# Next Gen of Trading: How Markets Evolve | Simran Singh, Katie Talati, Peter Choi, John Peurifoy - Channel: [Ethereum Denver](https://streameth.org/ethereum-denver) - Date: 2026-03-09 - Duration: 24:10 - Topics: ETHDenver, Crypto, Web3, Blockchain, Event, Conference, ETHDenver 2025, ETHDenver 2024, Bitcoin, Ethereum - Watch: https://streameth.org/watch/yt-w6bTUEdNzlc - YouTube: https://www.youtube.com/watch?v=w6bTUEdNzlc ## Description πŸš€ Get Ready for ETHDenver 2026! πŸš€ We're already hard at work preparing for next year's biggest Web3 event! Keep your eyes peeled for more info on ETHDenver 2026β€”it’s going to be epic! 🌟 ## Transcript Hello. Hello. Here is me again. Uh, okay. So, our next talk, this one also is exciting. All talks are exciting. So this one is about the death of passive yield. Why DeFi needs a real work? So as AI and robotic robotics reshape the world, their computer power can and can can anchor a new kind of a productive finance where onchain returns and build next generation of trading. There you go. Yes. Yes. Yes. Sorry, I was I was testing if you're paying attention. Apparently, you did. Okay. So, next generation of trading, how markets evolve. Now, we have Sim Siman Siman Singh from Monaco Research. We have Katie from ARCA. And we have Peter from JPEG Trading. Come on. Thanks for the correction and paying attention to my talk. All right. All right. A test. Okay. Yeah, you kind of hear me. All right. Well, I wasn't uh important enough to get a intro, but my name is Kelvin Sparks. I'm a researcher and podcast host at the block. I'll be moderating this discussion and GM in the PM everyone. So, maybe to start out, we'll have our guests go along the line and introduce yourselves, then we'll get into it. >> I I will say it's the first time. Is my mic on? >> Yeah, it's on. >> All right, cool. It's the first time everyone I've ever heard anyone say uh GM and PM. So, I I respect that. I like that a lot. Um, yeah, turn it into token. Uh, tokenize everything. Um, it's great to meet everyone. My name is Peter. I'm from JPEG Trading where I am a partner currently. You might have seen our logo around this week. We're we're trying to make a good old push on that side of things. But long story short, JPEG trading, we're a prop trading desk and research firm. Um, so we do a lot of prop trading as obviously. Um, we do a lot of token market making things as well. A lot of engagements directly with different venues, whether they be on or offchain. Um, spend a lot of time doing, you know, allocating to DVL deals. um venture investing just wake up and try to find interesting opportunities to trade and invest in and make some money. Um but that's us. >> Uh hello everyone. Sim Singh, CEO of Monaco Research. Uh Monaco is building a global trading network that takes compliance first because in a world where you have to choose one or the other. It's the compliant answer that inevitably wins long term. Uh we're marketing this as very much the last trading exchange that you'll ever need. >> Hello, I'm Katie Totti. I'm the director of research at Arca. We're a crypton native asset manager. Um, we've been around since 2018 and we have a family of three funds that I oversee the investment research for. Um, and our flagship fund is a liquid token fund. So, very familiar with the token trading space. >> Nice. So, without further ado, let's get into it. I think, uh, Simron, you and I were having a very interesting conversation last night on price execution. I mean, right now it seems like ME market making and even validators are all starting to converge and fight for the same resources while also trying to get users the best prices. So, could you speak to some of the work that you're doing in that area as well as where you think things are headed? >> Sure. I think uh people throw around the word liquidity fragmentation a lot. Uh what that really just means is the 0 to1 of crypto was self-custody and then people went out and made 4,000 versions of the same thing. And so then if you have to keep the price of ETH on chain one versus chain two together, there needs to be something that brings those together. Uh and I think the way that you do that is by having an overarching network that is able to solve the best price for you. And so you have developments like cow swap or any honestly RFQ platform that's developed which serves as a meta aggregator. Uh the conversation that we were having last night was more geared towards prop amms which are this innovation which dare I say combine off-chain matching elements with onchain settlement which I strongly believe is probably the inevitable asmtotic conclusion for how execution is going to be managed. If you limit things to be fully onchain we know for a fact that this is uh not nearly performant enough when you're talking about actual HFT. Retail may not necessarily care about do I pay an additional two bips or not but when you're talking about billions and billions of dollars of assets flowing if not trillions those additional bips add up and so execution actually matters >> absolutely and with that you're talking about execution this respect to product products that people want to trade we saw a Cambrian explosion in HIP3 per volume this is uh on hyperlquid derivatives contracts that uh really captured the hearts and minds and felt like all of crypto for a few months one of the things that I thought was interesting was precious metals coming on chain and with that silver uh during that massive nasty draw down. I think Hyperlooka captured about 2% of open interest on that day. Uh Katie, I see you nodding. I'm going to pass it over to you. Like do you think Pers will ever be a