How a Chance Encounter on a Hong Kong Hike Revolutionized Crypto Trading

In 2015, a hike in Hong Kong's countryside led to the creation of the perpetual swap, a groundbreaking financial product that would change the face of cryptocurrency trading. Ben Delo, BitMEX's co-founder and a mathematician, was discussing a persistent problem with a friend, Bavik, a derivatives trader. BitMEX had tried various futures contracts, but customers complained about positions closing unexpectedly. They wanted a product that combined the benefits of spot trading with the leverage of derivatives. Delo asked, "What if a future never expired?" Bavik's response was that it would be mathematically worth infinity, but he suggested charging traders the bitcoin overnight rate to balance it. Delo built this concept into a product, inventing one of the most influential financial innovations 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 a dynamic system that looked inward at the swap's trading activity. This mechanism, now used by major derivatives exchanges worldwide, has become a cornerstone of the crypto market. By 2017, BitMEX had become the most liquid bitcoin market, with the perpetual swap at its core. The product's success has attracted the attention of traditional finance regulators, with the CFTC considering room for perpetual swaps and speculation about the CME listing them on equities. Delo believes that once traditional finance recognizes the benefits of this product, it will be a significant milestone.