Onchain options (also written on-chain options, and often called DeFi options) are option contracts where the collateral is held and the trade is settled by smart contracts instead of an exchange. You can buy or sell calls and puts on crypto — and increasingly on tokenized stocks — without handing your assets to a centralized exchange. In return you take smart-contract risk (a fault in the software) and often price-feed risk.
Primer on the instrument: Crypto options explained.
Four onchain designs
| Pattern | How premium is set | Seller experience | Examples |
|---|---|---|---|
| Vaults | Scheduled auctions or manager strikes | Deposit; strategy sells for you | Thetanuts Finance |
| AMM / pools | A formula applied to a pool of funds | A price is always available; you trade against a pool | Panoptic |
| Order books | Bids and asks matched offchain, settled onchain | Exchange-style trading on listed strikes | Derive, Aevo |
| RFQ | Counterparties quote your terms | You set strike and size; trading desks compete | Rysk, Overcast |
Vaults
The 2021 wave made covered-call and put-selling strategies a single deposit. Ribbon Finance, the largest vault protocol, held about $268 million in March 2022 and about $51 million a year later, as incentives and volatility faded. Vaults remain a valid product — read how the auction works and what the fees are.
AMMs and pools
An automated market maker (AMM) is a pool of funds that quotes prices by formula. Keeping a price available for every strike and expiry is hard, because each one is its own small market. Panoptic, for example, builds perpetual options on Uniswap liquidity positions.
Order books
The second wave moved matching offchain and kept settlement onchain, which lets market makers quote the way they do on an exchange. Derive and Aevo work this way; Derive also runs an RFQ desk for larger trades.
RFQ
A request for quote (RFQ) suits a market with many strikes and expiries. You state your terms, professional trading desks quote a premium, and the trade settles onchain. Rysk and Overcast both use it for covered calls and cash-secured puts; Overcast's version is described in How Overcast works.
Limits of the first wave
Researchers and builders converge on similar gaps:
- Thin markets — buyers and sellers were spread across too many strikes and expiries.
- Hard to hedge — firms quoting prices could not easily offset their own risk.
- Poor economics for market makers — updating hundreds of prices onchain is costly, and predictable vault auctions were easy to trade against.
- Product fit — too complex for casual users, not robust enough for professional firms.
A second wave (roughly 2024–26) pushed toward order books, RFQ, and professional quoting. Onchain activity has grown and remains small next to centralized exchanges: Deribit alone reported about $60 billion of open interest in August 2025, while the DefiLlama onchain options dashboard showed open interest in the tens of millions of dollars at the largest onchain platform in mid-2026.
How an option settles
How an option settles decides how much cash the buyer needs. With delivery, the buyer pays the full strike amount for the asset. With cash-style settlement, the buyer receives only the profit, paid out of the collateral, which needs a price feed. The technical detail is in Overcast's settlement methods docs.
Onchain vs a centralized exchange
| Centralized exchange | Onchain | |
|---|---|---|
| Who holds your assets | The exchange | A smart contract (escrow) |
| Guarantee of payment | The exchange or its clearing house | Collateral locked in advance |
| Pricing | Order book | Order book, vault, AMM or RFQ |
| What can go wrong | The exchange fails or freezes | A software fault or a bad price feed |
A longer comparison: platforms compared.
The two trades for sellers
FAQ
What are onchain options?
Options where the collateral is locked and the trade is settled by a protocol onchain, with the premium set by a vault, an AMM, an order book or an RFQ.
What are DeFi options protocols?
The same category in common speech — vaults, pools, and RFQ platforms that sell or match crypto options without a traditional brokerage account. Examples by type: Derive and Aevo (order books), Thetanuts Finance (vaults), Panoptic (AMM-style), Rysk and Overcast (RFQ).
Are options vaults worth it?
They trade control for convenience. Compare net premium after fees, auction design, and smart-contract risk against writing directly via RFQ or a book.
Sources
- The Vaultification of DeFi, The Mothership, 31 March 2022
- Ribbon Finance deep dive, Blockchain at Georgia Tech, 9 March 2023
- Deribit Joins Coinbase, Coinbase press release, 14 August 2025
- Onchain options dashboard, DefiLlama (community dashboard), viewed 6 October 2026
- Best DeFi Options Protocols in 2026, Derive
- Derive Explained, Datawallet, 2026
- Rysk documentation, Rysk
Next reading
Risk disclosure and disclaimer
The content on this blog is published by Overcast for general information and education only. It does not constitute financial, investment, legal, tax or accounting advice, and it is not an offer, solicitation or recommendation to buy, sell or hold any asset or to use any product or strategy. It does not take into account your objectives, financial situation or needs. Consult a qualified professional before making any investment decision.
Writing options involves substantial risk. A covered call limits your upside and leaves you fully exposed to declines in the underlying asset. A cash-secured put can oblige you to buy an asset at a price above its market value at expiry. Premiums, yields and APRs shown are illustrative or historical, are not guaranteed and do not predict future results. Crypto assets and tokenized securities are highly volatile and may lose some or all of their value. Smart contracts may contain vulnerabilities, and onchain transactions are irreversible.
Products, assets and features mentioned may not be available in your jurisdiction. You are responsible for complying with the laws that apply to you. Information may be incomplete, contain errors or become outdated; Overcast makes no warranty as to its accuracy or completeness.
Overcast is in early access. Features, supported assets and availability described here may change before or after launch.
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