Variational has signed more than $1 billion of open interest capacity with traditional-finance dealers, and Lucas Schuermann says that is the first tranche. The point of it is to hedge an instrument the platform is launching to replace the perpetual future.
Every other venue trying to list stocks, oil and gold on chain has done it by building an order book and paying market makers to quote into it. Schuermann's argument is that the depth being rebuilt already exists a few counterparties away, and that the right move is to connect to it rather than recreate it.
"We're not rebuilding liquidity. We're aggregating."
Schuermann co-founded Variational, whose retail platform Omni charges no maker or taker fee, quotes every trade from a single internal liquidity provider, and has taken what he puts at 12 or 13% of crypto's real-world-asset open interest.
The full interview is covered here so you can skip it. 74 minutes of audio, 27 minutes of reading.
Here are the 20 takeaways that matter.
👤 Guest: Lucas Schuermann, co-founder of Variational, which is building on-chain derivatives trading and previously worked in hedge funds, market making and high-frequency trading
🎙️ Host: Corey Hoffstein, co-founder and Chief Investment Officer of Newfound Research
📰 Published: 14 September 2026 on YouTube (Flirting with Models)
🔴 YouTube | 🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 1 hr 14 min | ✅ Time saved: 47 min
Key Takeaways
Every trade on the platform is quoted by one internal liquidity provider rather than a crowd of market makers
Knowing who is on the other side is what lets it quote retail flow tight
Zero maker and taker fees, with the whole revenue in the spread — and he expects the spread to fall as the platform grows
The answer to real-world assets on chain is to connect to traditional dealers, not to rebuild their order books
He put traditional markets at trillions a day against a few hundred million on chain
Perpetual funding is the problem nobody names: variable, unpredictable, and different on every venue
Weekend funding rates on early real-world-asset perps reached thousands of percent
The replacement is a swap — a price-return leg plus a fixed financing leg priced off SOFR
He expects roughly 4.5 to 5% a year against 7 to 10% for perp funding
More than $1B of dealer capacity is already signed, which he calls the first tranche and part of the moat
He expects most volume to move to swaps and will not rule out retiring the perp
The institutional pitch is not better prices but access: mid-size funds, family offices and corporates that cannot get an ISDA with a tier-one prime
1. Broker, Not an Order Book
Hoffstein opened by asking for a reintroduction, since his previous episode on Variational was with Schuermann's co-founder Edward Yu a year earlier.
Schuermann started with a joke about the division of labor. "I like to joke sometimes I'm the discount version of Edward." Yu is the quant; Schuermann came up through engineering and now sits mostly on the business side.
"We've been working together for the better part of a decade in hedge funds, in market making, HFT, and in crypto."
The company's goal is to bring derivatives trading on chain, and it takes two forms. The first is retail: "We're building a broker like model as opposed to an order book or an exchange using RFQ to match versus our users", with liquidity aggregated for real-world assets straight from traditional finance, zero-fee trading, hundreds of pairs and a single account with a single USDC balance.
The second is institutional, and it comes out of the founders' background in over-the-counter trading, options and structured products. The question there is how to bring institutional trading, settlement and clearing on chain.
His analogy for the whole project is what stablecoins did to payments. "How do we move the derivative trading piece broadly on chain? That's kind of our mission."
2. Why Zero Fees Still Pay
Hoffstein put the commercial puzzle to him: with no maker or taker fee, all the revenue is in the spread, so how can that spread be tighter all-in than a venue that charges fees on top of its own spread?
Schuermann's first move was to knock down the assumption that a hedger must be a price taker. Aggregating and hedging does not force you to cross the spread and pay taker fees on every order.
His proof is what a large market maker already does. Sell a hundred million dollars of bitcoin to one of them and they will go and build hedges across a range of venues — and that does not stop them quoting tighter than the taker fees on a major exchange, or tighter than you could walk the book at that size anywhere.
What Variational's liquidity provider does, on his account, is act like one of those firms. Internalize the flow, connect broadly to hedging venues, use the fee tiers that come with size, and end up quoting better than the sum of the parts.
