The Genesis of a Revolutionary Trading Concept: How a Hong Kong Hike Paved the Way for Crypto's Perpetual Future

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's co-founder and a mathematician, was discussing a persistent problem with a friend named Bavik, a derivatives trader. Despite trying various futures contracts, including quarterly, monthly, weekly, 48-hour, and 24-hour contracts, customers continued to express dissatisfaction with their positions closing without warning. They desired a product that resembled spot trading but offered the leverage characteristic of derivatives exchanges. Delo posed a question: 'What if a future never expired?' Bavik's immediate response was that it would be mathematically worth infinity, given that a futures contract's value is derived from its time to expiry and carrying costs. However, Bavik suggested charging traders the bitcoin overnight rate to address this issue. The problem was that this rate did not exist at the time. Undeterred, Delo decided to create it, thereby inventing one of the most significant financial products of the 21st century. The story of BitMEX's evolution and the impact of the perpetual swap is a testament to innovation in the financial sector.