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 problem with his friend Bavik, a derivatives trader. BitMEX had been experimenting with various futures contracts, but customers kept complaining about their positions closing without warning. They wanted a product that mimicked spot trading but offered the leverage of a derivatives exchange.

Delo asked, 'What if a future never expired?' Bavik replied that it would be worth infinity mathematically. However, he suggested charging traders the bitcoin overnight rate to solve the issue.

Delo built this concept, inventing one of the most significant financial products of the 21st century. Initially, BitMEX aimed to cater to institutional hedgers, but it ended up attracting sophisticated retail traders who wanted to speculate with high leverage.

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 early funding rate was derived from external lending markets but was later adjusted to a dynamic approach, looking inward at the swap's trading activity.

This solution allowed market makers to anchor the swap price back to the spot price, creating a dynamic equilibrium. The perpetual swap became a huge success, and by 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion daily.

The concentration of liquidity was a result of the swap's design, which consolidated market maker capital into one instrument. Competitors noticed, and soon every major exchange in crypto offered its own perpetual swap. Delo believes that the product's success, with an estimated $40-50 trillion in annual turnover, is a testament to its financial innovation. BitMEX chose not to patent the perpetual swap, focusing on building instead.

Now, traditional finance regulators are taking notice, and the product may eventually be listed on equities.