Can Backpack Seize the Future Opportunity as Crypto Derivatives Evolve from Traditional Replication to Innovation?
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Can Backpack Seize the Future Opportunity as Crypto Derivatives Evolve from Traditional Replication to Innovation?
Why is the derivatives market accelerating? History might offer us some answers.
Navigating Web3 tides with focused insightsBy: Zhixiong Pan
In the past week, established crypto exchanges Kraken and Coinbase have both made headlines with major acquisition moves—aiming to aggressively expand into the derivatives market. Kraken acquired NinjaTrader for $1.5 billion, while Coinbase is in talks to acquire Deribit in a deal potentially worth several billion dollars. These transactions not only reflect the giants’ strong ambitions toward derivatives businesses but also highlight the growing strategic value of the crypto derivatives market.
Since Bitcoin’s inception, spot trading has been the primary mode of interaction in crypto assets. However, as the market has grown in scale and participant diversity, simple buying and selling can no longer meet complex demands for risk management, investment, and speculation. Just as derivatives play a crucial role in price discovery, hedging, and leveraged trading in traditional financial markets, the crypto space similarly requires derivative instruments to improve market efficiency, enhance capital utilization, and provide professional traders with diversified strategies. Over the past decade, the crypto derivatives market has undergone a dramatic transformation—from nonexistence to mainstream adoption—evolving through four distinct phases: the early stage initiated by OKCoin (v0), the rise of perpetual contracts led by BitMEX (v1), FTX's enhancement of capital efficiency (v2), and Backpack’s innovation of interest-bearing derivatives via auto-lending (v3).
Each technological and product advancement has driven evolution in capital efficiency, trading experience, and risk control mechanisms, profoundly shaping industry dynamics. Parallel to the development of centralized exchanges (CEX), decentralized finance (DeFi) derivatives have rapidly emerged, with projects like dYdX, GMX, and Hyperliquid pioneering various innovations in on-chain contract models. This article systematically reviews these four developmental stages and integrates the parallel evolution of DeFi derivatives, analyzing the practical significance and long-term impact of each phase’s innovations. By revisiting history, we can gain clearer insights into the future trajectory of the crypto derivatives market.
Phase v0 (2014–2015): The Emergence of Crypto Derivatives
Stage Characteristics: Initial migration from traditional futures to crypto futures
Prior to 2014, cryptocurrency trading was largely limited to spot markets. With Bitcoin’s high volatility, miners and long-term holders faced needs for hedging risks, while speculators sought leverage for higher returns. In 2014, OKCoin (later rebranded as OKEx/OKX) pioneered the application of traditional futures mechanisms—such as margin systems, expiry-based settlement, and liquidation protocols—to Bitcoin trading by launching Bitcoin futures. This allowed holders to hedge against potential price declines and gave speculators access to high leverage. Subsequently, other platforms such as Huobi followed suit, marking the formal entry of crypto derivatives onto the historical stage.
Representative Platforms
The v0 phase was typified by OKCoin/OKEx and Huobi offering coin-margined delivery contracts with fixed weekly or quarterly expiries, closely mirroring traditional commodity futures. For miners and investors, this provided the first directly usable risk-hedging tool; for speculators, it meant being able to control larger positions with less capital.
Market Impact
The fixed-expiry design proved inflexible in the highly volatile crypto market—traders couldn’t freely adjust positions before expiry. Additionally, early risk controls were inadequate, leading to frequent auto-deleveraging (ADL): when extreme volatility caused leveraged positions to be liquidated with insufficient margin, profitable accounts would have their gains clawed back to cover losses—an unpopular practice among users. Despite these shortcomings, the v0 phase laid the foundational groundwork for crypto derivatives and accumulated valuable lessons for future innovation.
Phase v1 (2016–2017): The Rise of Perpetual Contracts and Market Explosion
Stage Characteristics: Perpetual contracts + high leverage = explosive growth
The market demanded more flexible and efficient derivatives. In 2016, BitMEX introduced the Bitcoin perpetual swap contract, whose key innovation was eliminating expiry dates and instead using a funding rate mechanism to anchor the contract price to the spot market. This allowed long and short positions to be held indefinitely without rollover pressure near expiry. BitMEX also increased leverage up to 100x, attracting immense trader interest. During the 2017 bull market, perpetual contract volumes surged dramatically, with BitMEX achieving record-breaking daily trading volumes. From then on, Bitcoin perpetuals were widely adopted across the industry, becoming one of the most popular products in crypto history.
