The Birth of a Crypto Revolution: How a Hong Kong Hike Changed Trading Forever

The concept of the perpetual swap, also known as a perpetual future or 'perp,' was conceived in 2015 on a Hong Kong hiking trail. Ben Delo, BitMEX's co-founder and a mathematician, was discussing a persistent problem with a friend, Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, including quarterly, monthly, weekly, 48-hour, and 24-hour contracts, but none of them worked as intended. Customers complained about positions closing without warning, seeking 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. However, he proposed a solution: charge traders the bitcoin overnight rate. Delo built this concept into a product, inventing one of the most significant financial innovations of the 21st century. The perpetual swap launched in May 2016, with a daily funding rate that anchored the contract to the spot price. Initially, the funding rate was derived from external lending markets, but it was later adjusted to a dynamic mechanism that looked inward at the swap's trading activity. This approach has become the standard for major derivatives exchanges worldwide. By 2017, BitMEX had become the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its core. The product's success has been so profound that every major exchange in crypto now offers its own perpetual swap, with an estimated $40-50 trillion in annual turnover. The concept has also attracted the attention of traditional finance regulators, with the CFTC reportedly making room for perpetual swaps under its framework.