The Birth of a Revolutionary Trading Concept: How a Hong Kong Hike Changed Crypto Forever

The concept of the perpetual swap, also known as a perpetual future or 'perp,' was conceived on a hiking trail in Hong Kong in 2015. Ben Delo, BitMEX co-founder and mathematician, was discussing a problem with a friend, Bavik, a derivatives trader. BitMEX had tried various futures contracts, but customers complained about positions closing without warning. They wanted a product that resembled spot trading but offered the leverage of a derivatives exchange. Delo asked, 'What if a future never expired?' Bavik replied that it would be mathematically worth infinity, but suggested charging traders the bitcoin overnight rate. Delo built this concept, inventing one of the most significant financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but retail traders flocked to the platform, seeking high leverage and speculation opportunities. By Halloween 2015, BitMEX 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 funding rate was initially derived from external lending markets but was later adjusted to a dynamic, inward-looking mechanism. This solution, now used by major derivatives exchanges, created a dynamic equilibrium. By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion daily, with the perpetual swap at its core. The concentration of liquidity was a result of the swap's design, which consolidated market maker capital into one instrument. Competitors noticed, and the perpetual swap is now a staple in crypto, with some estimates suggesting it facilitates $40-50 trillion in turnover annually. BitMEX chose not to patent the perpetual swap, focusing on building instead. Now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps, and speculation about the CME listing them on equities. For Delo, this is the ultimate validation of a concept born from a question on a Hong Kong hillside.