building a strong and fast platform, Deribit attracted big institutional traders and serious retail speculation. They offered European-style options with many strike prices and expiry dates, becoming the main place for price discovery and liquidity in crypto options.
• Other major centralized exchanges also recognized the growing demand for crypto options. Giants like Binance and Bybit progressively built out their own options trading platforms. While often starting with simpler, European-style cash-settled options for major cryptocurrencies like Bitcoin and Ethereum, they aimed to provide their large existing user bases with more comprehensive trading tools, further solidifying the role of CEXs in the crypto derivatives landscape.

The DeFi Awakening: Onchain Experiments

With the growth of DeFi, innovators tried to bring options onto the blockchain. They wanted them to be transparent, open to everyone, and able to work with other DeFi tools.

• Ribbon Finance (Making Option Vaults Popular): Launched in 2021, they made participating in options strategies easier for DeFi users via DeFi Option Vaults (DOVs). These vaults automatically ran strategies like selling covered calls or cash-secured on exchanges like Deribit. Users could deposit their crypto and earn money from option sales, without needing to understand how options were priced or traded. This made things simpler and introduced many people to earning with options. The strategy was not dynamic so when the markets shifted, option vaults could do very poorly (huge negative returns).
• The Rapid Growth of Onchain Options Protocols: After DOVs and the general DeFi excitement, many onchain options platforms appeared. These included:
  • Hegic (2020): One of the first attempts at onchain options, offering American-style options using liquidity pools. It had issues with pricing and how efficiently it used money.
  • Premia (2020): Aimed to offer options trading where users traded against a pool, with better pricing and money use.
  • Dopex (2021): Introduced new ideas like Single Staking Option Vaults (SSOVs) and interest rate options, focusing on using money well and giving rebates to option sellers.
  • Lyra (2021): Launched on Ethereum Layer 2 (Optimism) to lower gas fees. It used an AMM made just for options, trying to offer better prices and less difference between buying and selling prices. Has been rebranded to Derive (DRV) in 2024.
  • Cega (2022): Put options together into products similar to fixed-coupon notes and offered a wide variety of markets, great for users looking for specific risk and reward. Was acquired by an undisclosed "leading platform" in November 2024.
  • JonesDAO (2022): Built on Dopex, offering vaults that managed positions in Dopex's SSOVs, making strategy management even simpler.

Even with new designs and dedicated teams, none of these onchain options platforms got a large, lasting share of the market or trading volume compared to centralized places like Deribit. They got some early attention but struggled to get widely used.

Recent Innovations in Crypto Options

Here are just some innovations I saw in crypto options that I think are cool that can help get more onchain adoption.

• Paradex, a decentralized derivatives exchange, launched perpetual options, trying to mix the non-expiring nature of perpetuals with the clear risk profile of options, aiming for a more capital-efficient and user-friendly options experience that mimic perpetuals.
• Rysk Finance (Reimagining Covered Calls): Recognizing that past onchain covered call strategies (like many DOVs) often failed due to flawed design (e.g., front-running, rigid vaults), Rysk Finance launched its "V12" in March 2025. Instead of another vault or options exchange, Rysk presented itself as a new financial primitive for liquid, tradable covered calls. It aims to make this traditionally complex strategy simple, allowing users to pick a target price and receive upfront yield in USDC without needing deep options knowledge. Key features include customizable risk, no pooled vaults for greater flexibility, and an RFQ (Request for Quote) system designed to ensure good execution and deep liquidity, preventing front-running. Rysk's goal is to make covered calls scalable and accessible for various assets (ETH, BTC, LSTs, etc.), providing a sustainable yield source previously elusive in DeFi.