product that is going to be widely used by retail? >> I mean I think you're already kind of seeing that and you're seeing that interest there because you essentially can use PERPS on pretty much any product that's out there. Um, and you're seeing the adoption in TRFI as well, which I think kind of legitimizes it. I will say though, I think for kind of that mass retail adoption audience, it kind of has to be treated like options because you hear again and again, right? So many like people are like, "Oh my god, I liquidated my whole portfolio because I was like trading well first years ago it was on BitMX and then it's on Binance and now it's on Hyperlquid." Um, but it's the same story which is like really like we shouldn't unfortunately we shouldn't give like everybody the same access to each financial instrument. like you should have some base knowledge of like how portfolio margin works and like you know what does it mean to take on like two three 10x leverage dare say 100x um and like how that can essentially like liquidate your assets because it does it ends in a lot of like s like so stories unfortunately but it is a really great method of essentially you know making more capital efficiency out of what you have if you know how to do it the right way and if you can bear the risk >> very eloquently stated Pete oh did you want to add something >> oh Yeah, sure. I guess. Um, no, I think that's a great point. Um, and I know you briefly bring up kind of the education aspect of how to kind of get retail users to to really be prolific around per trading and I don't necessarily I'm not convinced yet um that we will ever kind of get to that point. Um, and I also do think that like crypto education and onboarding all that that's an entirely conversation. But I I guess I bring up the mic just to kind of underscore the importance of per markets being developed and being matured over the years in crypto. Um, I think we kind of woke up overnight and it kind of almost became natural course of action, right? There's a spot market, eventually it matures and there becomes a pers market. There's always that volume flow there. But I think it's gotten to a point where we really kind of have maybe forgotten about the just genuine trading benefits PERS markets have brought to crypto and having it take a life form that is a little bit more sophisticated and institutionalized, right? Where like back a couple years ago, spot was really the signal, but you really only have a portion of the picture because it doesn't tell the whole story. Now you kind of have per where you are able to do a bunch of more sophisticated strategies and things along that line. So um the growth of per has been tremendous for you know sophisticated trading shops. Um but not only just for us for those who are really kind of gearing up into more derivative tradings or other more you know um I guess high level strategies rather than just longing spot. Peter, I was going to ask you though because like one thing and this just popped in my head like I do think we've seen more now though when the pers market outpac this spot by so much volume that you do start to see more manipulation because it's easier to manipulate those per markets and then therefore under like manipulate the underlying spot because it make it can make it look like somebody's buying spot when in fact they're not. >> Yeah. I to that honestly in my mind right it's kind of growth stages is kind of how I see it right like when we're talking about something incredibly nent um like derivative markets and the function of that part aren't particularly new um by any means but kind of introducing perpetual futures into crypto like yeah it's been you know um growing over the years and I think that it's just a natural course of correction that does need to take place um there's going to be kind of a byproduct of market manipulation or other kind of market events or kind of things that people can do to not have the cleanest trading activity. Um, but that's partially I think a responsibility of a at the protocol level, b if it's a centralized venue, then partially in the centralized venue as well, but also a couple of dynamic uh, sorry, a couple of like I suppose market dynamics um, that could be set into place to kind of cover those things that you're describing. Um, but yeah, I see of it more as a byproduct now more than anything else. Um, I think on a net basis, it's done definitely net good rather than harm. Um but yeah, I >> I was just gonna add I think the development of per volume and the fact that it's seen such a surge compared to spot is a byproduct purely of market microstructure, right? You have dated futures that exist in traditional finance because the actual original use case for futures was to hedge, right? There was an actual physical spot thing that you were hedging. My background is in oil trading at Goldman and it's like you can actually smell a barrel of oil and go down to Cushing, Oklahoma and and see it. Uh and so if you want to hedge against the price of that, you probably want to sell a WTI contract uh to lock in a price if you're an oil producer. Or if you're an airline, you want to hedge in uh fuel costs, right? And so when you approach it from that perspective, there's an actual reason to drive this mechanic versus in crypto, we know that in an era of hyper financialization, all I really care about is cheap access to directional leverage, which is also why you haven't really seen the emergence of liquid altcoin options markets, right? Right. And so I think like it very much is easy to manipulate the underlying oracle price because there isn't something to peg it to because the