As crypto has grown, so too has the number of tokens traders want to speculate on. In today’s market, traders expect deep liquidity, the ability to utilize leverage to maximize gains, and a wide variety of instruments (perps, futures, options) to match their desired position.

While many centralized and decentralized exchanges have grown rapidly using traditional limit order books, none have yet been able to solve the problem of permissionless derivatives, or the ability to source liquidity without being beholden to centralized gatekeepers such as Binance Launchpad or Coinbase, which often have non-transparent listing requirements, fees, and long lead times.

For trading liquid assets at high frequencies (say, ETH-USDC or a BTC perp), a centralized orderbook-based exchange such as Binance or Bybit would be a fine choice. If decentralization is your focus, dYdX or Hyperliquid might fit the bill. But where would you go to trade Aevo points, or monthly options on JUP? Unfortunately, the design decisions of existing exchanges make them unable to support listing illiquid underlyings or complex derivatives.

Our long-term vision is simple: we want our users to be able to trade any derivative on any asset imaginable, while retaining full control over the trade lifecycle.

Introducing Variational

Variational is a new kind of decentralized trading platform with three key design elements: request-for-quote (RFQ), bilateral settlement, and customizability.

Request-for-quote (RFQ) is best suited for markets with limited liquidity. Users submit a request on a specific market they’d like to trade. Liquidity providers respond with quotes and users select the best one. Users can also respond to other RFQs by submitting quotes. Using RFQs rather than orderbooks allows traders to precisely tailor their requests to their desired structure and liquidity providers to show their best prices in an open auction.

Bilateral settlement solves the main problem with listing illiquid markets–settlement risk. Since illiquid markets often have higher volatility (sharp price moves), they present risks to the centralized insurance fund model used by most exchanges. By contrast, all trades on Variational are peer-to-peer and are booked into settlement pools—a ledger of open positions and collateral between two counterparties. 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.

Customizability is a core focus of the entire platform–almost every aspect of the trading, clearing, and settlement process is fully configurable. Terms are explicitly agreed upon by both parties before a trade is confirmed. Users can select everything from whitelisted counterparties to margin requirements, mark sources, auto liquidation, penalties, and more. Variational is built to accommodate any settings necessary to match your trading style and comes with sensible defaults for ease of use.

Variational’s unique design enables use cases that aren’t supported by existing exchanges including:

• Perpetual and dated futures on all tokens (so-called permissionless markets), even ones that have not yet been listed on exchanges. A token can be available to trade the same day it is created.

• Liquidity on thinly traded derivatives, such as options, multi-leg structures, altcoin underlyings, and more

• Pre-launch points and tokens, prediction markets, interest rate derivatives, exotic options, and other novel financial products

Launch

Variational’s mainnet will be launching later this year. At launch, users will be able to trade thousands of instruments with deep liquidity, including permissionless perpetual markets.

Our testnet is currently live at https://testnet.variational.io. We welcome feedback from early users on our Discord community.

In the coming weeks, we will share additional information about our product roadmap, testnet incentives, token design, and exciting industry partnerships.

To stay updated on the latest Variational news, follow us on X @variational_io.