Perpetual Futures Decoded — From Shiller's 1993 Paper to the Rise of Hyperliquid: The Complete History of the "Never-Expiring" Contract That Conquered Global Derivatives

Origin — The Theoretical Framework Laid Out in Shiller's 1993 Paper

The theoretical roots of perpetual futures trace back to a paper by Yale University economist Robert J. Shiller (later a Nobel laureate), published in July 1993 in the Journal of Finance (Vol. 48, No. 3, pp. 911-931 / NBER Technical Working Paper No. t0131), titled "Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures." The paper proposed never-expiring futures referencing observable cash flows such as real estate rents or corporate profits, with periodic interest payments exchanged between longs and shorts (the conceptual ancestor of today's funding rate) anchoring futures prices to the underlying. While the Chinese Gold and Silver Exchange of Hong Kong had previously offered "undated futures," these were effectively auto-rolled one-day contracts. The freely floating, true perpetual futures concept is widely regarded in academic literature as originating with Shiller (Wharton/Ackerer-Hugonnier-Jermann 2024).

Invention — BitMEX's Mass Implementation of Crypto Perpetuals (May 2016)

The transition from theory to practice came from BitMEX, a crypto derivatives exchange founded in the Seychelles in 2014. Co-founders Arthur Hayes, Ben Delo, and Sam Reed launched the world's first crypto perpetual swap, XBTUSD, on May 13, 2016. The original motivation was retail-trader frustration with quarterly futures expiring and rolling — many users complained their contracts had "suddenly disappeared." Ben Delo first conceived the idea of a non-expiring futures contract to address this problem. The implementation was advised by Hong Kong-based financial engineers Joseph Wang and Bhavik Patel and combined a funding rate referencing Bitfinex's peer-to-peer lending market, a 0.5%-per-hour funding cap, and a socialized-loss margining system. Offering up to 100x leverage with no expiry and 24/7 trading, the product saw explosive uptake — by 2018 daily notional volume exceeded $1 billion, and every major derivatives venue eventually copied the design.

The Core Invention — How Funding Rates Make Perpetuals Work

Because perpetual contracts have no maturity date, an alternative mechanism is required to enforce convergence with the spot price. That mechanism is the funding rate — a periodic payment exchanged directly between long and short traders (not a fee paid to the exchange). A typical formula is: Funding Rate = Premium Index + clamp(Interest Rate − Premium Index, −0.05%, +0.05%), where the Premium Index measures the deviation of the perpetual price from spot, and the Interest Rate is commonly set at 0.01% per 8 hours (roughly 10.95% annualized). When the perpetual price exceeds spot (bullish positioning), longs pay shorts; when it falls below spot, shorts pay longs — creating an arbitrage incentive that continuously pulls the perpetual price back toward spot. Funding intervals vary: BitMEX, Bybit, Binance, and Hyperliquid use 8-hour cycles; Coinbase uses hourly. Academically, Ackerer, Hugonnier, and Jermann (2024) prove under no-arbitrage conditions that with properly specified funding parameters, the perpetual futures price converges exactly to spot.

Diffusion — CEX Imitation and the First Wave of Decentralized Perpetuals

Following BitMEX's success, Bybit and OKEx (now OKX) launched perpetuals in December 2018, FTX in October 2019, and Binance in December 2019 — Binance now leads the world in perpetual futures volume. By the first half of 2023, perpetual contracts accounted for 75% of the approximately $27 billion daily average Bitcoin futures volume and 94% of the $8 billion daily average open interest, cementing perps as the dominant crypto derivative. On the on-chain side, the dYdX whitepaper of 2017 laid the groundwork; in 2020, dYdX launched the first BTC perpetual on Ethereum mainnet. Its StarkEx-based v3 went live in 2021 and captured 94.8% of decentralized perpetual volume by Q4 2021. GMX, launched on Arbitrum in September 2021, introduced a multi-asset GLP liquidity pool combined with oracle pricing and gained significant share following the 2022 FTX collapse, holding around 30% of OI by mid-2023. Perpetual Protocol (vAMM model), Gains Network, Kwenta, and Level Finance also pursued varied designs, but none matched the speed and convenience of centralized exchanges.

