The concept of the perpetual swap was conceived in 2015 on a hiking trail in Hong Kong, where Ben Delo, BitMEX co-founder, was brainstorming with a friend, Bavik, a derivatives trader. They were determined to resolve an issue that had been plaguing BitMEX: customers were frustrated with positions closing unexpectedly. Delo posed a question: what if a futures contract never expired? Bavik's response was that it would be mathematically worth infinity, but he also suggested a solution - charge traders the bitcoin overnight rate.
This exchange laid the groundwork for one of the most influential financial products of the 21st century. The perpetual swap was launched in May 2016, with a core mechanism that was straightforward: a futures contract with no expiry date, anchored to the spot price through a daily funding rate.
The early funding rate was derived from third-party lending markets, but as demand for long exposure on BitMEX grew, the swap began trading at a persistent premium to spot. To address this, Delo introduced a dynamic funding rate that looked inward at how the swap was trading, rather than relying on external lending markets. This solution has since become the standard for major derivatives exchanges worldwide. By 2017, BitMEX had become the most liquid bitcoin market, with the perpetual swap at its core.
The product's success can be attributed to its design, which consolidated liquidity into one instrument. Competitors took notice, and soon every major exchange in crypto offered its own perpetual swap.
Today, the perpetual swap is considered one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. As traditional finance regulators begin to take notice, Delo believes that the perpetual swap will have a profound impact on the industry.