The counter-intuitive part is that the biggest market makers produce the tightest spreads, not the widest. He noted that the largest firms make billions of dollars of profit a quarter and still quote tight into retail brokerages and exchanges. "The bigger the economy of scale, the cheaper they can be because the lower their fee tiers are, the better connectivity they have, the more internalization they have".
"Our execution costs are some of the best anywhere on Omni because we have zero fees plus very tight spreads." He expects them to improve.
The flywheel he described runs both ways at once. "We can actually simultaneously expand our margins, which is good for the protocol and reduce our spreads, offer better size to our users."
He also drew the line he says separates the model from a bookmaker: "we don't counter trade users".
3. Seeing Who You Trade With
Hoffstein pushed: a large market maker on an order book also hedges across venues and internalizes risk. So what is structurally different about the request-for-quote model?
"There are a few nuances here and I'll pack probably three of them, but let's start with the big one, which is called flow segmentation."
He was candid that the quoting mechanism itself is not the point. Request-for-quote is the matching primitive and an easy differentiator to explain; the real difference is that a single principal sits on the other side of every trade instead of an order book doing price discovery.
"We have full information about who's facing us." Counterparty, quantity and size arrive together, before the price.
The problem that solves is adverse selection, and he illustrated it with size. "No one in their right mind is walking the book on an order book." The firms posting that liquidity will see someone working through it — or splitting it over time on a public chain — and move the price, because their objective is profit per dollar traded.
The second half is that an order book cannot tell who it is trading with. A taker sweeping the book might be a high-frequency firm with short-term alpha, so the quote has to be defensive against that possibility.
What Variational optimizes for instead is the price it can show when it knows the flow is retail — someone entering a block or a day-trading position rather than arbitraging — which he said is a completely different quoting problem.
His framing of the product is access rather than technology. "So one of the ways I like thinking about what we're doing in Variational is democratizing access to that quality of execution and that style of trading, which is massively usually better for the end client than having to trade directly on an order book."
4. If the Books Turn Toxic
Hoffstein's next challenge was the second-order effect: if the benign flow migrates to Variational, the venues it hedges on are left with the toxic flow, which should make hedging worse and spreads wider.
Schuermann agreed with half of it and disagreed hard with the other half. The half he accepted is the question of how many crypto hedging venues will still be needed once retail moves to broker-like platforms.
The half he rejected is that it would hurt him. "This is the absolute dream scenario for us."
"It's a dream scenario for pricing because we know our flow is nontoxic, and therefore, we can quote it really, really, really tight while still monetizing nicely."
On the hedging side the same logic applies: an aggregate of benign flow is still benign, and therefore still wanted by the venues taking it.
The leverage that creates is the part he emphasized. "We have all the negotiating power in the world." Benign order flow is scarce even in traditional markets at equilibrium, which gives the party directing it a choice: hedge over the counter with a small set of counterparties, hedge into what he expects will eventually be crypto dark pools and lit pools, or go straight to an exchange.
He distinguished his own business from a market maker's on objective rather than method. A trading desk is trying to maximize profit on each trade; Variational, he said, tilts toward the best price rather than juicing the spread, because it is building a retail-facing product.
"I do agree with the premise that it will lead to a thinning of the herd" — the price-discovery venues do have to exist, the way exchanges do in traditional markets, but he expects fewer of them and a different shape.
"They are for order matching. They are for price discovery."
"I do think eventually, retail flow will move to a broker like model like ours."
5. Guarding the API
Hoffstein asked what happens to that neat separation when Variational ships an API, and answered his own question: what stops an adversarial counterparty plugging into it?
Schuermann said the defense is easier than it sounds. "But the reality is, to put it incredibly reductively, it's quite trivial to protect ourselves."
The line he draws is not retail against programmatic. He wants to serve people building strategies through an API; what he does not want is genuine high-frequency takers arbitraging the platform's prices.
The cost of letting that happen is borne by everyone else. "By definition, if we allow that to happen, we have to widen out prices for everyone."
So the plan is detection and per-account handling — monitor, identify, and protect where necessary, which he said still leaves almost the entire user base untouched because the firms capable of causing the problem are very few.
