Another L2 chain has pivoted—Derive, which focuses on on-chain options, has decided to scrap its Derive chain (an L2 built on the OP Stack) with the launch of V3. They’re moving custody and settlement validation to Ethereum L1. Execution will happen off-chain, using a centralized sequencer + off-chain matching. Margin/pricing/settlement logic will run in zkVM, with zero-knowledge proofs generated for each batch and verified on Ethereum L1. The security model leans more toward 'L1 custody + provable settlement,' but active trading paths, DA, and the sequencer are still not on Ethereum L1. So, what’s the benefit of Derive scrapping its L2 chain and moving funds to Ethereum L1 for Ethereum? The main upside is Ethereum’s role as the settlement layer: Custody of funds and rule validation return to L1, meaning the sequencer can’t unilaterally move funds, and there’s an enforced withdrawal path via L1. This aligns the security model and narrative closer to Ethereum. It’s a long-term positive for Ethereum. However, the short-term impact on ETH demand is quite limited: • V3 newly supports ETH as collateral and a borrowable asset, which might lead to some ETH being locked in contracts, but this is optional. Derive has historically used USDC as its primary collateral. Users using ETH as margin are more likely reallocating existing holdings rather than creating net new buy pressure. Currently, there’s no data indicating significant usage. • User trades themselves remain gasless—there’s no need to pay ETH gas for placing or executing orders. On L1, the entity submitting proofs pays the gas, not regular traders. The main gas consumption on L1 comes from proof verification (around 400,000–500,000 gas per batch, whether it contains one transaction or a million). This burns some ETH, but compared to the mainnet fee market, the scale is tiny—even dozens of batches per day would only result in minor consumption. This aspect is less impactful than Lighter. Lighter uses Ethereum blobs for data availability, with assets and state roots stored in L1 contracts. Overall, Derive’s move to place asset custody and validation on L1 is a positive for Ethereum’s role as a settlement layer, but it won’t significantly boost ETH demand in the short term.