demand is very much more for speculation than hedging. >> Well said. Well said. And one of the things I was curious about now with respect to new kinds of structured products. We're seeing a lot of these CD5 vaults start to pop up. One of which that's notable is Chaos Labs launched one recently with Kraken. So as folks are looking for these strategies, they want to earn high yields. How do you think about mitigating that risk for maybe an incumbent who's coming into crypto doesn't really know much and doesn't really know how to underwrite smart contract risk? What would you say to these instit say to these institutions who are curious but don't necessarily know where to start in DeFi trading? >> I I mean so I it's funny you say this. I actually wrote a piece about this like three weeks ago. >> Oh, perfect. >> Every form of yield in crypto and like I'm generalizing here but it's actually quite true. Every form of yield in crypto is one of four things. The probably most real form of cryp uh yield is RWA, right? I'm tokenizing treasuries. Uh I'm being charged a liquidity premium if I'm tokenizing private credit. There's an actual fundamental cash flow that's driving that yield. That is one form of yield. The second form of yield is lever looping or funding trades. Right? There's a dislocation. People want access to leverage. I'm getting compensated by collecting funding by going the other side of the trade by providing access to that leverage or it's running leverage looping strategies on more phone. The third bucket is selling some sort of options, right? So when people talk about structured products in crypto, I always have to stop myself from chuckling because structured products in crypto is is trying to like put a Ferrari engine in a horse car, right? It's like structured products in trifi are quarter variants like things that sound like Greek to everyone including myself very much because the underlying market is liquid and there's actual um primitives that you can use to hedge. Structured products in crypto means selling optionality as a yield product, right? Right? And so that that's the third form of yield. And the fourth form of yield, which I actually don't include as yield, but often gets bucketed, is inflationary dynamics, right? Which is like VC based incentive. I'm trying to bootstrap liquidity. Let me throw money your way and lock in TVL deals. And so if if someone is entering into the DeFi landscape, I would argue that if they're trying to optimize for yield, they need to understand like yield comes from being compensated for taking risk. These are the basic primitives and building blocks of that risk. And then you have to choose does this make sense? Is this a long-term sustainable thing or is the 30% that I'm getting from Inker uh probably fugazi fugazi tawazi tuzi? >> There's no free lunch. >> Yeah. I mean straight up you guys you guys are hit it on the head like money does not grow on trees. any type of a stable coin, LPD, whatever it might be, a vault, CD5, vault, whatever. Like anytime yield is mentioned, it's being derived from something, right? And I think oftentimes people just forget to ask the right questions. And even if it's not even talking about the yield generation aspect of it, but let's talk about the settlement side of it, too, right? Like what are you receiving these, you know, what are you receiving the yield in, how is it settled, you know, what are the controls around these assets, right? Like so there's a lot of due diligence questions that admittedly are very difficult for non-cryptofriendly people um to know even fundamentally that they have to ask. Um it's a challenge but I don't know you've got the guy who wrote the paper on it here. >> I mean crypto is still everything you don't know about money combined with everything you don't know about computers but we are getting better over time. >> Yeah. Exactly. >> Well said. >> Well one thing I kind of want to move on now to is talk about these trading venues. If you look at what's going on, the wars between centralized exchanges and decentralized exchanges, uh, as well as the different products that are offering there, maybe Katie, this could be an interesting one for you. How do you see this playing out as it seems like they're almost fighting for market share at some level? >> Yeah, I mean, my original thesis, and this was like years and years ago, but you know, we we definitely saw the, you know, people are distrustful of centralized exchanges, and that's just because of the nature of, you know, you're having them custody your assets. And so over time, and I know people who've been in the space far longer than me, they lost money in the Bitfinex hack. They lost money in um, you know, get Bitco, you know, places that were supposed to be safe and everyone says not your keys, not your crypto, right? So like it made sense to in, you know, when Uniswap launched um, that we saw kind of this move towards the decentralized exchange because people could have, you know, assets in, you know, in their own custody. But the trade-off is that at the end of the day, an AMM is not the same as an order book. And in order to kind of have that orderbook technology, you can't really decentralize it because it introduces a ton of problems with things like front running, sandwich attacks, etc. I mean, we could go into each of these in depth, but the problem with that is that I still think you see people then gravitate towards the CDFI products, right? Or the places that are decentralized, right? So you have things like Hyperlid where it's a closed validator set, so they can offer the orderbook product. There is still some front running though that