Power Shift — How Hyperliquid Rewrote the Competitive Map

Founded in 2023 by Jeff Yan (Harvard graduate, ex-Hudson River Trading) and co-founder iliensinc, Hyperliquid took zero venture capital and built its own Layer-1 blockchain entirely with self-funded resources. Its proprietary HotStuff-derived consensus, HyperBFT, achieves around 200,000 transactions per second with block finality near 0.07 seconds, hosting a fully on-chain central limit order book (CLOB). On November 29, 2024, Hyperliquid airdropped 31% of its 1 billion HYPE supply (310 million tokens, valued at roughly $1.3 billion at distribution) to approximately 94,000 early users — one of the largest airdrops in crypto history. HYPE rose from an initial $3.20 to roughly $35 within a month, ultimately peaking at $59.39 in September 2025. By Q2 2025 Hyperliquid commanded 73% of the perp DEX market, reaching 80% in August with monthly volume exceeding $35 billion. Full-year 2025 trading volume reached approximately $2.9 trillion, cumulative platform revenue surpassed $600 million, and HYPE traded at roughly $40 with a market cap near $10 billion as of April 2026. According to CoinGecko, perpetual DEXs as a whole grew from less than 2% of CEX perpetual volume in 2022 to over 10% by 2025, generating $7.9 trillion in annual volume.

Intensifying Competition — Aster, Lighter, edgeX, and the "AWS of Liquidity" Strategy

Hyperliquid's dominance hit a turning point in late 2025. Binance-aligned Aster launched in September and surged roughly 2,800% in price within a week. Combined with point-and-airdrop-driven challengers Lighter and edgeX, Hyperliquid's monthly trading volume share fell to around 38% by October 2025 — although it still held roughly 62% of perp DEX open interest. In response, Hyperliquid rolled out HIP-3 (allowing anyone with 500,000 HYPE staked to deploy a permissionless perpetual market and earn the resulting fees), Builder Codes (enabling third-party developers to build front-ends and capture up to 0.1% in additional fees on perpetual fills), and HyperEVM plus CoreWriter (allowing smart contracts to write directly to HyperCore's order book). Branded as the "AWS of Liquidity," this architecture has already enabled an external firm called XYZ to launch a Nasdaq-100 equity perpetual via HIP-3 with daily volume exceeding $100 million — extending the model beyond crypto.

Spillover into Traditional Finance — TradFi Embraces "Never-Expiring" Contracts

In 2025, Coinbase listed a retail-facing perpetual futures product in the U.S., while Singapore Exchange (SGX) and CBOE in the U.S. announced plans to launch perpetual-style contracts before year-end. Arthur Hayes himself has predicted that equity price discovery will migrate to perpetual contracts by the end of 2026. Perpetual futures are evolving from a crypto-native invention into the de facto standard for global, around-the-clock derivatives markets. Hayes's "Adapt or Die" warning is no longer aimed only at crypto operators — it is now a real strategic question for traditional futures exchanges.

[Business Development Insights]

