About Pro

Learn about the Pro application.

Variational Pro is currently not live. Please contact our team via hello@variational.io if you are interested in using Pro.

Variational Pro is designed for advanced and institutional traders of OTC derivatives.

Pro unlocks the full capabilities of the Variational protocol, allowing traders to access over-the-counter (OTC) liquidity for non-linear derivatives and execute block trades on configurable structures with deep liquidity.

As with traditional finance, a large portion of trading volume in crypto happens via OTC derivatives trading. Crypto (and even certain segments of derivatives trading in traditional finance) still has largely undeveloped infrastructure for booking and settling these OTC trades. Variational Pro addresses this by creating a one-stop-shop for advanced derivatives traders (largely institutions) to automate the execution and settlement of any derivative product they desire.

Why Variational Pro?

Current institutional crypto derivatives trading (accounting for hundreds of billions or trillions in annual volume) relies heavily on inefficient, manual OTC processes, often via informal channels like Telegram. While some exchanges like Deribit and tools like Paradigm exist, they lack customization and asset diversity beyond basic options on major cryptocurrencies. This results in high operational overhead for more complex derivatives, with dedicated team members, lawyers, and bank wires required to make any trades. Most current institutional trading occurs as follows:

An institution (Hedge Fund A) decides they want to make a trade on an altcoin option.
Knowing that Deribit and others don't support the altcoin they wish to trade, a team at Hedge Fund A uses Telegram to contact a market making desk (Market Maker A).
Prior to contacting Market Maker A, Hedge Fund A had to negotiate an ISDA agreement and go through a lengthy KYC process. They were rejected by Market Maker B due to operational constraints, and didn't have time to complete the forms from Market Maker C.
Given they only have one desk to choose from, in the Telegram group, Hedge Fund A describes the option structure they're looking to trade with Market Maker A.
A team at Market Maker A checks what quote they can offer for the trade Hedge Fund A is looking for, sometimes using manual infrastructure such as spreadsheets.
Market Maker A sends the quote and initial terms to Hedge Fund A.
Hedge Fund A and Market Maker A debate price/terms and eventually come to agreement.
Hedge Fund A and Market Maker A exchange an email trade confirm, which is reviewed by their legal and operations teams.
Hedge Fund A's operations team completes a test transaction to the crypto wallet or fiat account of Market Maker A.
Hedge Fund A sends funds directly to Market Maker A as collateral, assuming a large amount of counterparty risk if Market Maker A faces financial difficulty.
The trade is officially cleared.
Every so often, a team at Market Maker A checks up on the trade to ensure margin is topped up and no liquidation is required. Manual margin calls are issued via Telegram and email, though, since they don't have a strong relationship, Market Maker A never posts collateral to Hedge Fund A, even if their trade is winning.

Even with all of this operational lift, institutions still face limited price transparency (i.e. Market Maker A knows that Hedge Fund A has very limited options to book this trade, and can price their quote accordingly), and increased counterparty risk due to infrequent collateral checks and one-way margin requirements. Some risks and inefficiencies of current OTC derivatives trading include:

Lack of Market Participants: Due to the operational overhead required to onboard/KYC, quote, and manage these trades, many smaller market makers and (especially) taker funds limit or outright avoid OTC derivatives trading.
Human error: Since margin checks, collateral movements, and liquidations are manual, firms have limited confidence in trades being managed properly.

Variational Pro solves these issues by automating the entire trade lifecycle, from booking to on-chain settlement. It offers complete customization for complex derivatives, and allows traders to immediately receive competing quotes from many market makers simultaneously. As opposed to the 12-step, highly manual process above, the process of booking a trade on Variational Pro is the following:

An institution (Hedge Fund A) decides they want to make a trade on an altcoin option.
Hedge Fund A logs into their Variational Pro account, builds a Request-For-Quote (RFQ) describing the desired trade using the intuitive UI.
All market makers on Variational Pro see the RFQ (unless Hedge Fund A has designated specific MMs to request a quote from) and can respond with their best offer, over both the UI and API.
Hedge Fund A sees quotes from multiple market makers (Market Maker A, Market Maker B, Market Maker C) and decides which (if any) to accept, considering the counterparty's reputation, the terms of the quote (margin requirements), and more.
Once Hedge Fund A chooses to accept a quote (for example, with Market Maker B), Hedge Fund A and Market Maker B are immediately prompted to deposit funds to an on-chain smart contract that functions as their escrow/settlement pool.
Once deposits are verified, the trade is automatically marked as cleared. Variational Protocol automatically tracks margin usage, funding payments/settlements (if applicable), and handles liquidations.

Variational Pro takes a process that currently requires Telegram groups, manual transfers/wires and large teams of operations employees and lawyers, and turns it into a safe, on-chain, fully automated flow that can be completed by a single team member or API client.

How Does Variational Pro Work?

