An Overview of Perpetual Swaps in DeFi

The original purpose of a futures contract was to stabilize cash flows for commodity producers by allowing them to lock in a sale price for goods not yet produced. Speculators in the market improve liquidity but are faced with the issue of having to roll contracts over before expiration. BitMEX solved this problem with the introduction of perpetual swap contracts, which give investors synthetic exposure to an underlying asset. 

Without delivery at expiration, though, there is no natural incentive for the futures price to converge to the spot price. Funding payments solve this problem by increasing carrying costs for positions that skew open interest. By encouraging market participants to take unpopular positions, the futures price remains tethered to the spot price.