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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.
Ethena's USDe stablecoin has exceeded $12 billion in market capitalization, as the protocol plans to launch its Converge blockchain in Q2 2025 to further bridge traditional finance and DeFi. Ethena's USDe Ascends to Third-Largest USD-Pegged Asset Ethena's synthetic stablecoin USDe has surpassed DAI and USDS, reaching a market capitalization of over $12 billion and becoming the third-largest USD-pegged asset in DeFi. [1] This growth reflects a 42% increase in circulating supply over approximately one month. [1] Converge Blockchain: Bridging DeFi and Institutional Finance Ethena is developing Converge, an EVM-compatible blockchain in partnership with Securitize, scheduled for launch in Q2 2025. The initiative aims to create a "settlement layer between traditional finance and digital dollars," facilitating the integration of Ethereum smart contracts while meeting institutional compliance standards. Converge will support both permissionless DeFi applications and compliant products for traditional financial institutions. The network will utilize permissioned validation nodes, requiring validators to stake ENA tokens to maintain network security. USDe and USDTb will function as native GAS tokens, reducing transaction costs. > Ethena plans to migrate its nearly $6 billion ecosystem to this new blockchain and issue native stablecoins USDe, USDtb (backed by the BlackRock BUIDL fund), and iUSDe specifically for asset management firms. Strategic Implications and Market Positioning Ethena's growth is driven by institutional adoption and high-yield mechanisms, with partners like Anchorage Digital and Transak enhancing accessibility. The inclusion of XRP and BNB as collateral diversified USDe's risk profile and attracted $1.2 billion in institutional inflows. Converge is expected to unlock new use cases for USDe, such as cross-chain lending and tokenized real-world assets, while reducing reliance on Ethereum's gas fees. Aave's Exposure to Ethena: Potential Risks According to Chaos Labs, one of Aave's risk advisors, Aave's exposure to Ethena poses a potential risk, drawing parallels to the 2008 financial crisis. The advisor suggests that Ethena's dual role of backing assets as redemption capital and liquidity on Aave could amplify stress during a deleveraging event. Ethena has already deposited $580 million of USDe backing assets into Aave, with 55% of USDe-backed assets, or $4.7 billion worth, deposited to Aave.
Derive is a decentralized protocol that creates programmable onchain options, perpetuals, and structured products.
Derive is deployed and operates on Derive Chain, an Ethereum rollup built using the OP stack and is the home of the Derive Protocol. It is a permission-less smart contract platform.
The Derive DAO earns trading fees from the Derive Protocol and gas fees from the Derive Chain, governed by DRV token holders. Trading fees accrue to an insurance fund to foster robustness of the protocol and rollup.
Derive has built an AI-powered trading app built for pro traders. In collaboration with Messari, Derive Pro translates market views into trades. The agent then prepares transactions for users and leverages smart contract wallets to make trades one-click, gasless and chainless. The app will support spot, perps and options trading on Derive, and will also plug in to spot AMMs on L2s like Optimism, Arbitrum and Base. (Data from Coingecko)
Derive (DRV) current price is $0.031752, down 7.62% today.
Derive (DRV) daily trading volume is $98577
Derive (DRV) current market cap is $27.0M
Derive (DRV) current circulating supply is 851.1M
Derive (DRV) fully diluted market cap (FDV) is $31.8M