Variational Pro allows for the safe trading of many kinds of bilateral derivatives on any token. Key features include:

RFQ-Based: Users submit a request-for-quote for a specific market/structure they'd like to trade. Liquidity providers respond with quotes and the user may select the best one. Users can also respond to RFQs by providing bids and offers.
Bilateral: All trades are completed peer-to-peer--also interchangeably referred to as bilateral or OTC (over the counter). Trades are booked in settlement pools, which are a ledger of open positions and collateral between two parties. Each unique pair of counterparties will have one (or more) settlement pools. Positions are not fungible between pools, and assets are not commingled between pools, isolating risk.
Fully Customizable: Almost every aspect of the trading, clearing, and settlement process is customizable. Terms are decided before any trade is done and agreed upon by both parties as part of the quote. Market makers compete to offer the best price and terms. Users can decide to only request quotes from a whitelist of counterparties, adjust margin requirements on a per pool basis, or decide to auto liquidate their counterparty when they fall below margin requirements/impose a liquidation penalty.

PreviousFees NextAPI

Last updated 3 days ago

Why Variational Pro?

An institution (Hedge Fund A) decides they want to make a trade on an altcoin option.

Knowing that Deribit and others don't support the altcoin they wish to trade, a team at Hedge Fund A uses Telegram to contact a market making desk (Market Maker A).

Prior to contacting Market Maker A, Hedge Fund A had to negotiate an ISDA agreement and go through a lengthy KYC process. They were rejected by Market Maker B due to operational constraints, and didn't have time to complete the forms from Market Maker C.

Given they only have one desk to choose from, in the Telegram group, Hedge Fund A describes the option structure they're looking to trade with Market Maker A.

A team at Market Maker A checks what quote they can offer for the trade Hedge Fund A is looking for, sometimes using manual infrastructure such as spreadsheets.

Market Maker A sends the quote and initial terms to Hedge Fund A.

Hedge Fund A and Market Maker A debate price/terms and eventually come to agreement.

Hedge Fund A and Market Maker A exchange an email trade confirm, which is reviewed by their legal and operations teams.

Hedge Fund A's operations team completes a test transaction to the crypto wallet or fiat account of Market Maker A.

Hedge Fund A sends funds directly to Market Maker A as collateral, assuming a large amount of counterparty risk if Market Maker A faces financial difficulty.

The trade is officially cleared.

Every so often, a team at Market Maker A checks up on the trade to ensure margin is topped up and no liquidation is required. Manual margin calls are issued via Telegram and email, though, since they don't have a strong relationship, Market Maker A never posts collateral to Hedge Fund A, even if their trade is winning.

Lack of Market Participants: Due to the operational overhead required to onboard/KYC, quote, and manage these trades, many smaller market makers and (especially) taker funds limit or outright avoid OTC derivatives trading.

Human error: Since margin checks, collateral movements, and liquidations are manual, firms have limited confidence in trades being managed properly.

Counterparty Risk: Since funds are not automatically moved on-chain with clearly defined rules for real-time pricing and liquidation, institutions are frequently assuming their counterparties will not go bankrupt. to rely on.

An institution (Hedge Fund A) decides they want to make a trade on an altcoin option.

Hedge Fund A logs into their Variational Pro account, builds a Request-For-Quote (RFQ) describing the desired trade using the intuitive UI.

All market makers on Variational Pro see the RFQ (unless Hedge Fund A has designated specific MMs to request a quote from) and can respond with their best offer, over both the UI and API.

Hedge Fund A sees quotes from multiple market makers (Market Maker A, Market Maker B, Market Maker C) and decides which (if any) to accept, considering the counterparty's reputation, the terms of the quote (margin requirements), and more.

Once Hedge Fund A chooses to accept a quote (for example, with Market Maker B), Hedge Fund A and Market Maker B are immediately prompted to deposit funds to an on-chain smart contract that functions as their escrow/settlement pool.

Once deposits are verified, the trade is automatically marked as cleared. Variational Protocol automatically tracks margin usage, funding payments/settlements (if applicable), and handles liquidations.

How Does Variational Pro Work?

Variational Pro allows for the safe trading of many kinds of bilateral derivatives on any token. Key features include:

RFQ-Based: Users submit a request-for-quote for a specific market/structure they'd like to trade. Liquidity providers respond with quotes and the user may select the best one. Users can also respond to RFQs by providing bids and offers.

Bilateral: All trades are completed peer-to-peer--also interchangeably referred to as bilateral or OTC (over the counter). Trades are booked in settlement pools, which are a ledger of open positions and collateral between two parties. Each unique pair of counterparties will have one (or more) settlement pools. Positions are not fungible between pools, and assets are not commingled between pools, isolating risk.

Fully Customizable: Almost every aspect of the trading, clearing, and settlement process is customizable. Terms are decided before any trade is done and agreed upon by both parties as part of the quote. Market makers compete to offer the best price and terms. Users can decide to only request quotes from a whitelist of counterparties, adjust margin requirements on a per pool basis, or decide to auto liquidate their counterparty when they fall below margin requirements/impose a liquidation penalty.