The infrastructure for crypto derivatives is gradually maturing. Rails has announced the launch of institutional on-chain custody based on the Stellar blockchain. The new product is aimed at brokers, fintech companies, and trading platforms that work with perpetual futures and are looking for a more transparent and secure model for storing funds.
The key idea is simple. Trade execution and asset custody are no longer within the same perimeter. Rails retains a centralized order matching engine, while client funds are placed in on-chain smart contracts. This reduces counterparty risk and simplifies audits.
The company has already confirmed that in the second quarter of 2026 it plans to add options trading, expanding its line of derivatives.
How the Custody Model Works
The new architecture is built on a strict separation of roles. Client collateral is stored in separate on-chain vaults and is not mixed with the capital of market makers or the company’s operating funds.
Rails records data on profits and losses, fees, and obligations every 30 seconds. This data is aggregated and written on-chain as Merkle roots. Institutional clients can verify the information with their internal accounting systems at any time.
Rails CEO Satraj Bambra emphasizes that the main difference of the model is its verifiability. According to him, it was the lack of transparency and commingled accounts that became one of the key reasons for the collapse of major centralized platforms in the past.
In the new system, client funds are not reflected on Rails’ balance sheet. Formally, they are held in verifiable smart contracts, access to which can be confirmed on-chain without relying on the company’s internal accounting.
Why Stellar Was Chosen
To launch the custody solution, Rails chose the Stellar network. The reason is predictability and speed. Transaction confirmation takes about five seconds, which allows for regular updates of balance and obligation data without delays.
Network fees remain consistently low. This is critical for a model where state changes are recorded frequently and automatically. High or variable fees would make such an architecture economically inefficient.
Another factor is Stellar’s experience working with regulated financial organizations. The blockchain has long been used by banks, payment services, and asset issuers. For the institutional segment, this lowers the trust barrier and simplifies integration.
Derivatives Market Context
The crypto derivatives market remains the largest segment of the industry. According to CoinGlass estimates, the total derivatives trading volume in 2025 reached $85.7 trillion. The average daily turnover exceeded $260 billion.
Futures and options are actively used by institutional participants for hedging and price discovery. However, the growth of leverage and complex structures increases systemic risks. In the fall of 2025, a large-scale deleveraging event exposed the vulnerability of existing liquidation and auto-deleveraging models. It is against this backdrop that Rails’ initiative is being launched.
The company believes that on-chain custody with separated accounting and regular publication of obligations can reduce risks for intermediaries and their clients. Especially in an environment where trust in centralized platforms remains limited. Rails is betting on an infrastructure shift. From closed balances to verifiable on-chain models. For the institutional derivatives market, this could become one of the key development directions in the coming years.
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