In 2015, mathematician and BitMEX co-founder Ben Delo was on a hike in Hong Kong, discussing a problem with his friend Bavik, a derivatives trader. BitMEX had been trying various futures contracts, but customers kept complaining about positions closing without warning. Delo asked, 'What if a future never expired?' Bavik replied that it would be worth infinity, but suggested charging traders the bitcoin overnight rate. Delo built it, inventing one of the most consequential financial products of the 21st century.

The perpetual swap was born, and it changed the face of crypto trading. Initially, BitMEX was designed for institutional hedgers, but it ended up catering to retail traders who wanted to speculate with high leverage. The exchange offered 100x leverage and a real-time margining system, which Delo built from scratch.

The issue with futures was basis, the premium at which a futures contract trades above the spot price. BitMEX kept shortening the expiry of its listed futures contracts, but customers wanted a leveraged product that never went away.

The perpetual swap launched in May 2016, with a daily funding rate that anchored the contract to the spot price. The early funding rate was derived from third-party lending markets, but it was later replaced with a dynamic approach that looked inward at how the swap was trading.

The solution was elegant, and it gave market makers notice of how the funding rate was calculated. This mechanism is now used by every major derivatives exchange in the world.

By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion a day, with the perpetual swap at its center. The product took over, and competitors noticed.

Every major exchange in crypto now offers its own perpetual swap, each built on the funding rate architecture that Delo had begun assembling on that Hong Kong hiking trail. The fact that every other exchange has copied the swap proves its financial innovation, with a turnover of $40-50 trillion dollars a year.

BitMEX chose not to patent the perpetual swap, and now, a decade on, the product is attracting the attention of traditional finance regulators. The CFTC is reportedly making room for perpetual swaps, and there is speculation that the CME could eventually list them on equities.

For Delo, this prospect is the final validation of something that started as a question on a hillside above Hong Kong.