freemartian.VAR

here's a question by question summary of my most recent space with @JustinCBram, @0xMGB & @cas3333333 from the @variational_io team, alongside @TradFiHater and @0xMerp as special guests enjoy -------------------------------------------------------- 1. on launching swaps: what was it actually like behind the curtain? max said it was a long-anticipated product and a late sprint. weekend deploys, heavy internal testing, and a lot of last-mile work to make sure it launched clean the team sat on a call while the deploy went live. orders started coming in within seconds. no major issues since launch. the numbers in the days after have been motivating, and the team is already onto the next features -------------------------------------------------------- 2. what have max and cas been doing on swaps specifically? core growth work: test thoroughly, surface small ux improvements, and push the product so people actually try it cas framed it as getting the job done rather than talking about it. max said they started posting screenshots early because the internal liquidity and execution quality was already exciting the quant team -------------------------------------------------------- 3. what's the response been like thus far? some swaps stats, accurate at press time: -swaps make up ~30% of weekday volume -consistently making new oi and tvl aths -gross trading revenue is up 61% -the majority of trading volume now in tradfi markets max's take: they care more about real usage than farmed metrics. points are obviously in the mix, but backend data suggests a meaningful organic chunk comparison versus existing btc perps and rwa perps looked strong. this is only the first handful of markets, with 100+ more in the pipeline justin: reception was stronger than expected, but it makes sense. existing crypto perp markets for tradfi assets have been mispriced for a long time direct quotes: ‘I think i'm seeing funding right now at negative 45% for us 500. And so we're able to offer, you know, i think a 4.65% annualized funding rate for us 500 and we're paying dividends on top of that to longs. and so like this mispricing is just so vast. . .I think we're actually going to have a pretty big impact over the next few weeks in what people are paying in crypto in general, and we're going to push these rates down to what they should be and what they should have been this whole time." 'If you look at the gold perp funding rate on your Hyperliquids, your Lighters, your Binances, and what the rate should be for gold, the most liquid asset in the entire world, it's pretty clear that crypto has been mispricing this stuff.' -------------------------------------------------------- 4. how big can swaps be? justin thinks swaps will dwarf perps. already a large share of volume with only four markets. if growth continues, variational starts looking more like a swaps venue than a perp venue because variational is not an exchange, duplicative listings let users farm funding differences without variational users being the ones stuck paying the mispricing direct quotes: ‘I think it's going to dwarf perps honest. I mean it already is i think 30%ish of our volume on the platform after like 3 days with four markets listed. I would expect variational to very quickly be described better as like a swaps trading platform than a perp trading platform.’ 'Because we're not an exchange, when we have a duplicative listing, it's not necessarily our users that are paying this mispricing in funding. We're pulling that liquidity in from other exchanges. That allows our users to farm the funding arbitrage directly on our platform all in one go, without it actually having a negative impact on our users.' -------------------------------------------------------- 5. wen api? justin: can't go beyond what has already been shared. it is a top priority into points winding down. points are meant to go to real users, so timing will be coordinated nb: later in the space, max said to expect something this month. the team has been delaying api so early points go to click traders rather than bots direct quote: ‘I can't answer beyond what's already been shared. i'll say it's one of our top priorities leading into points winding down. Points are supposed to go to your real users. and so it's something that i think will play hand in hand.’ -------------------------------------------------------- 6. feedback from larger traders on swaps? justin: positive. big traders were previously anchored to binance, hyperliquid, bybit etc. swaps gave variational a genuinely new product class and enough size to matter onchain. group chats with large users have been constructive. ui feedback is being shipped quickly, including items sent overnight direct quote: ‘A lot of them have sort of come back and said, wow, this really changes things. we can actually really use swaps in the size that we want to trade on chain. A bigger trader just messaged me last night on twitter, gave us two pieces of feedback that we were able to implement basically immediately.’ -------------------------------------------------------- 7. what has the growth team got planned to get people to try swaps? max: -direct outreach to known large traders with execution screenshots -onchain trader rewards campaign, designed around swaps and seeing a second wind after launch -double points boost on swaps to push existing users off familiar perps the recurring theme: just get people to click into the product. the eureka moment is the execution cost direct quote: ‘A lot of the times it's just as simple as us kind of pinging a message over with a good graphic or a screenshot of what the execution cost looks like on a large order: 'Hey, we just launched a new product, you might be interested in giving it a try if you're trading a lot of tradfi perps right now.’ -------------------------------------------------------- 8. will users stick around after points end? cas: build something people cannot get elsewhere. hog futures and a memecoin in the same venue is the kind of uniqueness that creates reasons to stay max: while metrics derived from farming can be misleading, we shouldn't be overly cynical. there is a huge amount of real trading/organic activity going on. the product ultimately has to stand on its own justin: betting on the rfq model. almost every tradfi perp should get a swap market with better pricing, tighter execution, and bounded funding direct quotes: ‘The product's just going to have to stand on its own two legs. like if the product is something that people are going to use, you know, regardless of points, then it's going to be something people use regardless of points. If it's not, then it's not.’ 'These projects will kind of let the farmer metrics get to their heads, as like, oh yeah, we have a user base of hundreds of thousands of people, and it's like no, you have 100 people sybiling a points campaign.' 'Users are basically going to be forced to trade on Variational because we're going to deliver the best price, the best execution, bounded funding rates on any asset you can imagine. And right now the space is pretty open to us as far as I'm aware. Like we're the ones that are really building out the true vision for RFQ. I just haven't seen that elsewhere.' -------------------------------------------------------- 9. will it be the case that traders use different trading venues for different markets, based on execution? max: depends on fee tier. for ordinary retail on the bottom fee tier, variational should be the default for almost everything. a top-tier binance trader may still get better long-tail crypto execution elsewhere. the target user is the person who does not have a billion in weekly volume direct quote: ‘If you're looking at things like a true pure retail user that has like bottom fee tier on any platform i genuinely do think variational would be the go-to place to trade pretty much anything. That first user that i'm talking about is really our target market.’ -------------------------------------------------------- 10. krieger's variational thesis background: former lawyer, late to crypto in 2024, approached it like due diligence. docs and team quality stood out. the unique model, especially pro, was the hook. core thesis: the otc derivatives market is dark, slow, and intermediated pro can let anyone craft and trade custom derivatives without weeks of phone calls and middlemen. swaps are the first public proof that the liquidity and demand are real direct quote: ‘In the us there is $150 trillion of derivatives. that's the total notional. and it's completely hidden. . .You have trillions of derivatives sleeping out there and if you can plug them uh to this market you unlock trillions of liquidity.' -------------------------------------------------------- 11. liquidity, oi limits, and bottlenecks krieger asked where the liquidity comes from and what the ceiling is. max gave the clearest answer the team has given publicly, and named the constraints himself first, a clarification: the ~$1b figure is olp's current external hedging capacity, not an oi cap. a 60/40 book only needs a slice hedged two bottlenecks, both capital and connectivity problems rather than design problems: -hedging capacity and market access. current agreements are the first, not the last, with later-stage conversations ongoing for asian and european markets -olp's balance sheet. near term via lp deals, longer term via community deposits direct quote: 'The one billion plus in capacity that we have sourced is actually the current hedging limits that olp has against its traders. That doesn't actually translate to a one billion strict oi cap on swaps because a lot of the flow ends up netting itself out' -------------------------------------------------------- 12: active accounts have been flat since may. what now? (question from community) max : the internal north star is market share, not raw active users, volume or oi. that share has been rising. raw active users have also started recovering. next is onboarding people outside the existing crypto perp cohort justin, on future product developments: inspired by fomo's mobile/onboarding polish. public mainnet after private beta, trading api, twaps, safer path to opening olp, and more ways to make trading cheaper and more rewarding