Representative Platforms
BitMEX: Quickly captured market leadership with its perpetual contracts, implementing an insurance fund and forced liquidation mechanisms that significantly reduced profit-sharing disputes among users.
Deribit: Launched crypto options in 2016. Though initial volume was low, it offered institutional and professional traders new strategic tools and signaled the emergence of the options market.
Traditional institutions enter: At the end of 2017, CME and CBOE launched Bitcoin futures, bringing crypto derivatives into the regulated financial landscape.
Market Impact
The introduction of perpetual contracts triggered an explosion in crypto derivatives activity. Trading volumes during the 2017 bull run even surpassed some spot markets, making derivatives a key venue for price discovery. However, the combination of high leverage and high volatility led to cascading liquidations, with some exchanges experiencing outages or forced deleveraging, sparking user backlash. This underscored the need for stronger technology and risk management alongside innovation. Meanwhile, regulators began paying closer attention to high-leverage crypto derivatives.
Phase v2 (2019–2020): Unified Margin and Multi-Asset Collateral
Stage Characteristics: Shifting focus from “whether new products exist” to “how to improve capital efficiency”
After the 2018 bear market, derivatives regained momentum in 2019, with demand shifting toward improving trading efficiency, capital utilization, and product breadth. Upon launch in 2019, FTX introduced the “unified margin account,” allowing users to trade multiple derivatives using a single shared margin pool, with stablecoins serving as universal collateral. Compared to earlier models requiring separate deposits and cumbersome transfers per contract, this greatly simplified operations and enhanced capital turnover efficiency. FTX also refined its tiered liquidation system, alleviating the persistent issue of loss sharing.
Representative Platforms
FTX: Gained favor among professional traders due to stablecoin settlements and cross-margin functionality. It launched leveraged tokens, MOVE contracts, and numerous altcoin futures, creating a rich and diverse product suite.
Binance, OKEx, Huobi: Followed suit by upgrading their offerings with USDT-margined perpetuals and unified accounts, demonstrating more mature risk management compared to the v1 era.
Market Impact
The v2 phase witnessed further expansion and mainstream adoption of the derivatives market, with trading volumes steadily rising and institutional capital entering at scale. As regulatory compliance progressed, platforms like CME also saw significant volume growth. While issues like auto-deleveraging diminished, events such as the extreme market crash on March 12, 2020 (“Black Thursday”) still exposed vulnerabilities—multiple exchanges suffered price spikes (wicks) or temporary outages, highlighting the importance of upgrading risk controls and matching engines. Overall, the defining features of v2—“unified accounts + stablecoin settlement”—alongside richer product lines, marked a maturation of the crypto derivatives market.
Phase v3 (2024–Present): A New Era of Auto-Lending and Interest-Bearing Derivatives
Stage Characteristics: Further enhancing capital efficiency—margin no longer sits idle
Despite progress under unified margin systems, a longstanding pain point remained: idle funds in accounts typically earned no return. In 2024, Backpack introduced “auto-lending” and “interest-bearing perpetuals,” integrating margin accounts with lending pools. Specifically, unused balances and floating profits are automatically lent to leveraged traders, generating interest income. Conversely, traders with unrealized losses pay interest into the pool. This transforms the exchange from merely a matching engine into a platform capable of facilitating lending and interest management. Combined with Backpack’s recently launched points system, users may achieve diversified passive income streams tailored to different risk preferences.
Additionally, in March 2025, two U.S.-based legacy exchanges—Coinbase and Kraken—accelerated their derivatives expansion. Kraken acquired NinjaTrader for $1.5 billion, while Coinbase entered negotiations to acquire Deribit, which had an estimated valuation between $4–5 billion earlier in the year. The aggressive moves by large, compliant crypto exchanges signal that the derivatives赛道 remains ripe with opportunity.
