The Genesis of a Crypto Trading Revolution: How a Hong Kong Hike Changed the Game

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 pressing issue with Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, but customers complained about positions closing without warning. They sought a product that resembled spot trading but offered the leverage of a derivatives exchange. Delo asked, 'What if a future never expired?' Bavik's response was that it would be mathematically worth infinity. However, he suggested charging traders the bitcoin overnight rate to solve the problem. Delo built this concept, inventing one of the most significant financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but it was retail traders who dominated the platform. By Halloween 2015, the exchange offered 100x leverage, thanks to Delo's real-time margining system. The perpetual swap launched in May 2016, with a daily funding rate that kept the contract price aligned with the spot price. The funding rate was initially derived from third-party lending markets but was later adjusted to a dynamic mechanism that looked inward at the swap's trading activity. This approach has become the standard for 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 adopted by competitors, with an estimated $40-50 trillion in annual turnover, making it one of the most successful financial products in history. As traditional finance regulators take notice, the perpetual swap may soon be integrated into mainstream markets.