• Cega Finance (Exotic Structured Products): Moving beyond standard call and put options, Cega, launched in 2022, focused on bringing more complex exotic options and structured financial products directly onchain. Exotic options have non-standard features (e.g., barrier options that activate or deactivate if the underlying hits a certain price, or basket options based on multiple assets). Cega packaged these into fixed-coupon-note-like products, allowing users to access specific, often higher-yield, risk-reward profiles that weren't previously available in a decentralized and transparent manner. This innovation demonstrated DeFi's potential to not just replicate traditional finance products but to also create novel, composable structured products tailored to various market views and risk appetites, expanding the toolkit for DeFi-native yield generation and hedging. I haven't seen another options vault platform that offer this much variety yet.

Onchain Options: Why Adoption is Still Hard

The limited success of onchain options platforms, even with big centralized deals like Coinbase buying Deribit, is due to several linked reasons:

1. Complicated: Options are not easy for most regular users to understand. Pricing (things like "Greeks" and implied volatility), choosing strategies, and managing risk and just navigating the UI are much harder than spot trading or even perpetual futures. It is also complicated for the builders, building a fully onchain options platform is far more complicated than building a centralized version.
2. Inefficient Liquidity: Getting enough buyers and sellers for many different option prices and end dates onchain is very hard. AMM models, though new, often don't use money very well for options. This means wider price spreads and more price changes when trading, compared to CEX order books. Liquidity providers (LPs) face complex risks.
3. Gas Costs & Slowness: While L2s help, trading and managing options strategies onchain can still be expensive and slower than on CEXs. This is especially true for active market makers and high-frequency traders who are key for liquidity.
4. Need for Reliable Price Data & Security: Accurate and secure real-time price data (especially for implied volatility) is vital for options. Relying on oracles (data feeds) adds another place where things could go wrong or be manipulated.
5. Mismatch in Target Audience: The main users of options are big institutional traders and experienced speculators, and usually care most about liquidity and speed, and are used to trusting custodial exchanges. Retail DeFi users often prefer simpler ways to earn yield or speculate, aka not options.

Building the Future: How can Onchain Options Succeed?

For onchain options to really take off and find their place next to strong centralized players, several problems need to be solved:

1. More Efficient Liquidity: We need more new ideas in AMM design for options (like Lyra's method, adjusting for volatility changes, better ways to share risk for LPs) or mixed models (onchain settlement, offchain order books). Paradex's perpetual options are one try at making things simpler and better.
2. More Capacity & Lower Costs: Highly performant chains, like Monad, will be key to cut transaction costs and speed things up. This would make onchain market making practical.
3. Better User Experience & Simpler Tools: Making interfaces easier to use and offering more pre-packaged products (like advanced DOVs or easy-to-use strategy builders) can make it easier for people to start. Onchain needs to be clearly better in some way (like access, unique product types, transparency) to draw users from efficient CEXs.
4. Strong Data Feed Solutions: Reliable, fast, and cheat-proof oracles for underlying asset prices and implied volatility data are essential.
5. Increasing Composability: Better connections with other DeFi protocols (lending, margin, structured products) could create new uses and attract more users. Onchain options might also succeed by focusing on less common assets or new types of options not offered by CEXs.
6. Education & Awareness: A lot of work is needed to teach potential users about the good and bad sides of options trading, and how onchain versions can offer unique benefits (like transparency, holding your own crypto, and open innovation for new option types).

Parting Words

I trade options daily on tradfi (via IBKR), but till date there still hasn't been a crypto option protocol that i use regularly, primarily because of mobile UIUX (deribit has a horrendous mobile UIUX, maybe it's better in 2025).

While onchain options haven't reached the size of their centralized versions yet, the groundwork has been laid (performant chains, composability, reliable data feeds). As technology gets better, transaction costs go down, and people understand more, decentralized options platforms could offer a more open, easy-to-access, and profitable alternative.

The challenge is to figure out liquidity efficiency, user distribution, and user experience. The good news is doing it on Monad is half the battle won, you get far better performance, and will likely have a huge user base of active participants willing to try it out.

Disclaimer: This content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. Nothing contained in this article should be construed as a recommendation to buy, sell, or hold any financial asset. Always do your own research and consult with a licensed financial advisor before making investment decisions.