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.
Pro unlocks the full capabilities of the Variational protocol, allowing traders to access over-the-counter (OTC) liquidity for thinly traded derivatives and execute block trades on structured products with deep liquidity.
Just like in traditional finance, the vast majority of volume in crypto trading occurs in OTC derivatives trading. However, unlike traditional finance, crypto 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 maintenance of whatever derivatives trades they can imagine.
Why Variational Pro?
Current institutional crypto derivatives trading (accounting for trillions in annual volume) relies heavily on inefficient, manual OTC processes, often via informal channels like Telegram. While some exchanges like Deribit 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 needed to book any trades. Most current institutional trading occurs using the following general flow:
An institution (Hedge Fund A) decides they want to book a trade on an altcoin.
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 maker (Market Maker A).
In the Telegram group, Hedge Fund A describes the trade they're looking to book to Market Maker A.
A team at Market Maker A checks what quote they can offer for the trade Hedge Fund A is looking for.
Market Maker A sends the quote and initial terms to Hedge Fund A.
Hedge Fund A and Market Maker A debate terms and eventually come to agreement.
Hedge Fund A and Market Maker A involve their lawyers to draft an ISDA and finalize the terms.
The ISDA is signed by Hedge Fund A and Market Maker A.
Hedge Fund A and Market Maker A create an escrow account.
Hedge Fund A and Market Maker A wire funds to the escrow account as collateral.
The trade is officially booked.
Every so often, teams at Market Maker A and Hedge Fund A will check up on the trade and escrow account to ensure margin is topped up and no liquidation is required.
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. Some risks and inefficiencies of current OTC derivatives trading include:
Lack of Market Participants: Due to the operational overhead required to quote and manage these trades, many makers and funds limit or outright avoid OTC derivatives trading.
Human error: Since margin checks and liquidations are entirely 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 book a trade on an altcoin.
Hedge Fund A logs into their Variational Pro account, and fills out a Request-For-Quote (RFQ) describing the desired trade.
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.
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, 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 prompted to deposit funds to an on-chain smart contract that functions as their escrow / settlement pool.
Once funds are deposited, the Variational Protocol automatically tracks margin usage, funding payments (if applicable), and handles liquidations.
Variational Pro takes a process that currently requires Telegram groups, bank wires and teams of operations employees and lawyers, and turns it into a completely on-chain, automated flow that can be completed by a single team member.
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 on a specific market 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 done peer-to-peer. We also interchangeably refer to this as bilateral or OTC (over the counter). Trades are booked to settlement pools, which is a ledger of open positions and collateral between two parties. For each counterparty you trade against, you will have one (or more) settlement pools. Positions are not fungible between pools, and assets are not commingled between pools.
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. You can decide to only request quotes from your whitelist of counterparties, adjust margin requirements on a per pool basis, and decide to auto liquidate your counterparty when they fall below margin requirements/impose a liquidation penalty.
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