Estimates suggest that over 90% of global market volume is dominated by derivatives, while under 10% is handled by the spot markets.

Some analysts believe the notional value for the size of the global derivatives market is around $730 trillion, although it is difficult to get an accurate estimate.

The finer details don’t matter. The point is that derivatives naturally dominate volume in any market, primarily due to the leverage and flexibility offered for speculation/use in risk management strategies.

The story is the same for crypto. Roughly 70% of the crypto market's volume comes from derivative contracts (primarily perps), while spot chips in the remaining 30%.  

So, what exactly is the problem?

Well, yes, there indeed is a problem. In fact, there are two problems.

1. Immature options markets
2. CEX dominance

Options are vital financial instruments often used for hedging, speculation, and risk management. They can also be used for more complex multi-leg strategies.

The issue within the crypto industry is that we have struggled to nail down options.

Estimates suggest that roughly 7-10% of the crypto derivatives market volume is done by options, while perps/futures do the remainder.

I know it’s fun to slide the leverage bar to the right, but c’mon, it’s not always fun. At some point, the options market will need to mature.

Currently, crypto options are simply not as intuitive/easy as perps. Perps is a product that’s adapted to the 24/7 nature of crypto, whereas for options, we are yet to find that sweet spot.

Therefore, many users remain hesitant to interact with them when bringing them on-chain through an AMM or orderbook.

On the other hand, we have traditional markets, where options account for around 86% of derivatives volume. So there’s a lot of room for growth in the crypto options sector.

This brings us to the related issue. In 2023, CEXes accounted for a little over 98% of derivative volume.

The DEX derivative market has since grown, with the likes of GMX, dYdX, and Hyperliquid chipping away at a portion of the CEX market share.

Estimates suggest that in 2024, roughly 7-8% of derivative volume was done on-chain. While the growth is note-worthy, the battle is far from won.

What the on-chain economy needs is a product that offers a derivatives feature of a CEX with the same efficiency and simple user experience, combined with the benefits of self-custody and transparency.  

Barring Hyperliquid’s success in the perps game, the industry has struggled to come up with a solution thus far.

I said “thus far” because the chads at Premia are just about to come to market with Kyan (Premia v4), and this thing is poised to be a game changer.

Don’t take my word for it, just strap yourself in, grab a drink, and take a break from the charts as I walk you through Kyan.

A Premia primer

Premia isn’t new to this game. They’ve been building since early 2021, and it’s taken a lot of hard work and multiple product iterations to get to where they are now.

So, without boring you to death, I’m going to quickly review their history to give you context as to why they are credible enough to make a full-suite DeFi derivatives hub a reality.

Premia v1 launched in early 2021. At the time, Premia's primary focus was simply bringing options.

Although it was a very barebones protocol, it was one of the first functional on-chain options matching engines, a pretty impressive feat for the time.

Continuing with the aim to provide the best on-chain options experience, Premia built upon their order matching engine by introducing a peer-to-pool AMM options exchange. This was Premia v2.

The ultimate takeaway from Premia v2 was the simplification of the user experience.

Under the peer-to-pool model, liquidity providers could simply pool assets in the available pools, giving option buyers access to instant liquidity.

But, as we know, one week in crypto is equivalent to six months in any other industry.

As time passed, the industry matured, the products became more sophisticated, and users demanded more. Premia responded with the launch of Premia v3

With Premia v2 as a simplified backdrop, the idea was to introduce more advanced features while increasing capital efficiency to give users more granular control over their trading strategies.

Premia v3, commonly known as Premia Blue, introduced a concentrated AMM/Orderbook Exchange with a peer-to-peer quoting network. I know that’s an absolute mouthful, but that’s the gist of it.

The introduction of concentrated liquidity and a quoting system essentially allowed users to place and match orders at specific prices, giving them more optionality.

Think of it this way, Premia v2 is like a standalone lemonade stand where all the drinks are sold from one pitcher at a fixed price.

Premia v3 is like a drinks festival where you have a bunch of different stalls, drinks, and pricing options to choose from.

Despite the success of Premia Blue, there’s always room for improvement.

In the words of some wise old man (probably, idk), “If you aren’t moving forward, then you’re moving backwards.”

The idea is to take things to the next level by implementing more products, granularity, and a better user experience while maintaining the benefits of on-chain functionality.

This brings us to Premia v4, better known as Kyan.

What is Kyan?

Kyan is designed to be a non-custodial, capital-efficient, and user-centric DeFi derivatives exchange that will significantly improve quality, liquidity, speed, complexity, and user experience over Premia Blue.

