The Genesis of a Crypto Trading Revolution: A Hike in Hong Kong

In 2015, during a hike in Hong Kong, the concept of the perpetual swap, also known as a perpetual future, was conceived. Ben Delo, BitMEX's co-founder and a mathematician, was discussing a problem with a friend, Bavik, a derivatives trader. BitMEX had been experimenting with various futures contracts, but customers were unhappy with their positions being closed without warning. They wanted a product that resembled spot trading but offered the leverage of derivatives. Delo asked, "What if a future never expired?" Bavik replied that mathematically, it would be worth infinity. However, he suggested charging traders the bitcoin overnight rate to solve the issue. Delo built this concept into a product, inventing one of the most significant financial products of the 21st century. The perpetual swap launched in May 2016, with a daily funding rate that kept the contract price aligned with the spot price. Initially, the funding rate was derived from external lending markets, but it was later adjusted to be dynamic, based on the swap's trading activity. This mechanism has become the standard for major derivatives exchanges worldwide. By 2017, BitMEX had become the most liquid bitcoin market, with the perpetual swap at its core. The product's success has been so significant that it now attracts the attention of traditional finance regulators, with the potential for it to be listed on equities in the future.