Derive co-founder Nick Forster proposed a 50% increase in DRV token supply, diluting existing holders by 33%, to fund institutional partnerships and enhance competitiveness against Deribit.

Executive Summary

Derive co-founder Nick Forster has proposed a 50% increase in the DRV token supply, totaling 500 million new tokens, which is expected to result in a 33% dilution for current token holders. This strategic mint, intended to fund institutional partnerships and bolster competitiveness against Deribit, marks a significant shift from the protocol's previous "no new tokens" pledge.

The Event in Detail

On Friday, September 12, Derive co-founder Nick Forster formally proposed the minting of 500 million new DRV tokens. This issuance would expand the total DRV token supply by 50%, leading to an estimated 33% dilution for existing holders over a four-year period, or "at most 8.25% per year". The newly minted tokens are designated for the Derive Foundation (formerly the Lyra Foundation) to facilitate strategic deals and secure institutional liquidity.

According to Forster's proposal, Derive has already secured "one major partnership to bring institutional-grade liquidity and custody to the ecosystem" and is in "advanced negotiations with several of the largest liquidity providers and traders to onboard deeper liquidity and launch new product lines." The proposal allocates 46% of these new tokens to core contributors for retention purposes. These tokens will vest over four years and their sale is contingent on DRV maintaining a market capitalization above $150 million, significantly higher than its current $28.5 million market capitalization.

This initiative represents a reversal of Derive's earlier commitment that "no new tokens will be minted" following the LYRA to DRV token migration, which maintained a flat supply of 1 billion tokens. The proposal follows the cessation of a proposed merger with Synthetix in May, which was called off due to investor criticism regarding undervaluation of the options platform. Derive has subsequently cut ties with team members and investors who supported the merger. The strategic mint is positioned as necessary to compete with Deribit, the leading options trading platform recently acquired by Coinbase.

Market Implications

The proposed DRV token supply expansion carries immediate and long-term market implications. In the short term, the 50% supply increase and subsequent 33% dilution for existing holders are likely to exert downward pressure on the DRV token price. The allocation of a substantial portion of new tokens to core contributors, albeit with vesting conditions tied to market capitalization performance, introduces a potential future selling overhang.

However, the long-term outlook could be positive if Derive's strategy succeeds in attracting significant institutional liquidity and establishing major partnerships. Successful competition with Deribit could position Derive as a stronger player in the onchain options market, potentially benefiting the protocol's ecosystem and the value of DRV over time. This move also establishes a precedent for how decentralized finance (DeFi) protocols may adjust tokenomics to finance growth and adapt to competitive pressures, influencing similar projects within the Web3 ecosystem.

Broader Context

The DRV token mint occurs within a rapidly expanding crypto derivatives market. In 2025, the crypto derivatives market reportedly reached a monthly trading volume of $8.94 trillion, surpassing spot trading volumes. Derivatives now account for approximately 76% of the total cryptocurrency trading volume, up from previous years, with Bitcoin and Ethereum derivatives dominating 68% of the sector.

Derive's stated objective to compete with industry leader Deribit highlights the intense competition in this growing sector. Deribit holds a significant position, with Paradigm's institutional network accounting for 33% to 36% of its monthly volume. The recent acquisition of Deribit by Coinbase in a $2.9 billion cash-and-stock deal further underscores the institutional interest and consolidation within the crypto derivatives landscape. Meanwhile, decentralized derivatives platforms such as dYdX have seen substantial growth, with dYdX doubling its volume and securing 10% of the DeFi market share. This backdrop indicates that Derive's push for institutional liquidity is a response to the evolving and increasingly competitive nature of the digital asset derivatives space.