As stated before, Kyan will be a DeFi derivatives hub, which means that in addition to options, the platform will have a full suite offering. This includes perpetuals, portfolio margin, and a multi-leg strategy builder for more complex multi-leg trades.

Kyan will be orderbook-based, offering CEX-like execution speeds, low latency, and efficient order matching.

While this enhanced product suite, which can compete with centralized exchanges, is great for retail users, it also taps into a completely new user base of institutional/professional traders, something that Premia Blue was not built for.

There are four key elements to Kyan:

• Options & perpetual futures (perps)
• Portfolio margin & risk engine
• Multi-leg strategy builder & perp hedging
• User experience & account system

Options & perps on Kyan

With Kyan, the options trading will remain similar as that is Premia’s bread and butter, but under the same roof, users will also be able to trade perps.

The liquidity for derivative products on the exchange will be sourced from a central orderbook, which means more liquidity and a better trading experience.

To complement this, Kyan will also have tooling and latency that are on par with, if not better than, most CEXs to create an institutional-grade derivatives trading platform.

There are four main types of orders on Kyan:

• Market Limit: executes at a specific price
• Fill-Or-Kill (FOK): Fills entirely or not at all
• Immediate-Or-Cancel (IOC): Allows for partial fills
• Request-For-Quote (RFQ): Larger orders beyond the orderbook's capacity

So, to quickly touch upon the last point: Yes, Kyan will have low fees, instant execution, strong liquidity, and all that good stuff.

But in the event that whale traders struggle to get their orders filled, the strategy builder allows them to circumvent the orderbook to build positions of any size.

Multi-leg strategy & perp hedging on Kyan

Now, the multi-leg strategy builder unlocks the true beauty of having both perps and options under one roof.

Kyan’s strategy builder simplifies the process of building out these multi-leg strategies like spreads, butterflies, and condors to name a few.

Trader’s can build out a position with any payoff structure they can dream of and get filled at one price. To manage their risk, the multi-leg positions can be hedged with a perp position.

On Kyan, the trading experience is elevated to the next level because the implementation of portfolio margin (more on this later) brings together a trader’s portfolio risk profile under one roof.

So, all the options legs and perps offset a trader’s delta.

Kyan’s strategy builder is the epitome of making professional-grade derivatives trading a truly seamless experience.

On a simple interface, users will be allowed to create multi-leg strategies such as spreads, straddles, iron condors, strangles, and more from a single interface.

As a user, you have two options:

• Option 1: Select an existing preset strategy option.
• Option 2: Create your own custom strategy. Note, the builder allows up to eight legs in one combo trade.

It’s also worth noting that all the elements of the individual legs, such as expiry and strike price, are customizable.  

Beyond its customizability, capital efficiency, and seamless execution, Kyan is truly above the rest because traders can hedge their combo trades with perps.

You see, sometimes with these combo trades, there is exposure to price movement, which can leave a trade at risk.

Managing this with options can prove to be difficult, so the incorporation of perps into the platform allows traders to hedge and more finely manage their portfolio’s delta.

As part of the technical infrastructure, Kyan uses transaction bundling. For those who don’t know, transaction bundling is simply the process of combining multiple actions into one transaction.

The implementation of transaction bundling is what allows the strategy builder to shine. This means, in terms of user experience, Kyan will compete with CEXes as multi-leg strategies can be executed in one transaction.

Taking things a step further, there is also the ability to activate automatic hedging. When purchasing an option, you simply tick the ‘automatic hedging’ box, and it will offset your risk by opening a perps position.

This feature will, however, be implemented at a later date.

In short, from a user-facing perspective, Kyan offers CEX-like efficiency for trading derivatives with the benefits of self-custody and transparency.

But things get even better.

Kyan’s portfolio margin & risk engine

Put simply, the portfolio margin feature is a risk management and collateral optimization mechanism.

At a high level, the portfolio margin mechanism holistically analyzes all positions in a user’s portfolio and balances the collateral requirements and risk so that users minimize the margin they are required to put up.

It is a system that accounts for how your positions offset each other.

In options trading, the two common types of margin systems are isolated margin and portfolio margin (there is also cross margin).

With isolated margin, each position requires its collateral independently. So, when executing complex multi-leg strategies, it is not the most capital-efficient system.    

Portfolio margin is more dynamic. It looks at the portfolio holistically and assesses the risk based on all the open positions combined. Based on this, the margin requirements are computed.

In practice, implementing portfolio margin enhances capital efficiency. Users can execute their multi-leg strategy using the strategy builder while requiring less collateral.

