Perpetual Futures
A perpetual futures contract (perp) is a derivative that tracks the price of an underlying asset but has no expiration date, unlike traditional futures which settle at expiry. The perpetual stays anchored to the spot price through the funding rate mechanism: when the perpetual price diverges from the spot index price, a periodic payment flows from one side of the market to the other, creating an incentive to trade the perp back toward spot. Perps were invented in crypto (BitMEX, 2016) and have become the dominant derivative instrument, with daily volumes exceeding spot trading volumes on major exchanges. On-chain perpetual DEXs (Hyperliquid, dYdX, GMX, Drift) use different designs: some use centralized limit order books with on-chain settlement, others use oracle-based pricing with pooled counterparties (liquidity provider pools that act as the collective counterparty to all trader positions). Perps enable leverage trading without the roll costs and basis uncertainty of dated futures.