The concept of the perpetual swap, also known as a perpetual future or 'perp,' was conceived in 2015 on a hiking trail in Hong Kong. Ben Delo, BitMEX co-founder and mathematician, was discussing a nagging issue with his friend Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, but customers complained about positions closing unexpectedly. They sought 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 due to the compounding carrying cost. However, he suggested charging traders the bitcoin overnight rate to address this issue. Delo built this concept, inventing one of the most significant financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but it attracted retail traders seeking speculation and high leverage instead.

By Halloween 2015, the exchange offered 100x leverage, thanks to Delo's real-time margining system. The perpetual swap launched in May 2016, with a daily funding rate that anchored it to the spot price. The early funding rate was derived from third-party lending markets but was later adjusted to a dynamic approach, looking inward at how the swap was trading. This solution, which has been adopted by major derivatives exchanges, created a dynamic equilibrium.

By 2017, BitMEX had become the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its core. The concentration of liquidity was a result of the swap's design, which consolidated market maker capital into one instrument. Competitors noticed, and every major exchange in crypto now offers its own perpetual swap. BitMEX chose not to patent the product, focusing on building instead.

The perpetual swap has attracted traditional finance regulators' attention, with the CFTC reportedly making room for it under its framework. Delo believes that once traditional finance recognizes the benefits of this financial product, it will be impressive.