How a Pivotal Hike in Hong Kong Revolutionized Crypto Trading

In 2015, during a hike in Hong Kong, the concept of the perpetual swap, also known as a perpetual future or 'perp,' was conceived. Ben Delo, BitMEX co-founder and mathematician, was discussing a problem with his friend Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, including quarterly, monthly, weekly, 48-hour, and 24-hour contracts, but none met customer demands for a product that mimicked spot trading with the leverage of derivatives. Delo asked, 'What if a future never expired?' Bavik replied that mathematically, it would be worth infinity, due to the compounding carrying cost. However, he suggested charging traders the bitcoin overnight rate to address this issue. Delo then built this concept into a product, inventing one of the most significant financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but it was retail traders who primarily used the platform, seeking high leverage for speculation. By Halloween 2015, BitMEX offered 100x leverage, thanks to Delo's real-time margining system. The perpetual swap, launched in May 2016, was a futures contract with no expiry date, anchored to the spot price via a daily funding rate. Longs paid shorts, or vice versa, depending on whether the swap traded above or below spot. The early funding rate was derived from third-party lending markets but eventually became dynamic, based on the swap's trading activity. This mechanism is now used by every major derivatives exchange. By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its core. Competitors copied the product, and it has become a standard in crypto, with an estimated $40-50 trillion in annual turnover. BitMEX chose not to patent the perpetual swap, focusing instead on development. Now, traditional finance regulators are taking notice, and the product may soon be integrated into traditional financial frameworks.