Representative Platforms
Backpack: Its interest-bearing perpetuals treat unused margin and floating profits as “lendable funds,” generating yield for holders, while users with losing positions automatically pay interest to the lending pool.
The platform employs a dynamic interest rate model to adapt to market volatility. Partial withdrawals of floating profits remain eligible for lending, enabling users to “earn interest while holding long or short positions.”
Backpack plans to support multi-asset collateral and cross-chain assets to further broaden capital coverage.
Market Impact
The interest-bearing perpetual model pushes capital efficiency even further. If successfully implemented, it could become the next industry trend. Other exchanges may consider adopting similar features or partnering with DeFi protocols to generate returns on idle margin funds. However, this model demands higher standards in risk control and asset management, requiring precise liquidity management of lending pools and mitigation of systemic risks during extreme market conditions. Furthermore, compliance and prudent operations are critical—any imbalance in asset management could amplify risks. Nevertheless, v3 represents a bold step forward, introducing a new paradigm that deepens the integration of trading and financial functions in crypto derivatives.
DeFi Derivatives Side Track: Diverse Innovations from dYdX, GMX, Hyperliquid, and Others
While centralized exchanges (CEX) continue evolving, decentralized derivatives (DeFi) have developed along a parallel path in recent years. Their core goal is to enable trustless futures, options, and other trading functions via smart contracts and blockchain technology—without reliance on intermediaries. Delivering high throughput, sufficient liquidity, and robust risk management within a decentralized architecture remains a key challenge, driving diverse technical approaches across projects.
dYdX initially operated a hybrid model combining order books with on-chain settlement via Ethereum L2 StarkEx, later migrating to its own chain on the Cosmos ecosystem (V4) to further decentralize and boost matching performance. GMX took a different route, leveraging an automated market maker (AMM) model where users trade directly against liquidity pools, distributing risk and rewards among liquidity providers to deliver perpetual contract functionality. Hyperliquid built a dedicated high-performance blockchain optimized for order book matching, executing both trade matching and clearing entirely on-chain—striving to combine CEX-level speed with DeFi-grade transparency.
These decentralized platforms have attracted users who prioritize self-custody due to tightening regulations or security concerns. Yet overall, DeFi derivatives trading volumes remain far below those of CEX, primarily constrained by liquidity depth and ecosystem maturity. As technologies mature and more capital flows in, if DeFi derivatives can strike a balance between performance and compliance, they may deeply complement CEX offerings and enrich the broader crypto market structure.
Convergence of CEX and DeFi: Future Outlook
Looking back at the evolution of crypto derivatives from v0 to v3, each phase has centered around technological innovation and efficiency gains:
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v0: Transplanted traditional futures frameworks to crypto, albeit with rudimentary flexibility and risk controls;
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v1: The birth of BitMEX’s perpetual contracts dramatically boosted liquidity and market engagement, establishing derivatives as central to price discovery;
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v2: Unified margin, multi-asset collateral, and diversified products elevated capital efficiency and professionalism;
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v3: Backpack integrated lending and yield-bearing capabilities into exchanges, aiming to maximize capital efficiency.
In parallel, the DeFi derivatives track continues exploring viable paths for decentralized trading through order books, AMMs, and purpose-built chains, offering self-custody and trustless alternatives.
Looking ahead, the development of crypto derivatives may follow several key trends:
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Convergence of Centralized and Decentralized Models: CEXs may become more transparent or launch on-chain derivatives, while DEXs improve matching speed and liquidity.
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Risk Management and Compliance: As trading scales grow, so do demands for advanced risk controls, insurance funds, dynamic liquidation mechanisms, and regulatory compliance.
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Market Size and Product Diversification: More asset classes and complex structured products will emerge, potentially pushing derivatives trading volume beyond spot markets.
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Ongoing Innovation: Mechanisms like Backpack’s auto-yield, volatility derivatives, or even AI-powered prediction markets could appear. The first to deliver products aligned with real user needs may lead the next wave of competition.
In summary, the crypto derivatives market is gradually maturing and diversifying. Through continuous innovation in technology, business models, and compliance, it will better serve the varied needs of both institutional and retail participants, evolving into a dynamic and promising component of the global financial system.
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