Today at CryptoNewsZ, we are joined by John Jansen, CEO and co-founder of cryptocurrency derivatives exchange, Deribit. A Bitcoin enthusiast, John is the architect of one of the most promising exchanges and is driven by perfection.
CryptoNewsZ: Hello and welcome to CryptoNewsZ John, our readers would love to know more about you and what sparked your interest in the cryptocurrency domain?
I first got to know about Bitcoin in 2012, and the more I learned, the more interested I was. This was also the year I bought my first bitcoins. At the time, the crypto space was at its infancy, and it lacked an efficient, multi-instrument marketplace. I saw great potential in Bitcoin and thought that well-built trading infrastructure will even further facilitate the adoption by masses.
CryptoNewsZ: Would you like to tell us about the inception of Deribit and the creative minds that conceived the idea?
I started my career as an options market maker in Amsterdam Exchange, and although since then, I have worked in various fields, trading and specifically options were always a passion of mine. Due to this, the idea of Deribit came quite naturally to me. In 2014, there were no crypto-options platforms, and I saw an opportunity. I founded Deribit together with my brother – Marius Jansen, and our CTO – Sebastian Smyczýnski. It was technically a very challenging task, as we wanted to build a high-performance system that is easily scalable. I think we were ahead of our time, as it took approximately 2 years after launching Deribit for crypto-options contracts to take off. Currently, we are the leader in the options market and we see demand for our services increasing every day.
CryptoNewsZ: Deribit started as a Bitcoin Futures and options trading platform. Please elaborate more about Deribit and how does it work?
Deribit is a crypto-derivatives platform that currently provides perpetual, futures, and options contracts for both – BTC and ETH. Derivatives track the price of the underlying asset and provide an efficient and low-cost way to gain exposure to the underlying asset’s price movements. All our contracts can be sold and bought, and therefore are an excellent tool for price speculation or hedging the risk. Our goal was to create a unified marketplace for traders of all backgrounds and we have achieved this by implementing incremental liquidation, competitive fees, and low latency.
CryptoNewsZ: Recently, Deribit proposed key changes to crypto derivatives exchanges. What are the primary problems associated with the current solutions to automated liquidation? How can they be addressed?
In traditional markets, trading is mostly done through a broker, has large contract sizes, and higher initial margin, therefore also manual liquidation. Crypto exchanges have removed these barriers for traders, thus requiring the use of auto liquidation. The current problems are mostly associated with price indexes having a low resistance to price manipulation, full liquidations of large positions causing increased selling pressure in the market, as well as simplified risk management causing trades to be executed below the bankruptcy price.
On our exchange, we have decreased the price manipulation risk by implementing a diversified index of multiple constituents, as well as price bandwidth. Moreover, our incremental liquidation system allows partial liquidation when the market recovers instantly, and ensures seamless unwinding of positions. As the last layer of protection, we have an insurance fund to avoid socialized losses in most critical market events. Only if our insurance fund got depleted, we would have to socialize losses. Until this day, we have never had to do it.
CryptoNewsZ: Deribit has integrated with Mudrex, a platform to automate your trading without writing any code. Would you like to elaborate on the same?
As an exchange, we provide a marketplace for trading, and therefore, we cannot provide any services that are directly related to trading itself. Deribit’s performance allows for algorithmic and high-frequency trading also in crypto space; therefore, we are happy to integrate with platforms like Mudrex.
CryptoNewsZ: Security is one of the greatest concerns looming over the crypto space. Deribit guarantees 99% safety of Bitcoins stored on its platform; how does Deribit address the security issues?
More than 99% of our funds are stored in cold storage; however, we also guarantee the full safety of funds in our hot wallet. Safety is one of our top priorities, and until now, we have had zero hacking attacks. We employ a geographically distributed, multi-sig, split key system, and guarantee that top safety measures have been taken. We are also exploring potential 3rd party custody solutions to learn if that would further enhance safety.
CryptoNewsZ: Deribit claims to be doing things quite differently as compared to other exchanges. How do you think Deribit will help reshape the future of the derivatives market?
The crypto industry is becoming more mature and is changing rapidly. We see more participants entering the market, especially traders from traditional markets. These clients are used to excellent performance. Moreover, regulators are catching up and demanding a higher level of transparency. Since day one, our priority was to create a high-quality exchange that would offer the performance standard of traditional exchanges. Due to this, we always prioritized fundamental infrastructure advancements over smaller-scale projects. This allowed us to be fully prepared for future demand. We did not want to compromise quality over short term profits. More traders are acknowledging this and choosing Deribit. I believe that Deribit is challenging many market leaders and will set the industry standard for high-performance crypto derivatives trading.
CryptoNewsZ: What are your future plans for Deribit? Should we look forward to new developments or announcements?
This year we reached a new 24h volume record of $3.5 billion traded. This is more than 10x the record of 2018. This rapid growth requires continuous updates, and our goal is to ensure the same stable trading experience that our clients are accustomed to. Our future system updates will reduce latency even further, catering to our high-frequency traders’ needs. Moreover, in the upcoming months, we are planning to introduce more altcoin pairs and launch a new user interface that will be customizable and more customer-friendly. Just recently, we launched the first crypto multi-asset block-trade solution, as well as Deribit Insights publication and Deribit Education track. We are always working on new projects and interested to hear our clients’ feedback.
CryptoNewsZ: You have phenomenal experience about the work dynamics of the crypto world. What parting advice would you like to give to entrepreneurs or investors who want to invest in cryptocurrency?
I chose to invest in crypto as I believed in the potential of technology, and I still do today. However, that is no longer the only reason for investing in crypto. Despite its volatile nature, cryptocurrencies have also proven to be a good tool for portfolio diversification, due to their low correlation with any other asset class. Crypto derivatives markets are offering a wide range of products; therefore, any investor will be able to invest according to their risk profile. When it comes to investing, always invest carefully, and consider the risks.
Thank you for your precious time, John. It was our pleasure interacting with you; we at CryptoNewsZ, wish you tremendous success in all your ventures.