The idea of a perpetual swap, also known as a perpetual future, was born out of frustration with traditional futures contracts. Ben Delo, co-founder of BitMEX, was determined to find a solution to the problems faced by his customers, who were struggling with expiring contracts and basis issues. The breakthrough came when Delo's friend, a derivatives trader, suggested charging traders the bitcoin overnight rate.
This concept would eventually become the foundation of the perpetual swap. The launch of the perpetual swap in 2016 marked a significant turning point for BitMEX, as it provided a leveraged product that never expired, anchored to the spot price through a daily funding rate. The funding rate mechanism, which was dynamically adjusted to reflect market conditions, allowed the swap to trade in a way that was fair and efficient. The success of the perpetual swap was rapid, with BitMEX becoming the most liquid bitcoin market in the world by 2017.
The product's impact was not limited to the crypto space, as it also attracted the attention of traditional finance regulators, who are now exploring ways to incorporate perpetual swaps into their frameworks. The story of the perpetual swap serves as a testament to the power of innovation and the importance of listening to customer needs. By providing a solution to a long-standing problem, BitMEX was able to create a product that would go on to revolutionize the crypto trading landscape.