The tools short of shutting an account off are the ordinary ones. "Like, you can widen. You can add speed bumps, all sorts of stuff to stop the abuse."
His first-principles answer to whether a big firm would even bother: "Jump doesn't trade on Robinhood. That's just a silly premise."
6. An Ocean and a Pond
Hoffstein turned to the change of the past year: real-world-asset perpetual futures, around for years as a niche gold product, have exploded in volume and open interest — and venues have listed them the way they listed crypto, with external market makers quoting an on-chain book and then hedging in markets that are off chain and sometimes closed.
Hoffstein quoted Variational's own Series A language back at him: you cannot rebuild "forty years of traditional market depth from scratch on a crypto order book".
Schuermann's answer was a series of size comparisons. Traditional markets are decades of accumulated participants — high-frequency firms, banks, non-bank dealers, broker-dealers — layered on top of each other.
He was careful to credit the on-chain venues before dismantling the comparison, saying an oil book on chain is among the most tradable things there and still pales against a single traditional exchange.
"We're talking about markets that trade single digit and sometimes even double digit trillions a day versus markets that trade a few 100,000,000."
"These are exponentials. These are orders of magnitude, so there's huge differences."
The breadth gap is his second point. On chain, he counted something like thirty to fifty instruments with decent depth at retail size; outside that set, assets are either unlisted or quoted with spreads he called laughably wide.
What depth buys a user, in his telling, is not having to think. Trading a large-cap stock at a retail broker means never worrying about whether the book can support the trade, whether you can get out, or whether a thin weekend will liquidate you.
His picture of building a venue from nothing: "It's like a social network with no users. There's nothing there." "And I'm gonna have to incentivize and kind of beg and claw and give subsidies my way to getting that first little puddle of liquidity into the books and move up from there."
The metaphor he extended through the conversation is water: a puddle becomes a pond, oil has reached something like a lake. "But there's an ocean of liquidity out there in tradfi, and that difference is just too huge in magnitude to ignore."
7. Skip the Rebuild
Having established the gap, Schuermann gave his answer to it, which is to refuse the problem.
"We're not rebuilding liquidity. We're aggregating."
His objection to the incumbent approach is that it is a decades-long project. Competing head-on means incentivizing and negotiating venue by venue, market by market, while global markets move toward round-the-clock trading and the list of symbols runs to tens of thousands.
The distinction he insisted on is who you are actually connected to. Not crypto-native dealers holding a little traditional liquidity through a retail broker: "I mean directly to the largest dealers and, hopefully, in many cases, nonbank and even future bank prime brokerages that underpin these in the traditional markets."
"We're just going straight to where they're most liquid, which is on TradFi, and we're bringing them on chain by nature of this broker like model."
Where price discovery happens is what decides where a hedge goes. For crypto it is on a major exchange almost all the time; for real-world assets it is in the traditional venues.
8. When On-Chain Hedging Wins
Hoffstein asked whether there are still cases where an order is better laid off on chain than through the dealer network.
"Occasionally is the short answer to your question."
The one structural advantage he grants crypto is coverage. "I think right now where crypto has an advantage is indeed that product market fit on 24 by seven coverage." Outside those hours, and short of a venue pricing outside its bands, the answer is essentially no.
He was repeatedly complimentary about the leading on-chain venue. "I am a big believer in hyperliquid. I think they'll continue to succeed." "We've hedged historically on hyperliquid."
His reason for treating the advantage as temporary is that traditional venues are moving the same way — interdealer networks, prime brokers and exchanges extending hours, including additional single-stock listings — which he expects to pull weekend price discovery back toward traditional markets over time.
9. Dealers, Not Brokers
Hoffstein asked what actually changes between the two phases of the real-world-asset rollout: quoting against aggregated crypto liquidity first, hedging into traditional institutions second. Schuermann interrupted himself to correct a word.
"I would not describe our connectivity as to brokers. I describe it to dealers because that's where the pricing source is actually coming from", which he called the underpinning layer of liquidity in traditional finance.
