The idea for the perpetual swap was born out of frustration with traditional futures contracts, which were expiring too quickly and causing customer positions to close without warning. Ben Delo, co-founder of BitMEX, was on a hike with a friend, Bavik, when he asked, 'What if a future never expired?' Bavik's response, 'Mathematically, it would be worth infinity,' sparked an idea that would change the face of crypto trading. Delo built the perpetual swap, which launched in May 2016, and it quickly became a game-changer for the industry. The product allowed traders to buy and sell with leverage, without the burden of expiry dates, and it was anchored to the spot price through a daily funding rate.
The funding rate was initially derived from third-party lending markets, but it was later adjusted to be dynamic, looking inward at how the swap was trading rather than outward at external markets. This elegant solution created a dynamic equilibrium, where market makers could short the swap and anchor it back down to the spot price. Today, the perpetual swap is used by every major derivatives exchange in the world, and it has become a cornerstone of the crypto trading industry.
With its success, the product has also attracted the attention of traditional finance regulators, who are now considering how to incorporate it into their frameworks. For Delo, the perpetual swap is a testament to the power of innovation and the importance of listening to customer needs. As he looks to the future, he is excited to see how the product will continue to evolve and shape the world of finance.