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

In 2015, a hike in Hong Kong marked the birth of the perpetual swap, a concept that would go on to revolutionize crypto trading. Ben Delo, BitMEX co-founder and mathematician, was discussing a problem with his friend Bavik, a derivatives trader, when the idea struck. BitMEX had experimented with various futures contracts, but customers kept complaining about positions closing without warning. They wanted a product that combined the benefits of spot trading with the leverage of derivatives. Delo's question, "What if a future never expired?" sparked a conversation that would change the course of crypto history. Bavik's response, "Mathematically, it would be worth infinity," led to the creation of a novel financial product. The perpetual swap was born, with a daily funding rate that would keep the contract price anchored to the spot price. The product launched in May 2016 and quickly gained popularity. However, as demand for long exposure increased, the funding mechanism needed to be adjusted. Delo's dynamic funding rate calculation, which looked inward at the swap's trading activity, replaced the fixed reference point from external lending markets. This innovation enabled the perpetual swap to thrive, and it soon became the most liquid bitcoin market in the world. By 2017, BitMEX was processing $3-4 billion daily, with the perpetual swap at its core. The concentration of liquidity was a direct result of the swap's design, which consolidated market maker capital into a single instrument. Competitors took notice, and soon every major exchange in crypto offered its own perpetual swap, built on the funding rate architecture that Delo had pioneered. The product's success has been staggering, with an estimated $40-50 trillion in annual turnover. As traditional finance regulators begin to take notice, the perpetual swap is poised to make a significant impact on the financial world. Delo's decision not to patent the concept has allowed it to spread freely, and he believes that once traditional finance recognizes its benefits, the results will be impressive.