"We're going straight to the source." He allowed that it is close to splitting hairs depending on how banking and non-banking institutions are classified, but said the distinction matters against crypto-native market makers who bring traditional liquidity in through proxies.
10. 13% of RWA Open Interest
Phase one, on his account, was a demonstration rather than the destination.
The goal was to show what the existing aggregation model could do for real-world assets: match the market, and beat most of what was available in crypto.
He gave the scoreboard. "I think we're at 12 or 13% of RWA open interest in crypto on the Crypto Perks by open interest share. Hyperliquid, think, at 70 plus. Most of the rest of the guys are at, like, one or 2%."
The design principles for phase one were to match the incumbent product: perpetuals, around the clock, hedged the way crypto flow is hedged, zero fees.
"But, yeah, they were hamstrung in a variety of ways." The hedging venues were crypto-native and therefore thin, and the instruments do not line up: "These perps are not fungible." Funding rates vary, index and mark price definitions differ, and real-world assets add different roll schedules across the dated futures underneath.
Solving that mismatch is, he said, a hard quant problem that exists only because the instrument is not aligned with what it is hedged against.
So phase two changes the instrument rather than the plumbing. "What if we redefine a new product category?"
"What if we allow retail to trade a PERP-like instrument, but that has a flatter funding rate, in many cases, directly flat, that has liquidity that comes from direct from TradFi because it's aligned on the instrument spec basis?"
11. Funding Around the Roll
Hoffstein stayed with perpetuals to set up the contrast, and pressed on a specific mechanical problem: commodity perps reference dated futures on a blended five-day roll, and someone has to set the funding rate around that roll.
His framing of how it normally works: on an order book traders handle it themselves. "They anticipate the price drift that's going to happen in the roll." They push the contract to a premium or a discount and funding adjusts.
Schuermann's answer is that Variational's funding is an aggregate of the effective funding on the venues it hedges into. Because the wider market is already converging the contract to its index, his platform does not need its own funding rate to do that job.
The difficulty is translating between venues. Each hedging venue defines funding, index and mark prices differently, so the work is producing one rule set that users can understand while still matching the fund flows on every venue behind it — which he called the secret sauce.
Hoffstein pushed further on what happens when the underlying market is shut, noting Variational's documents specify different index behavior by asset class: an exponentially weighted moving average to smooth overnight and weekend prices, equities frozen at the last value, commodities switching to a price derived from the platform's own book.
Schuermann deferred the detail to his co-founder and gave the principle instead: all of it is in service of one problem, which is that a perpetual is hard to map onto a market that stops trading.
What that produced in the early days is the strongest number in the section. On thin weekend books, "we'd see funding rates go to thousands and tens of thousands of percent over the weekend, and sometimes this was an intentional trading strategy by some individuals that we saw."
The iterations that followed — moving averages, smoothing, minimum and maximum bounds, delays — all address the same disconnect, and he credited the leading venues with the experimentation.
"We kind of stand on the shoulders of giants when it comes to our broker like or our aggregator model because we're not trying to be the price discovery venue", which is what lets him borrow their conventions rather than set the market price himself.
12. What a Swap Actually Is
Hoffstein described the new instrument as a price-return vehicle plus a financing leg, cash settled, with a retail contract-for-difference or an institutional total return swap as its closest traditional cousins, and asked what problem it is meant to solve.
Schuermann answered the last part first. "This is the problem that no one talks about with perps." The complexity and unpredictability of the funding rate and the basis, especially for a retail trader.
The use case he has in mind is deliberately plain. "If I'm a retail trader and I want to long Nvidia with some leverage, whether or short even, I wanna take a delta one position."
"Perps are great, and they were popularized in crypto versus options in more complex instruments, specifically because they're supposed to be simple." Simple is exactly what they stop being once the underlying is a real-world asset: hold one over a weekend and the basis can move, hold one for weeks and many platforms pay no dividend.
The design target is the institutional instrument, not the retail one. "I would compare the most to a total return swap because our goal is to approximate the return of the underlying as exactly as possible, including passing through dividends" — along with other cash flows and corporate actions.
