In 2015, a hike in Hong Kong's countryside sparked an idea that would transform the world of crypto trading. Ben Delo, co-founder of BitMEX, was discussing a persistent issue with a friend, Bavik, a derivatives trader. Customers were frustrated with their positions closing unexpectedly, and Delo was determined to find a solution. The breakthrough came when Delo asked, "What if a future never expired?" Bavik's response, "Mathematically, it would be worth infinity," set Delo on a path to create one of the most influential financial products of the 21st century.
The perpetual swap, or 'perp,' was born, allowing traders to buy and sell with leverage, without the constraints of traditional futures contracts. By charging traders an overnight rate, similar to LIBOR in traditional finance, Delo created a system that balanced the market, preventing the theoretical value from becoming infinite.
The perp's launch in 2016 marked a turning point for BitMEX, as it became the most liquid bitcoin market globally, with the perp at its core. The product's success can be attributed to its ability to provide a leveraged product that never expired, giving traders the flexibility they desired. As the perp's popularity grew, so did its impact on the crypto market.
The funding rate mechanism, which Delo developed, allowed for a dynamic equilibrium, where market makers could anchor the swap's price to the spot price. This innovation has been adopted by major derivatives exchanges worldwide.
Today, the perp is a staple of the crypto market, with a turnover of $40-50 trillion annually, making it one of the most successful financial products in history. As traditional finance regulators begin to take notice, the perp's influence is expected to extend beyond the crypto sphere, potentially leading to a new era of financial innovation.