A perpetual futures contract, usually shortened to a perpetual or a perp, is a derivative that tracks the price of an underlying asset with leverage and carries no fixed expiry date. Instead of the expiry that a traditional futures contract uses to converge onto spot, a perpetual uses a recurring funding payment to hold its price near an index, indefinitely, for as long as a trader chooses to keep the position open.
A derivative gets its value from an underlying asset's price instead of from holding the asset directly. A perpetual lets a trader take a leveraged long or short view on that price using posted margin instead of the full notional value, and it settles continuously against an index price instead of against physical delivery of anything. There is no delivery date because there is nothing to deliver: the position closes only when the trader submits an offsetting trade, or when it is closed automatically by liquidation.
The core design, funding payments substituting for expiry, has since been rebuilt with variations in funding formula, margin model and settlement asset across the venues operating today, from order-book venues such as dYdX to pool-priced venues such as gTrade. The mechanism is the same across all of them even where the formula differs: a periodic payment between longs and shorts stands in for the expiry a traditional contract would otherwise need.
The practical consequence of that expiry difference shows up most clearly around contract roll dates. A trader holding a dated future through expiry has to actively close the expiring contract and reopen an equivalent position in the next contract month to maintain exposure, which means paying the bid-ask spread and any roll cost twice. A perpetual position never forces that decision; it can be held for a day or for years without ever needing to be rolled. For a closer look at how the two compare in day-to-day trading, see perpetuals versus futures.
Three moving parts work together on every perpetual. Margin and leverage set how much notional a given amount of collateral controls, covered in leverage ratios on perps. Mark price is the reference that unrealized profit and loss, and liquidation, are measured against, covered in mark price versus index price. Funding is the periodic payment that keeps the perpetual's own price anchored near its index, covered in both funding rate and funding mechanics in depth. Understanding how those three pieces interact is most of what separates trading a perpetual from trading the spot asset it tracks.
A derivative gets its value from an underlying asset's price instead of from holding the asset directly. A perpetual lets a trader take a leveraged long or short view on that price using posted margin instead of the full notional value, and it settles continuously against an index price instead of against physical delivery of anything. There is no delivery date because there is nothing to deliver: the position closes only when the trader submits an offsetting trade, or when it is closed automatically by liquidation.
Two numbers describe every open perpetual position: the notional value, the full size of the exposure being traded, and the margin, the collateral actually posted against it. The ratio between the two is the leverage. A trader who posts $1,000 of margin to control $10,000 of notional is trading at 10x leverage, and both the potential gain and the potential loss scale with the full $10,000 notional value, well beyond the $1,000 actually posted.
Economist Robert Shiller outlined the idea of a futures-like contract with no expiry in a 1993 paper on hedging illiquid, hard-to-price assets such as real estate, where a conventional expiring futures contract was a poor fit because there was no reliable way to settle by physical delivery on a fixed date. The concept stayed largely academic for over two decades until BitMEX launched the first crypto perpetual swap in 2016, adapting it for a market that shared the same underlying problem: crypto assets trade continuously across many venues with no single closing bell, and there was no natural expiry cycle to anchor a conventional futures contract to.
The core design, funding payments substituting for expiry, has since been rebuilt with variations in funding formula, margin model and settlement asset across the venues operating today, from order-book venues such as dYdX to pool-priced venues such as gTrade . The mechanism is the same across all of them even where the formula differs: a periodic payment between longs and shorts stands in for the expiry a traditional contract would otherwise need.
The practical consequence of that expiry difference shows up most clearly around contract roll dates. A trader holding a dated future through expiry has to actively close the expiring contract and reopen an equivalent position in the next contract month to maintain exposure, which means paying the bid-ask spread and any roll cost twice. A perpetual position never forces that decision; it can be held for a day or for years without ever needing to be rolled. For a closer look at how the two compare in day-to-day trading, see perpetuals versus futures .
Buying spot means owning the asset outright: full price exposure, no leverage or funding by default, and settlement by actually receiving or delivering the asset. A perpetual is synthetic exposure held through margin, with optional leverage and a periodic funding payment, and the underlying asset is never delivered at any point. The position is opened and closed with offsetting trades, and profit or loss is realized in the settlement currency, typically a stablecoin.
This distinction matters for anyone comparing the two as ways to express the same market view. A spot buyer needs the full purchase price up front and profits only from price appreciation; a perpetual trader can go long or short with a fraction of the notional as margin, but takes on funding cost and liquidation risk that a spot holder never faces. As a simple illustration, buying $10,000 of an asset outright on spot and buying $10,000 of notional exposure through a perpetual at 10x leverage, using $1,000 of margin, produce the same dollar profit or loss for a given percentage move in price. What differs is that the spot position cannot be liquidated regardless of how far price falls, while the leveraged perpetual position can be closed automatically well before that same $1,000 is fully lost, and the perpetual position also accrues funding payments the spot position never sees.
Shorting is the other practical gap between the two. Taking a short view on spot generally requires borrowing the asset first, which is not available for every asset and carries its own borrowing cost and terms. A perpetual makes shorting symmetric with going long: the same margin mechanism, the same order flow, and the same liquidation logic apply on either side, which is a large part of why perpetuals became the default way to express a bearish view in crypto markets that often have limited native borrowing markets to short against.
Three moving parts work together on every perpetual. Margin and leverage set how much notional a given amount of collateral controls, covered in leverage ratios on perps . Mark price is the reference that unrealized profit and loss, and liquidation, are measured against, covered in mark price versus index price . Funding is the periodic payment that keeps the perpetual's own price anchored near its index, covered in both funding rate and funding mechanics in depth . Understanding how those three pieces interact is most of what separates trading a perpetual from trading the spot asset it tracks.
Perpetual futures are a derivative contract that gives leveraged long or short exposure to an underlying asset's price with no fixed expiry date. A recurring funding payment between longs and shorts replaces the expiry mechanism that a dated futures contract uses to converge onto spot. The design was first popularized for crypto by BitMEX in 2016.
Derivative trading means taking a position whose value is derived from an underlying asset's price. A perpetual is one type of derivative; options and dated futures are others, each with its own settlement mechanism. Derivatives commonly allow leverage, which magnifies both gains and losses relative to the collateral posted.
The contract mechanism of a perpetual is the combination of margin, mark price and funding that together replace what a traditional expiring contract achieves through delivery. Margin sets the leveraged position size, mark price governs unrealized profit, loss and liquidation, and funding periodically pulls the contract's price back toward its index. All three run continuously for as long as the position stays open.
Perpetual markets for stocks, gold, indices and pre-IPO names — settled on-chain, no wallet-to-exchange transfers.
