Over the past couple of months, in a little-known side avenue of crypto, something important has been happening. The stern and easily angered drill sergeants of financial regulation have been dishing out approvals, permissions and welcome mats to a newfangled type of futures contract, one forged in the Wild West of early crypto.
They are called “perpetual futures” – and they didn’t exist until very recently.
In the early 2020s, while the grown-ups of global finance were doing their legacy things, something odd was germinating at the margins. Decentralised finance – DeFi, the umbrella term for financial machinery built on public blockchains and governed by code rather than committee – was throwing off experiments at a furious clip. Lending markets with no banks. Exchanges with no order-takers. Funds with no managers.
A great deal of it was nonsense, a fair amount was fraud, and a substantive and stubborn fraction was the sort of thing that, viewed from here, looks less like a fad than a preview. I co-wrote a book about it in 2021 called Beyond Bitcoin: Decentralised Finance and the End of Banks. It was a thrilling spectacle to watch unfold.
What these ambitious tinkerers had in common was their habitat. They grew outside the legacy institutions, the old-boys’ clubs, the regulators and the marble lobbies – in a permissionless sandbox where anyone with a better idea could build, ship and test a new product, sometimes getting blown up or hacked in the process. The wreckage was considerable. But the best of these projects have since done something nobody at the time would have wagered on – they are being courted by the very establishment they were designed to circumvent, as crypto is finally, albeit warily, being welcomed into the traditional world of finance.
An indefinite position
To appreciate perpetual futures (commonly known as “perps”), you must first appreciate the thing they rebelled against. The traditional futures contract is among finance’s oldest and most ossified instruments (futures markets date back to Japan in the late 1600s) – an agreement to buy or sell an asset at a set price on a set date.
The date is the problem. Contracts expire (usually measured in months), and an investor who wishes to maintain a position must either exit or “roll” it over by selling the expiring contract and buying the next one. Rolling is tedious and costly, and because each dated contract trades at its own premium or discount to the spot price – the “basis” – the position never quite tracks the underlying asset cleanly. The whole apparatus assumes you want to be told when your view of the world must end.
The builders of the perp simply rejected the premise. Why, they asked, should a futures contract expire at all? Their answer was a derivative with no settlement date, one that could be held open indefinitely – for an afternoon or for a decade – so long as the trader kept enough collateral on deposit to cover the position.
A $92-trillion market
That sounds like a free lunch, and the obvious objection is mechanical – without an expiry to force convergence, what stops the contract’s price from drifting away from the asset it is meant to mirror? The answer is the funding rate, the small and rather elegant innovation at the heart of the thing. Every few hours – eight on most venues, hourly on the fastest – traders on the two sides of the market exchange a payment.
When the perp trades above the spot price, the longs pay the shorts to keep their trades open; when it trades below, the shorts pay the longs. The payment makes it expensive to be on the crowded side and lucrative to be on the lonely one, and the resulting tug keeps the perp tethered to the spot without any expiry date doing the work. It is a contract disciplined by incentive rather than by calendar.
The mechanism was pioneered on offshore crypto exchanges in about 2016 and 2017, but DeFi turned it into an open-source movement. Protocols such as dYdX, GMX and, latterly, Hyperliquid rebuilt the perp entirely on-chain, with collateral held in smart contracts, liquidations executed automatically, and every position visible to anyone who cared to look – no broker, no custodian, no closing bell.
The market they created is not a curiosity. Perpetual futures generated more than $92-trillion in trading volume in the past year, up 65% year on year. By some measures, they account for as much as 90% of all crypto derivatives activity, sometimes with leverage of up to 100 times.
The regulators step in
Which brings us to the courtship. For years, American regulators kept perps at arm’s length, wary of their leverage and thin protections, leaving American traders with “dated” CME futures or risky, unregulated offshore venues. In late May 2026, that changed. The Commodity Futures Trading Commission approved KalshiEX, the registered exchange run by the prediction-market firm Kalshi, to list BTCPERP – the first bitcoin perpetual born on a regulated American venue, capped at a comparatively chaste 10:1 leverage. On the same day, the agency cleared Coinbase to route domestic customers to perps on its offshore Deribit affiliate, and, by mid-June, Kraken had launched its own regulated perps through Bitnomial.
The funding-rate mechanism that makes a perp a perp was preserved; around it, the regulators bolted the guardrails the offshore world lacks – position limits, volatility controls, tighter margin and know-your-customer checks. Even the venerable CME, which has taken to running its crypto futures around the clock, has grumbled about the new competition.
The risks have not been abolished, merely supervised. In the same weeks as the approvals, a flash crash in DeFi project Hyperliquid’s thinly traded contracts – one tracking a notional SpaceX valuation – vaporised some $1.5m in half an hour, followed by a broader cascade that liquidated more than $1bn of positions within days. Caveat emptor remains very much in place.
Perps in the house
And all of this is unfolding in a sour market. Bitcoin has been grinding lower throughout 2026, hovering at about $66,000, with cautious sentiment and exchange traded funds bleeding capital. Yet the perp’s quiet migration onshore – at least in the US – into the teeth of a bear market is rather the point.
The grand experiment of decentralised finance has produced its share of carnage and grifters. But it has also turned out to be the one thing the old system could never build for itself – a permissionless sandbox where the future of finance gets prototyped in public.
Perps are in the house now, and more DeFi is on the way to a broker near you.
Steven Boykey Sidley is a professor of practice at JBS, University of Johannesburg, a partner at Bridge Capital and a columnist at Daily Maverick, Currency and Daily Friend.
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Top image collage: Rawpixel; Currency.
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