The Genesis of a Revolutionary Trading Concept: How a Hong Kong Hike Changed the Face of Crypto Trading

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 persistent problem with a friend, Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, but customers complained about positions closing without warning, seeking 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. However, he suggested charging traders the bitcoin overnight rate to solve the issue. Delo built this concept, inventing one of the most influential financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but it was retail traders who flocked to the platform, seeking high leverage and speculation opportunities. By October 2015, BitMEX 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 the contract to the spot price. Initially, the funding rate was derived from external lending markets, but it was later adjusted to a dynamic rate based on the swap's trading activity. This innovation allowed market makers to anchor the swap price to the spot price, creating a dynamic equilibrium. The perpetual swap became a massive success, with BitMEX processing $3-4 billion daily by 2017. The concentration of liquidity was a direct result of the swap's design, which consolidated market maker capital into a single instrument. Competitors took notice, and soon every major exchange in crypto offered their own perpetual swap, built on Delo's funding rate architecture. The product's success has been staggering, with an estimated $40-50 trillion in annual turnover, making it one of the most successful financial innovations in history. BitMEX chose not to patent the perpetual swap, focusing on building and letting the market validate its success. Now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps under its framework, and speculation about the CME listing them on equities. For Delo, this is the ultimate validation of a concept that started as a question on a Hong Kong hillside, driven by the desire to solve a problem that had been frustrating customers.