What makes it possible is the same thing that makes it hard to copy. A contract-for-difference or a total return swap always trades against a dealer on the other side; on chain that dealer is Variational's own liquidity provider, and off chain the risk goes to traditional counterparties.
"This is the moat. That is the systemic innovation. That is the unique advantage. No one else can pull it off. This isn't something you can do on an order book."
For the user, the whole change is in the financing leg. "Well, that funding leg is fixed. It's just a cost of carry, cost of capital in some sense."
"We expect it to be around a 100 bips to SOFR, plus give me a little rope on that depending on exactly where our economics lie as we are rolling it out in the next few days."
"I would go so far as to say that solves in almost every respect as a superset, meaning strictly better than a perp."
And the level matters as much as the stability: "In many cases, this spread to SOFR, in other words, the USD borrow rate, is gonna be substantially lower than what we usually see as the equilibrium rate set for PERPs, like more in the seven to eight to 10% per annum, this is probably gonna be in that 4.5 to 5% range."
13. Perp or Swap, for Now
Hoffstein pointed out that a user searching for a stock will see both a perp and a swap, and asked how anyone is meant to choose — and whether the perp eventually goes away.
Schuermann accepted that the first obstacle is not economics. "I think, frankly, one leg of this is gonna be education." Swaps will be new and strange for a while, and everyone already understands perps.
Both will be listed in the near term. "Users should trade perps if they specifically want exposure to the funding rate or in the near term if they want the ability to trade at 24 by seven."
His view is that the round-the-clock access comes at the cost of unpredictable funding and thinner, crypto-native liquidity that can push prices around at the weekend — on every platform, his own included.
The swap's limitation is the mirror image: it trades in traditional market hours, because it is hedged exclusively into traditional finance and that is definitional to the product. What he gets in exchange is depth, and hundreds — soon, he says, thousands — of markets available at traditional-finance execution quality from the moment they are switched on rather than bootstrapped one at a time.
He expects that limitation to fade, because the venues he hedges into are extending their own hours. "And our goal is always to aggregate from as much TradFi liquidity as we can", including dealers, alternative trading systems and electronic communication networks that will run around the clock.
On retiring the perp he stopped just short. "I don't wanna publicly commit that we would be sunsetting per se, but I think there is a world in which we eventually look to kind of merge these definitions", or at least steer most flow into swaps.
He also allowed that basis traders and other sophisticated users may keep trading perps alongside.
14. Where the Carry Comes From
Hoffstein asked where the financing rate actually comes from, noting that an institutional total return swap usually has a fixed rate because it has a known term — and a platform swap does not.
"The short answer to your question is it's a spread to SOFR."
"Here, it's flat and predictable, but not necessarily fixed, meaning for an indefinite term."
What moves it is policy rather than the platform. "The main driving factor that would change it in rates across literally everything else in our lives, including our bank accounts and what have you, is the US Fed policy essentially." His comparison was a bank account rate: not repriced day to day, but not immune to global monetary policy either.
He flagged exceptions and kept them small. Overnight holds, rolls and the financing structure behind some global commodities may build in a little slack — small in magnitude, he said, next to perp funding rates.
The design target for a retail audience is predictability and the cheapest cost of carry available, and he argued the instrument serves both.
15. SOFR Plus 100, Not 300
Hoffstein tested that with his own recent experience in the market Schuermann is copying.
He said he was quoted on single-name total return swaps on US-listed equities in January at SOFR plus 100, and more recently at closer to SOFR plus 300 on the same names. The explanation he was given was balance-sheet availability, in a period he tied to the SpaceX listing and to heavy demand for leverage through single-stock levered exchange-traded funds.
His question was whether Variational's swaps on popular single names would show the same intra-year drift.
"In short, my expectation would be no." There are mechanisms for anomalous periods when the cost of dollars rises quickly, he said, and that is more likely in commodities with complex financing stacks than in US single names.
"I expect that to be true of swaps for pretty much everything", with the qualification that the commercial arrangements with the dealers involve limits and understandings about what the platform's scale should buy in financing spread.
