What is a perpetual future?
A contract that tracks an asset's price and never expires. You post collateral against a position and hold it for as long as you keep it funded. There is no settlement date and nothing is ever delivered, because you do not own the underlying asset at any point. The table below breaks the design into four mechanisms and shows what each one exists to fix.
What is a perpetual future?
A contract that tracks an asset's price and never expires. You post collateral against a position and hold it for as long as you keep it funded. There is no settlement date and nothing is ever delivered, because you do not own the underlying asset at any point. The table below breaks the design into four mechanisms and shows what each one exists to fix.
Key Takeaways
- A perpetual future is a price-tracking contract with no expiry date. You never own the asset and nothing is ever delivered.
- The idea came from academia. Robert Shiller proposed perpetual futures in 1993 to create derivative markets for assets that are illiquid or whose price cannot be observed directly — not for crypto, which did not exist.
- Removing the expiry date breaks the mechanism that normally pulls a futures price toward spot. The funding rate is the replacement, and it is the design's central idea.
- They now dominate. Of all listed Bitcoin futures traded in the first half of 2023, perpetuals accounted for 75% of the $27bn daily average volume and 94% of the $8bn daily average open interest.
- The Entry.fi Terminal lists perpetual markets across crypto, commodities, indices and equity-tracking assets, all margined in USDC.
In This Article
- Where perpetual futures came from
- Four mechanisms, and what each one fixes
- How the funding rate actually works
- What this means in practice
- Perpetual markets on the Entry.fi Terminal
- FAQ
Where perpetual futures came from
Most explanations start with the features. Starting with the problem makes the features make sense.
A traditional futures contract has a settlement date. That date does useful work: as it approaches, the futures price and the spot price must converge, because on the final day they become the same thing. Expiry is the anchor.
It also creates a problem. Because contracts expire, liquidity splits across maturities and concentrates in the nearest one. Anyone wanting continuous exposure has to keep rolling from the expiring contract into the next, paying costs and taking execution risk each time. Robert Shiller proposed the perpetual future in 1993 partly to escape this, as a way to build derivative markets for things like real estate indices and corporate profits, where the underlying is illiquid or not directly observable.
The idea sat unused in traditional finance for over two decades. It was implemented in crypto in 2016, and the fit turned out to be unusually good. Here was a market already trading around the clock, with no delivery infrastructure to build and a user base that wanted leverage without a calendar attached to it. Perpetual futures are now the dominant Bitcoin derivative by a wide margin, carrying 75% of daily futures volume and 94% of open interest in the first half of 2023.
Four mechanisms, and what each one fixes
The design is best understood as a chain. Removing expiry solves one problem and creates another, and each subsequent piece patches the hole the previous one opened.
| Mechanism | What it fixes | What breaks without it |
|---|---|---|
| No expiry date | Liquidity splitting across maturities; the cost and hassle of rolling. | Continuous exposure means repeatedly closing one contract and opening another. |
| Funding rate | The loss of expiry, which was what forced the contract price toward spot. | Nothing anchors the contract. It drifts away from the asset it is meant to track. |
| Mark price | Thin order books, where one brief spike could trigger mass liquidations. | A single wick on one venue wipes out positions that were never really underwater. |
| Margin and liquidation | Counterparty default, with no settlement date to force a reckoning. | Losses run past the collateral backing them and someone else absorbs the shortfall. |
Read down that middle column and the instrument stops looking like a list of features. It is a sequence of solutions, and the thing beginners most often treat as an annoying fee (funding) is the single piece holding the whole arrangement to reality.
How the funding rate actually works
Without an expiry date to force convergence, something has to make it expensive to be on the side that has pushed the contract away from spot. That something is a recurring payment between traders.
When the perpetual trades above the reference price, longs pay shorts. Holding long becomes more expensive and holding short becomes more attractive, which pushes the contract back down. When it trades below, the flow reverses. The mechanism works by incentive rather than obligation: nobody is forced to correct the price, it simply becomes profitable to.
The payment moves between traders rather than to the venue, so it is not a fee the platform collects. And the rate is conventionally quoted per eight hours, while how often it is actually settled is a separate venue setting, usually shown as a countdown beside the rate.
Funding is also the main reason perpetuals suit shorter horizons. It accrues for as long as a position stays open, so what is invisible on a day trade becomes material over a month. The arithmetic is simple enough to do at the screen, and we worked it through across holding periods in the comparison between perpetuals and spot.
What this means in practice
Here is what that design means once you are actually holding a position:
- You own nothing. A gold perpetual is not gold, and a Bitcoin perpetual is not Bitcoin. Nothing can be withdrawn and nothing is delivered. The price exposure is genuine; the ownership is not.
- There is a price at which the position ends without you. Liquidation is not a worst case, it is a parameter. It sits closer to your entry than most people expect, because it triggers at the maintenance margin threshold rather than when collateral runs out.
- The clock runs whether you are right or wrong. Funding accrues on open positions regardless of direction. A correct view held too long on the crowded side can still cost money.
- Leverage is optional, not inherent. Perpetuals allow leverage; they do not require it. A position sized at or near 1x behaves much more like the underlying asset itself, minus funding. That is a legitimate way to use the instrument.
Perpetual markets on the Entry.fi Terminal
The Terminal lists perpetual markets across crypto, commodities, indices and equity-tracking assets, quoted and margined in USDC, so one balance backs exposure across every category.
Each market header shows the figures the mechanisms above depend on. Mark price and oracle price appear as separate numbers, alongside the funding rate and a countdown to the next payment. The maximum leverage for that market appears as a badge beside the ticker, and it varies — more volatile markets carry lower caps.
Commodity, index and equity-tracking markets are HIP-3 markets deployed on Hyperliquid, where a builder rather than the protocol defines the oracle and sets leverage limits for the markets it deploys. Crypto perpetuals route to Hyperliquid's core order books. In both cases the reference price your position is measured against is maintained by someone, which is worth knowing before sizing a position.
Entry.fi is the interface. It does not act as an exchange, a broker, a counterparty, or a custodian, and orders route to independent onchain venues rather than to any order book Entry.fi operates. Perpetual markets track the price or valuation of the underlying asset and do not confer ownership of it.
FAQ
What is the difference between a perpetual future and a regular future?
A regular future has a settlement date, and convergence to spot is enforced by that date arriving. A perpetual has no settlement date, so a recurring funding payment between longs and shorts does the anchoring instead.
Do I own the asset when I hold a perpetual?
No. You hold a contract tracking its price. Nothing is delivered and nothing can be withdrawn. The position carries no ownership rights of any kind.
Who do I pay the funding rate to?
To traders on the other side of the market, not to the platform. When funding is positive, longs pay shorts; when negative, shorts pay longs. If you are on the uncrowded side, you receive it.
Can I hold a perpetual position forever?
Contractually yes, since there is no expiry. Economically it depends on funding and on margin, because the position accrues cost the whole time and can be liquidated if collateral falls below the maintenance threshold.
Why is the mark price different from the last traded price?
Because the mark price is constructed from a broader reference rather than a single venue's most recent trade. It exists so one brief spike on a thin book cannot trigger liquidations that the wider market does not justify.
Are perpetual futures only for crypto?
The structure was proposed for illiquid real-world assets long before crypto existed, and it is now used onchain for commodities, indices and equity-tracking markets as well. Crypto is where it was first built, not where it has to stay.
Remove the expiry date and you remove the anchor. Everything else in the design exists to replace it.
Open the Entry.fi Terminal and see how a perpetual market is quoted.