happens as we know. Um so I think I think that people want to go to the totally decentralized route. I don't know if it's going to be possible unless we have far superior technology introduced especially on the privacy side. >> Oh that's an interesting point you made and one of the call outs you said with respect to me. If you don't know who Jared from Subway is, look him up. He's a sandwich attacker. He's alive and very very well. Uh the meb bots still do work. But I digress. But we don't have that much time left. So with 8 minutes and 30 seconds, Peter, I'm kind of curious like uh AI, how is that going to change how we think about financial markets and trading? >> Uh I I say D all the above. Um no, I mean it's it's it's a massive umbrella topic and the beautiful thing about it is I think that we've only really begun to scratch the surface around these things, right? like we're thinking about the most simple applications of decision-m of effectively just efficiency and like those kind of very general problems that we face every day in financial decision-m and tossing AI or a chunk of code at the problem and saying think about this for me solve it for me not rinse and repeat the problem um the answer to your question I don't know um that that's >> what are you curious about then >> what's that >> what are you curious about then with respect to what you can do with AI and onchain finance or transactions >> yeah the things that are really interesting to me are obviously the agent stuff that are going on um there's this project called Giza. Um they're they're still around and they're doing they're doing pretty well. Um but they're pretty early on into the agent game, right? They're effectively building agents that you can teach it very very specifically the the the trading strategies you want it to follow and it self self uh executes itself across multiple chains. It's very interesting stuff. Um I think for us like when I think about kind of AI and how it's going to be used and I guess my day-to-day life and the firm's day-to-day life, I just look at our day like a pie, right? right? And like think about where I'm spending time. Um, and if AI can come in and ease some of the operational side of those things, that's exciting for us, right? And then we start to think about like this on a long-term scale over a period of a month, a year, how much time is it saving? And if it gets to a point where in which the dollar, it's like the the the brain cells spent or yes, the brain cells spent per dollar earned um is is is leaning towards, you know, not being worth it, then that's an application that we're not going to use. Effectively what I'm trying to say here is that there are things and applications in which AI is really good for specifically in trading crypto and trading on DeFi scenes. Um but I think there are a lot of things that are just oversaturated and honestly we're trying to solve a problem that doesn't really exist yet. So I'm on the side of trying to wait to see what the true applications and powerful things are going to be on but we've invested into a couple of different people Giza specifically um that we really do find interesting. So I'm down to really kind of explore and observe how this agentic AI stuff uh develops specifically for DeFi applications over the next six months or six to 12 months. >> Understood. Better than me. Usually I say Claude, make me a billion dollars. Make no mistakes. Uh >> I use it every day too. You know, it like scans my Telegram stuff and my Slack channels. But um yeah, for for DeFi trading applications, I think it's the most interesting and most native use case that we probably have for it. Um but then you start to call into other themes and you know schools of thoughts like hey you know vulnerability risk and all these types of things that you know >> agree these still these things still definitely do need guard rails and with that uh you don't want to get prompt inject or any weird type of hallucinations things of that nature but it is fascinating with small amounts of capital not financial advice do your own research and all the other disclosures but uh that being said I think someone touched on privacy earlier what role does privacy uh play in DeFi I mean a ton. I right now I think probably one of the biggest gating factors for institutions to really adopt you know some of the DeFi primitives that we have whether it's trading on chain using lend borrow protocols even using stable coins for payments is that everyone can see what's going on and how much you're sending and who it's going to and even though it's you know pseudo anonymous you're sending it to a wallet you don't necessarily know the owner there's a lot of people who've been doxed these days so you can figure out you know who owns it especially if they're using an ENSETH address um and so I I do think that you know privacy has to be on the road map for any of the major L1's for any of these kind of like major products. That said, it is really like a hard thing to institute. Um I think there's some like really great work going on on some of the L2s. I think that you know we've seen like a lot of projects are trying to really make you know privacy this novel thing but kind of like all technology in this space there's you know we get two steps forward but there's at least one step back in terms of like you there's always a trade-off. Um and so I do think like privacy will you know you will need to get that. But I think unfortunately that's why we're starting to see the rise of some of the more like enterprise chains that have come out in the last year or two because they need that like opt-in privacy feature for