If we get into the technical nitty-gritty, the portfolio margin system operates through a real-time risk engine. It takes into account things like:

• Market conditions
• Position correlations
• Leverage and exposure
• Time to expiration

If we dive a little deeper into the calculations, the risk engine looks at two key factors:

• Initial Margin Ratio (IMr) - measures how much directional risk an account takes
• Maintenance Margin Ratio (MMr) - Indicates how close an account is to liquidation

If IMr is at 100%, the account cannot take on more directional exposure but can open other trades to reduce risk.

If MMr is at 100%, the account is put into liquidation. During the liquidation process, the system is designed to take over an account and delta hedge to reduce risk to ensure most liquidations are only partial, however, it is possible in some scenarios that a user gets fully liquidated.

Taking these two ratios, plus all the previously mentioned elements, is how the risk engine computes a comprehensive and accurate margin requirement.

What makes the system even better is that it adjusts dynamically. So, imagine a trader opening a new position on top of their existing position or simply modifying their current position.

The risk engine will automatically take this into account, assess the risk, and adjust the collateral requirement.

So why is this portfolio margin feature so highly anticipated?

Well, because it solves problems for everyone. For starters, it is capital efficient. Users are required to put up less collateral for the same positions they would have opened traditionally.

By lowering the trading margin, it frees up collateral for traders to build up larger positions or add more to existing positions.

Fun fact, it is the first on-chain derivatives platform to offer portfolio margin 1:1 with Deribit’s system. That’s a home run if I’ve ever seen one.

In terms of user experience, it makes the life of traders significantly easier. When positions are modified, the collateral requirements are dynamically modified.

This makes it easier to run manual or automated strategies without any hassle.

Furthermore, traders also have more flexibility when hedging. With multiple open positions, if a user wants to delta-hedge their total portfolio, Kyan makes it a very easy process.

On top of this, the platform gives traders risk visualization to make their job simpler.

Lastly, it’s also great for the options market makers. They can allocate capital more efficiently and offer deeper liquidity on the books.

This, in turn, will increase the overall liquidity on the platform, making it a better venue to trade on.

Put all of this together, and you have a platform that is primed to compete with all the big boys CEXes in the game.

User experience & account system

To finally tie the knot and complete the magnificent beast that is Kyan, we have the account system that significantly elevates the user experience.

To begin with, the account system will be more basic. When you connect your regular EOA wallet (Rabby, Metamask etc.) to Kyan, it will automatically create a sub-account within the interface.

Users can create as many sub-accounts as they want. Although the same EOA will control all the sub-accounts, the risk and margin requirements will be independent.

Soon, this will be switched to a smart account system. Smart accounts are basically traditional wallets on steroids.

On top of making it easy to execute complex actions, you get self-custody with the added benefit of social logins and key recovery making it more secure and user-friendly.

This is just technical jargon to say that the account system will offer a user experience rivaling CEXes.

You get an intuitive account system to manage multiple portfolios and the margin across the portfolios. There will be no gas fees, which is often the killer of on-chain derivative products.

In addition, traders can execute all the complex multi-leg and hedging strategies on Kyan with one click. All you have to do is sign once, and you’re good, no more pesky approval transactions again—instant, one-click.

Couple all of this with the fact that users have full transparency of trades on the platform and the liquidity on the platform, and yeah, you have a recipe for success.

Going hand in hand with the implementation of smart accounts is the chain abstraction feature.

Most of you are probably familiar with the term, but in case you aren’t, chain abstraction is the concept of being able to seamlessly interact across multiple chains through one interface without worrying about bridging or anything else of that nature.

Kyan will be chain abstracted, which means you can interact with the derivatives from any chain you choose.

Note: Both smart accounts and chain abstraction are a part of the roadmap, but will not be live on day one.
Kyan is currently in testing and will soon be released in beta. You can sign up on kyan.blue to get notified about updates.

Concluding thoughts

Despite the recent growth in the on-chain derivatives space, there is still room for a lot more growth.

With Kyan, Premia is placing itself at the forefront of dominating this on-chain realm while also chipping away at the dominance of CEXes like Deribit, Binance, and Bybit.

Kyan is primed to explode by offering users unparalleled flexibility and complexity paired with a sleek UI and next-level user interface.

A one-stop shop derivatives hub is exactly what the DeFi sector needs, and Kyan is providing it. The only question that remains is whether you’re ready to join the ride to the top?


Thanks to the Premia team for unlocking this article. All of our research and references are based on public information available in documents, etc., and are presented by blocmates for constructive discussion and analysis. To read more about our editorial policy and disclosures at blocmates, head here.