His argument for why his rate should be steadier than a small firm's is who is negotiating. Scale buys both a lower spread and a flatter one, because these are markups on balance-sheet availability from banks, primes and dealers — and a large allocator's prime relationship prices very differently from an individual firm's.
He left an explicit escape hatch: the agreements contain fail-safes, because markets change.
16. $1B of Dealer Capacity
Hoffstein asked about the recently announced billion dollars of open interest capacity: does it sit behind the swaps only, and where across asset classes is it most available?
Schuermann's first point was about the scale. "a billion dollars is just us getting started." "This is a first tranche of commercial agreements we did with some early partners." More are in discussion, covering more assets and more global markets.
The achievement he wanted noted is not the number but the integration — meeting traditional dealers where they are, connecting to their existing desks, and arranging commercial terms through the platform's off-chain component.
It can be used for perps, with caveats. There is a basis between a perp and a swap or total return swap, and a question of where limited capacity is best deployed. The platform has already used some traditional liquidity in perps — a step it called phase 1.5 — but expects to use it there sparingly and to point the good liquidity at the instrument that is aligned with it.
Capacity is not concentrated in one instrument. As with any dealer relationship there are limits on how much open interest can sit on a single name, and fail-safes alongside them.
What the size signals, in his reading, is conviction from the other side. "I'm actually quite proud of that we've been able to negotiate that much capacity so early on for an as of yet unproven and unreleased product category."
"It shows the faith that these partners have that swaps are really gonna take over and replace perps very quickly."
17. What Binds the Growth
Hoffstein asked what the binding constraint is between today's platform and Schuermann's stated expectation that on-chain real-world-asset exposure eventually exceeds all crypto exposure: dealer capacity, regulation, or the firm's own capital.
He named three, starting with capital. "We do not rehypothecate user balances." User funds sit in isolated smart contracts — "We call them settlement pools. They're essentially escrow contracts." — while a separate balance sheet collateralizes the liquidity provider's positions.
He described that balance sheet as growing and as increasingly easy to fund as the system scales, and as part of the defense. "I mean, it's not trivial to access billions of dollars in open interest capacity with dealers."
The second constraint is connectivity, which he called solved in principle. The ambition from here is breadth: "I want tens of thousands of listings." He has partners for the major indices, developed-market currencies and US single stocks — "But I want the weird stuff. I want everything." — and wants Asian and European markets and a hundred currency pairs rather than ten.
The third is commercial: risk limits, and both sides getting comfortable. He expects swaps to scale fast but on a curve rather than a step, on the platform's own limits as much as the partners'.
The numbers he gave for the current base: about $500 million of open interest in real-world-asset perps, about $1.5 billion across the platform, against an on-chain market he sized at roughly $10 billion or more.
The target he named is not another crypto venue. "We wanna go after the brokers globally with this new platform."
18. Institutions With No ISDA
Hoffstein turned to the institutional ambition, and asked what a platform like this offers institutions that already have access to swaps.
Schuermann split the answer between the two products, and on the retail platform his point was that the set of institutions with that access is far smaller than it sounds. "But the vast majority of still what I call institutional participants don't."
His examples were a family office in Malaysia or Indonesia, and a mid-sized US hedge fund that cannot get an agreement in place with a tier-one prime broker. "There is a lot of red tape here", and removing it is the part of crypto's premise he thinks is real.
The split he drew is three ways. The very largest funds facing a major prime broker have everything already. "If you're retail, absolutely not, and that's where we're structurally bringing the menus and the benefits to retail." In between — mid-sized funds, prop shops, family offices — access is not a given.
The category he said is missing from the conversation entirely is non-financial corporates with hedging needs. "Do you wanna do that on a platform that's crypto native, has dubious execution depth and quality, and this variable basis and funding rate that I can't predict? No." A predictable cost of carry on a familiar instrument, collateralized in a stablecoin, changes that calculation for a company hedging currency or oil exposure from Southeast Asia.
19. Pro Is Clearing, Not Depth
The institutional platform, which he calls Pro, is a different proposition from the retail one.
It is aimed mostly at options, structured products and other over-the-counter derivatives — nonlinear products rather than the delta-one instruments on the retail side.