their users. Um and so I think it'll be really interesting to see in the next few years like can Ethereum you know like come back and capture some of that or is it going to be like layer 2s that are really specific for these you know trading instances. I think it's a question with no answer just yet. >> Yeah understood. So maybe then to get even more meta, predictions of the future are oftentimes wrong and predictions about technology in the future oftentimes even further off. But think about like uh darkpool volume versus spot volume, retail and crypto. Uh which do you see being the dominant in maybe two years time? >> You said darkpool volume versus spot volume. >> Yes. Oh, by far darkpool volume, right? I mean, >> yeah, that would mean the institutions are here. >> Yeah. I mean, yeah, I would hope so. Um, if you look at the US equity market as a proxy, right? uh I think 55% on average of US equity volume that is traded is actually off exchange right and so in the context of privacy that becomes super important uh what whenever I first hear privacy I actually always think about two things one is when uh if you go on crypto Twitter you hear people like oh market maker so and so x moved you know these funds from A to B or put on this position and I'm just like did you ever think that you were only seeing one side of the equation like maybe it's a delta neutral trade, right? And so or even in trad open interest like institutions have never been shorter BTC futures and it's like well what is the actual implied basis? Maybe they're just putting on a basis trade or or like ETF inflows are seeing massive, right? It's it's the same thing. So if you're only seeing one side of the if only one side of the equation is transparent, I think it leads to one just like the wrong signals or wrong narratives. So that that is one reason why this is important. The other reason I think it becomes important is whenever you have massive flows, right? Think about index rebalancing. Billions and billions of dollars is being rebalanced on a very consistent basis and if you can frontr run that flow. If I know the largest asset manager in the world is about to buy it, right? That's a pretty clear signal. So privacy remains a very uh top often consideration and so you have things like uh Zama and Phoenix fully homeomorphic encryption that are trying to solve this. The challenge becomes when you have cryptographic complexity with a requirement for low latency that is a non-trivial problem right you could either be like very very encrypted but then you have fragmented liquidity because you have confidential tokens right and so you have to meet that standard and a lot of latency uh or you have high high performance systems that are operating on the order of like singledigit millies if not like 13.9 ticked trades but then like it's going to be very non-confidential >> understood and I only have about two minutes left of these Gigab Brains times. So I'd be curious to ask what are you most interested or want to spend more time exploring with respect to the future of trading these days? >> I mean the obvious answer for me at least is like how do we see traditional markets come more onchain um and more so along the lines of tokenization. Um I do think that you know we have a lot of assets in the space. Um but there's a lot of things like memecoins which like at least for me as a fundamental investor there's not really a place for that in my portfolio but you know buying you know tokenized stocks buying you know actual tokenized real commodities like they're you know that is kind of the future we're headed towards and so that I'm excited for but it's not coming this year. It's going to be many years of slow progress on that one. >> Yeah I'm I'm excited to continue observing the race between CFI and D5 parties at play. Right. And the CD5 thing um I think it was talked about earlier where we you know take one step forward or two steps backwards and things like that I think are very indicative in crypto specifically you talk asked about AI earlier right and we talked about privacy or we talk about the battle between CD5 right we're always doing this thing where we see something cool we see something innovative and there's a billion people trying to put a different rapper on it make a different type of version of it um and we start to over complicate a problem that started off as relatively simple um so I I I think in my mind this year there's going to be a lot of variance in flow between decentralized counter centralized venues and uh DeFi venues and stuff. We saw the wave of per deck's being exploded on last year and everything. I'm interested to see and observe like which ones die out this year quite frankly speaking, which ones survive and the mechanics of which they do live on by. Um and I think there's going to be a lot of signaling um as to what those things are. Um I'm excited to watch you guys grow as well at Monaco. Um and so I think those things are the things that are really going to be interesting to watch especially in the market environment that we are in, right? like liquidity is not as, you know, easy to come by from allocators or things of that nature as it maybe was 6 months ago. So, um, yeah, just interested to see how the money dries up, where it travels to, how it's traded. Um, and if it really does start to shift in DeFi's favor or in this time of consolidation, we do see C5 powers coming to play a little bit more prevalently. Sim, we got like 15 seconds. Uh, last take. >> Tokenization taking over the world. >> Mic drop. There you have it. Thank you for attending, folks. So, I hope you enjoyed the talk. Cheers. >> Thanks, Brad.