direct quote: 'The main metric that we look at is market share more than anything. . .We obviously can't control whether the market goes up or down, but what we can control and what we always try and push for is just taking up more and more of that trading activity.' -------------------------------------------------------- 13. is variational becoming an interactive brokers competitor? krieger's framing: less a perp dex, more an onchain broker going after wall street titans that are powerful but ugly and slow to support max: that is the original thesis. they are not trying to replace onchain or offchain order books. they are competing for where actual retail ends up trading direct quote: ‘Our thesis from the beginning has been like we're not here to replace any order books whether onchain or offchain. We have always seen ourselves as a very separate business model like that broker type model as you mentioned.’ -------------------------------------------------------- 14. merp on hyperliquid, community, airdrop % and tokens merp: still bullish hype, also bullish variational because the smartest people he knows are. no real negativity toward variational in the hl crowd, which is rare aligning thousands of people with token success is one of the strongest marketing tools that exists. the token needs a reason to exist, and the team needs to demonstrate alignment direct quotes: ‘The number one marketing tool like in the entire world probably is to align thousands and thousands of people with the economic success of your token. . .There are tokens that are built for long-term wealth accumulation, and there are tokens that exist to be sold.’ 'I don't have the most Variational points, but I know like basically all the smartest people I know are super bullish on Variational. And so that makes me too as well.' 'In crypto the bar was so low for so long that even still, if you just do these bare minimum executions and actually act with intent to accrue long-term value to your treasury and to your protocol and to your token holders, you can just make a f***load of money in crypto if you just decide to. And for the longest time, people decided to just take what was available as quick as possible.' -------------------------------------------------------- 15. how do liquidations work on swaps? (question from community) justin: listed swap markets trade about 23 hours a day. roughly one hour offline after us close. price does not update while closed, so quiet overnight wicks do not hit you. the risk is the open: first incoming price can gap, and that print can trigger orders and liquidations direct quote: ‘When the market opens if there's some really heavy news that hits, the market can go up or down and sort of gap open or gap down. The first price that comes in that's the price that orders are basically going to trigger off of and that would include liquidations as well.’ -------------------------------------------------------- 16. wen lean hogs? what else is coming? hogs are coming asap. lean hogs specifically tbd, but hogs are on the upcoming list. cocoa, coffee, sugar and other commodities already in view. hundreds of candidate markets direct quote: ‘I think we have hogs. i don't know if we have lean hogs, but hogs are coming asap. All of that stuff is coming soon. the most upcoming swaps i think are already listed as coming soon on the platform.’ -------------------------------------------------------- 17. beyond the api and swaps, what future catalysts does the team have up its sleeve? cas: pair exotic listings with the api and you get something genuinely new. not crypto traders getting a better tool, but people with real-world exposure hedging it onchain for the first time justin: variational still feels small internally, and the sector comparison explains why. binance did $80b in perp volume in a single day recently. hyperliquid does roughly $10b. capturing the existing perp market alone is a 100x from here, before swaps change the competitive map and before pro exists at all direct quotes: 'When we have hog futures available and then somebody's able to algorithmically trade, maybe they're a hog farmer, they have their own cattle or hogs or soybeans. There's a lot of opportunity for people to come in and bring their own personal liquidity and trade in a way that most people just wouldn't have access to' 'We've been working on variational for a while so it still feels really small to us. We're just at currently so, so small. even just capturing the current market is just a massive 100x growth from here, and that's not even factoring in how swaps sort of changed the dynamic with all the existing perp players' -------------------------------------------------------- finally 'go try swaps' - max dm the team with product feedback. max, cas and justin said they are responsive huge thanks to max, cas, justin, krieger and merp for joining, and to everyone who sent questions beforehand i obviously haven't covered every detail here, you can listen back to the space in full below -------------------------------------------------------- hope you enjoyed this, more spaces on the way. off to the gym now gvar