The concept of the perpetual swap, also known as a perpetual future or 'perp,' was born in 2015 on a hiking trail in Hong Kong. Ben Delo, BitMEX's co-founder and a mathematician, was discussing a persistent problem with a friend named Bavik, a derivatives trader. BitMEX had been experimenting with various futures contracts, including quarterly, monthly, weekly, 48-hour, and 24-hour contracts, but nothing seemed to work. Customers complained that their positions were closing without warning, and they wanted a product that resembled spot trading but offered the leverage of a derivatives exchange.
Delo asked, 'What if a future never expired?' Bavik replied that it would be mathematically worth infinity, as the value of a futures contract is partly derived from the time remaining until expiry and the cost of carrying the position. However, Bavik suggested charging traders the bitcoin overnight rate, similar to LIBOR in traditional finance.
The issue was that this rate did not exist at the time. Delo decided to build it, which led to the invention of one of the most significant financial products of the 21st century.
To understand the impact of the perpetual swap, it's essential to consider what BitMEX was trying to achieve before becoming the most liquid bitcoin market in the world. Founded in 2014 by Delo and Arthur Hayes, the exchange initially targeted institutional hedgers, but it eventually attracted sophisticated retail traders seeking high leverage and speculation opportunities.
By Halloween 2015, BitMEX was offering 100x leverage, thanks to a real-time margining system built by Delo. The perpetual swap launched in May 2016, with a core mechanic that included a futures contract with no expiry date, anchored to the spot price through a daily funding rate. Longs paid shorts, or vice versa, depending on whether the swap was trading above or below spot. The early funding rate was derived from third-party lending markets, but it was later replaced with a dynamic approach that looked inward at how the swap was trading on BitMEX.
This solution, which measured the implied basis over an eight-hour window and back-calculated the annualized rate, is now used by every major derivatives exchange in the world. By 2017, BitMEX had become the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its center. The product's design concentrated liquidity, allowing market makers to consolidate their capital into one instrument. Competitors noticed, and many copied the perpetual swap, with some reproducing portions of the BitMEX FAQ without fully understanding the product.
Today, the perpetual swap is considered one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. BitMEX chose not to patent the perpetual swap, instead focusing on building and innovating. Now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps under its framework, and speculation that the CME could eventually list them on equities.
For Delo, this is the final validation of a product that started as a question on a hillside above Hong Kong, driven by the desire to solve a problem that was frustrating his customers.