1. The "AWS of Liquidity" paradigm — platform-ization is the new playbook. Hyperliquid's true innovation is structural rather than technical: HIP-3, Builder Codes, and CoreWriter reposition the exchange from a single venue into infrastructure that others build upon. For Japanese firms, the realistic entry point is not building yet another exchange from scratch but layering localized UIs, regulatory-compliance wrappers, and institutional APIs on top of platforms like Hyperliquid. The Telegram bot "PvP," which has earned around $7.3 million via Builder Codes, demonstrates that monetizing the distribution layer is far from theoretical.
2. Token distribution design determines long-term survival — the zero-VC model's lesson. Hyperliquid's differentiator is less about technology than about its zero-VC, ~76% community-allocated distribution. Where dYdX and GMX have struggled with structural sell pressure from VC and insider unlocks, Hyperliquid's holder base has an average cost basis closer to market price, creating greater drawdown resilience. New protocols and Web3 startups should treat tokenomics not as a marketing afterthought but as the core of long-term supply-and-demand engineering. The decision to direct 97% of fee revenue toward HYPE buybacks and burns offers a compelling template for tying protocol economics directly to holder value.
3. The TradFi × perpetuals window is open — first-mover value in Japan. With CBOE, SGX, and Coinbase advancing perpetual-style products in 2025–2026, there is a clear opportunity to bring crypto-native perpetual know-how into global financial markets. In Japan, regulatory work on trust law, taxation, and FIEA classification will be required, but the three core attributes — 24/7 trading, no expiry, and funding rates — represent a fundamental UX upgrade over traditional FX, commodity, and equity-index derivatives. Brokers, exchanges, data vendors, and fund administrators that establish a bridging position between TradFi and crypto-native design now stand to capture durable competitive advantage on a 5- to 10-year horizon.

[Sources]

• Robert J. Shiller (1993), "Measuring Asset Values for Cash Settlement in Derivative Markets," Journal of Finance, Vol. 48, No. 3, pp. 911-931 / NBER Working Paper t0131: https://www.nber.org/papers/t0131
• Ackerer, Hugonnier, Jermann (2024), "Perpetual Futures Pricing," Wharton: https://finance.wharton.upenn.edu/~jermann/AHJ-main-10.pdf
• Arthur Hayes, "Adapt or Die," Crypto Trader Digest: https://cryptohayes.substack.com/p/adapt-or-die
• BitMEX history (Wikipedia): https://en.wikipedia.org/wiki/BitMEX
• The Token Dispatch, "Arthur Hayes: The Derivatives Genius": https://www.thetokendispatch.com/p/arthur-hayes-the-derivatives-genius
• TokenInsight, BitMEX founding-era account: https://tokeninsight.com/en/tokenwiki/all/who-is-arthur-hayes-a-tradfi-maverick-and-a-true-crypto-enthusiast
• Coinbase Learn, funding rate primer: https://www.coinbase.com/learn/perpetual-futures/understanding-funding-rates-in-perpetual-futures
• Binance Blog, funding rate primer: https://www.binance.com/en/blog/futures/what-is-futures-funding-rate-and-why-it-matters-421499824684903247
• OKX Ventures, perp DEX full evolutionary analysis (dYdX/GMX/Hyperliquid comparison): https://bbx.com/ko/article/495812
• CoinGecko, "The State of Decentralized Perpetual Protocols 2023": https://www.coingecko.com/research/publications/decentralized-perpetuals-report-2023
• Hyperliquid official documentation (HIP-3, Builder Codes): https://hyperliquid.gitbook.io/hyperliquid-docs/
• OAK Research, "Hyperliquid's vision: The AWS of liquidity": https://oakresearch.io/en/analyses/fundamentals/hyperliquid-vision-aws-of-liquidity-builder-codes-core-writer-hip-3
• RedStone Blog, Hyperliquid report: https://blog.redstone.finance/2025/08/21/hyperliquid/
• BeInCrypto, "DEXs Surge to 10% of Perpetuals" (March 2026): https://beincrypto.com/hyperliquid-dexs-cex-coingecko/
• Cryptopolitan, "DEX perpetual futures maintain 3-month streak of $1 trillion in monthly volume" (January 2026): https://www.cryptopolitan.com/dex-perpetual-futures-trading-growth/
• CoinDesk, "HyperLiquid's Native HYPE Token Debuts at $4.2B FDV": https://www.coindesk.com/business/2024/11/29/hyper-liquids-native-token-debuts-at-fully-diluted-4-2-b-market-cap
• CoinMarketCap, HYPE price data: https://coinmarketcap.com/currencies/hyperliquid/
• BingX News, "Arthur Hayes predicts equity pricing will shift to perpetual contracts by end of 2026": https://bingx.com/en/news/post/arthur-hayes-equity-pricing-to-shift-to-perpetual-contracts-by-end-of