In 2015, a hike in Hong Kong's trails led to the conception of the perpetual swap, also known as a perpetual future or 'perp' for short. Ben Delo, BitMEX's co-founder and a mathematician, was on a hike with Bavik, a derivatives trader, grappling with a problem that had been plaguing him for months.
BitMEX had experimented with various futures contracts - quarterly, monthly, weekly, 48-hour, and even 24-hour contracts. However, customers consistently complained about their positions closing without warning, seeking a product that resembled spot trading but offered the leverage of a derivatives exchange.
Delo asked, 'What if a future never expired?' Bavik's response was immediate: 'Mathematically, it would be worth infinity.' Although technically correct, the idea presented a challenge. The solution involved charging traders the bitcoin overnight rate, similar to the LIBOR in traditional finance.
However, Delo realized that this rate did not exist at the time, prompting him to create it. This innovation led to the development of one of the most significant financial products of the 21st century. The story of BitMEX's evolution and the creation of the perpetual swap is a testament to the power of innovation in the financial sector.