How Onchain Options Could Replace the Basis Trade as Crypto's Yield Strategy

In this episode of Unchained, host Laura Shin explores the future of on-chain derivatives, focusing on how options could replace the traditional basis trade as crypto's primary yield strategy. Nick Forster, CEO of Derive (formerly Lyra), and LTR, venture investor at Cosmos, discuss the evolution of crypto derivatives from early SPAR trading to the rise of perpetuals on platforms like Hyperliquid. They highlight Deribit's pivotal role in establishing a mature, transparent options market with real-time order books and volatility surfaces, which has now reached $2.7 billion in open interest. The conversation turns to why on-chain options are poised for growth: increasing institutional demand for self-custody, reduced counterparty risk, and the need for sustainable yield in a post-basis-trade era. Nick argues that options offer unmatched flexibility and are ideal for AI agents and structured products, while LTR emphasizes the importance of education and institutional adoption through real-world assets (RWAs) and tokenized stocks. Both guests agree that the next milestones include RWA options going live, major TradFi firms disclosing on-chain activity, and regulatory clarity. The episode concludes with a vision of a programmable, composable financial system where options enable tailored strategies across assets, time horizons, and use cases. Key takeaways include: 1) The basis trade is declining, creating a vacuum for sustainable yield strategies like options; 2) On-chain options offer superior security, transparency, and composability compared to centralized exchanges; 3) AI agents are uniquely suited to design complex options strategies that humans struggle with; 4) Institutional adoption will accelerate with qualified custody solutions and integrations with custodians; 5) The long tail of assets, especially RWAs, will unlock new use cases; 6) Success hinges on building integrations with third-party platforms rather than direct-to-consumer marketing; 7) Regulatory clarity and public disclosures from TradFi firms will be critical for mainstream acceptance; 8) Derive’s architecture, combining off-chain order books with on-chain settlement, enables scalability and trustlessness.