The concept of perpetual futures has become a cornerstone of crypto finance, but according to DRW CEO Don Wilson, many misconceptions surround this product. In a series of posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date.
The features commonly associated with crypto perpetuals, such as high leverage and auto-deleveraging, are not inherent to the contracts themselves but rather a result of how some crypto exchanges have chosen to implement them. Wilson emphasized that the true innovation of perpetual futures lies in their ability to eliminate the need for frequent contract rollovers, thereby reducing transaction costs and allowing for more accurate tracking of the futures curve. He urged regulators to focus on the economic substance of perpetual futures rather than their legal classification, arguing that they should be treated as futures contracts, not swaps.
Wilson advocates for the broader adoption of perpetual futures across various markets, including commodities, securities, and crypto, as a means to enhance price discovery and risk management.