Derive V3 is live

It's here.

V3 replaces Derive Chain with a zero knowledge exchange architecture designed to preserve fast execution while moving protocol verification and custody closer to Ethereum. It also gives Derive a more flexible foundation for launching markets, improving capital efficiency and supporting new trading products.

TL;DR

Fast trading, verified on Ethereum. We keep sub-millisecond order matching and use Ethereum to verify proofs that margin and settlement follow the protocol’s rules.
Simpler deposits. You can fund your account from your wallet or multisig through Ethereum contracts.
Less collateral for hedged portfolios. Eligible traders can combine ETH and BTC positions in one account, reducing margin requirements where positions offset each other’s risk.
More borrowing options. You can borrow ETH, WBTC and HYPE alongside USDC.
More room for new markets. We can separate higher-risk markets from core markets and roll out new listings in stages.
Easier vaults and team access. Builders can launch vaults without code. Trading firms can control what each bot or team member can do.

Why was V3 needed?

We built V2 around Derive Chain, an Ethereum rollup, to support an orderbook and portfolio margin. To give traders a gasless experience, we added smart contract wallets and services for bridging, gas sponsorship and deposits.

But as more brokers, custodians and vault builders integrated with Derive, they had to work through that infrastructure alongside the trading API. Our engineers had to maintain and coordinate changes across the exchange, rollup and supporting services.

We also needed more room for large options portfolios. To calculate margin, we assess positions across strikes and expiries under different price and volatility scenarios. As portfolios grow, we need to perform more calculations within the rollup’s block gas limits. We wanted to expand that capacity and reduce the work needed to introduce new margin models and markets.

Inside the rebuild

We’ve rewritten the core protocol in Rust and execute its margin, pricing and settlement logic inside a zero-knowledge virtual machine, or zkVM. We perform those calculations offchain, then generate a cryptographic proof that the resulting balance and position updates follow the protocol’s rules.

We keep sub-millisecond order matching offchain. After sequencing the updates, we generate a proof for each batch and submit it to Ethereum. We use Ethereum contracts to hold collateral, verify proofs and process withdrawals, and spread the cost of proof verification across the trades in each batch.

We publish each batch’s state changes to Celestia for data availability. Third parties can use this data to reconstruct the exchange state. Under the escape-hatch rules, another operator can continue settlement if Derive leaves a withdrawal request unprocessed beyond the protocol’s timeout. See the V3 proposal for governance and emergency controls.

Builders connect through Ethereum contracts and the Derive API, using Ethereum wallets and multisigs. We’ve made vaults and account permissions native to the protocol. Our engineers can reuse Rust code across the exchange and settlement system, reducing duplicated logic and the work needed to ship protocol upgrades.

V3 is live. Now what?

V3 is a foundation for staged growth, not a single release containing every planned market and integration.

Over the coming weeks, Derive will add markets, vaults, partner integrations and trading workflows while measuring performance and scaling the system. Each release expands what traders and builders can do. More markets support more activity. More activity attracts more builders and integrations. Those integrations create new ways to trade options onchain.

This compounding loop is the growth model behind V3.