How a Hong Kong Hike Revolutionized Crypto Trading Forever

The concept of the perpetual swap, also known as a perpetual future or 'perp,' was conceived on a hiking trail in Hong Kong in 2015. Ben Delo, BitMEX co-founder and mathematician, was discussing a nagging 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 mimicked 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, similar to LIBOR in traditional finance. 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 speculation. By Halloween 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 balanced long and short positions. The rate was derived from third-party lending markets but eventually became dynamic, looking inward at the swap's trading activity. This mechanism has been adopted by major derivatives exchanges worldwide. By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its core. The product's success has been recognized, with competitors copying the concept and traditional finance regulators taking notice. Delo believes that once traditional finance understands the benefits of perpetual swaps, it will be a significant validation of the product's value.