Evolution of OTC Trading in Crypto

In this episode I speak with Edward Yu, co-founder of Variational. 

We begin the conversation with Edward’s background in crypto OTC markets. He explains how the space evolved away from Telegram chats, the complexities of pricing derivative structures on the long-tail of alternative crypto currencies, and the sources of natural flow in the space.

This experience led Edward to co-found Variational, which seeks to bring the trillion dollar OTC derivatives market on-chain by disaggregating settlement, margining, and derivative payoff logic into programmable primitives.

Built on top of Variational is the OMNI perp dex – or decentralized perpetual futures exchange for the non-crypto-speaking listeners. Unlike other perp dexes that are build around a centralized order book, OMNI effectively acts as a user interface to a OTC RFQ system. On the other side is OLP – the OMNI Liquidity Provider. This structure allows OMNI to provide significant depth of liquidity on a huge breadth of investable assets despite the platform being in closed beta at the time of recording. Given its unique design, we spend a significant amount of time discussing the pros, cons, and risks of this structure.

This conversation is, obviously, out of my usual realm. But for those listeners interested in market structure and where the world of finance may be headed, this is one not to miss.

Please enjoy my conversation with Edward Yu.