The value it offers is not aggregated liquidity but the transaction itself. "This is a multi dealer platform to handle the life cycle of trading, settlement, and clearing. It's not liquidity aggregation."
Multi-dealer means the counterparty is another firm quoting you — his examples included traditional options market makers and crypto-native desks such as Wintermute.
What is being replaced is a workflow, and he listed it. "But what we're providing there is bringing the whole flow on chain, not calling each other to get a quote, not doing price discovery on Telegram, not paying ridiculous fees to intermediate agents, and not having ops teams in the Global South moving funds around with email confirmations."
"It's laughably antiquated", and his comparison was the one he opened with: stablecoins against the existing wire and messaging systems.
20. Power, Compute and Robots
Hoffstein closed with the question he has put to every guest for two years: what are you obsessed with outside work? Schuermann asked to give two.
The first is half work-adjacent: power and compute markets, which he has been studying through actual power deals and projects, and where he expects Variational to make moves for both platforms.
What interests him is the formation itself. "We're watching kind of a recommodification of a new type of commodity."
The second comes from his own research background in robotics — computational physics, training robots in simulation, transfer learning, and a period at Google X working on its robotics efforts. He said the colleagues he worked alongside as PhD students now run labs and teams.
His caution about the field is a historical analogy. "I like to liken it to self driving cars." "I think people have gotten a little bit over their skis in terms of thinking about how far we are along to productionizing these things."
"I remember in the early twenty tens when everyone was like, every car is gonna be driverless by 2020." Then came a shakeout in which most of the companies died and Waymo did well.
His actual forecast is bullish on a longer horizon. "I think we're gonna go through some booms and busts and some cycles, but I think within our lifetime and probably still in the very near term, grand scheme of things, we're going to have general purpose robots just everywhere in all parts of the economy."
Bonus Insights
Schuermann said an API is on the road map but does not exist yet, which is part of why the platform can quote the way it does today.
He described the firm's aggregated liquidity as a superset of what it is connected to — the hedging venues plus its own market-making system layered on top.
Hoffstein noted that one on-chain venue has built genuine depth in Brent crude, which Schuermann accepted, calling it a lake rather than a puddle.
Hoffstein's own disclosure ran at the top of the show: he is co-founder and chief investment officer of Newfound Research and does not discuss its funds on the podcast.
On options and structured products, Schuermann noted that a swap-like instrument with a date attached becomes a dated future, which is how the delta leg of an options trade would be handled on Pro.
Schuermann's bottom line is that the perpetual future was a workaround for a liquidity problem that no longer has to be solved on chain: connect directly to the dealers who already make the deepest markets in the world, align the retail instrument with what those dealers trade, and the variable funding rate that made a perp unpredictable to hold becomes a flat spread over SOFR.
Products, Companies & Tools Mentioned
Variational (Schuermann's company; its retail platform Omni charges zero maker and taker fees, quotes through a single internal liquidity provider, and holds what he puts at 12 or 13% of crypto's real-world-asset open interest)
Hyperliquid (The on-chain venue he repeatedly credits and says he has hedged on, and which he puts above 70% of real-world-asset open interest share)
Jump Trading, Hudson River Trading and Wintermute (His examples of firms whose scale lets them quote tighter than a taker could walk an order book — the model Variational's liquidity provider is built to imitate)
Robinhood (Used to make the point that a tier-one trading firm is not the counterparty on a retail brokerage: "Jump doesn't trade on Robinhood")
CME Group (His benchmark for what real depth looks like in a single commodity book, and one of the venues extending trading hours and single-stock listings)
Optiver and Orbit Markets (Examples of the dealers that would quote the other side of an options or structured-product trade on Variational's institutional platform)
Waymo (The survivor of the self-driving shakeout in his analogy for where general-purpose robotics is in its cycle)
Google X (Where he worked on robotics efforts before Variational)
Newfound Research (Hoffstein's firm, named in the show's standing disclosure)
If this was worth your time, send it to someone closer to the industry than you are.
Get the latest market chatter as it happens: