Perpetual contracts
A perpetual contract is a futures contract that never expires. A dated future converges with the underlying asset because it settles on a fixed day. A perpetual has no settlement day, so something else has to keep it close to the underlying price. That something is funding: a regular payment between buyers and sellers.
- Index price
- The reference price of the underlying asset, taken from the spot markets where it trades.
- Mark price
- The price of the perpetual contract itself, set by the buyers and sellers trading it.
- Funding
- A periodic payment between the two sides. When the mark trades above the index, buyers (longs) pay sellers (shorts); when it trades below, shorts pay longs. Holding the side that pushed the price away becomes expensive, so traders take the other side and the gap closes.
Watch funding at work
Illustrative simulation. Prices are generated, not market data.
Hold a button to push the price. Let go and watch funding pull the mark back to the index. Then set funding to Off and try again.One second here is one hour of trading.
If you know futures
A perpetual is closest to a future that is rolled continuously instead of at expiry. Funding plays the part of the roll: the premium a dated future carries over spot is paid away a little at a time, rather than all at settlement. Rolling spot FX works in a similar way, with the overnight rollover charge in place of funding. On most venues, funding passes between traders rather than to the exchange.
What this model leaves out
Trading fees, and the exact formulas, intervals and limits each venue uses to calculate funding. Real funding is usually paid at set intervals, often every eight hours or every hour, rather than continuously as it is here.
For specialistsHow venues set funding
- Funding
- A common design sets the rate for each interval as a premium index plus a clamped interest component: funding = P + clamp(I − P, −0.05%, +0.05%). I is a small fixed rate, often 0.01% per eight hours; P is a time-weighted average of the premium over the interval. While the premium is small, funding settles at the interest rate; beyond the clamp, it follows the premium. Many venues also cap the rate per interval.
- Premium
- Rather than comparing the last trade with the index, P usually uses impact prices: the average price at which a set amount could be filled against the order book. A thin quote on its own cannot move funding.
- Index and mark
- The index is typically a weighted median or average of several spot venues, with rules to drop outliers and stale feeds. The mark price, used to value open positions, is often the index plus a smoothed basis rather than the last traded price, which makes it harder to move with a single trade.
- What drives convergence
- In the model the pull is proportional to the premium. In practice it comes from basis traders who buy spot and sell the perpetual, or the reverse, to earn funding. Their capital and financing costs set how quickly a premium is traded away, which is why the same funding rate closes the gap quickly in one market and slowly in another.
How tokenisation works
Tokenisation puts a claim on a real asset onto a shared ledger. The asset itself stays where it is: in a bank, a vault, a fund or a land registry. What changes is how ownership of the claim is recorded, split and transferred. The mechanics are the same for every asset; what differs is who holds the asset, what the token legally gives you, and how you get out. The two instruments that follow are both tokenised assets.
Tokenisation map
Choose an asset to see how the same six steps change.
Off-chain
On-chain
The asset
Who holds it
What the token gives you
How its value is known
Who can hold it
How you get out
If you know securities
Tokenisation is closest to dematerialisation. Paper certificates became entries at a central securities depository; a token moves that entry onto a ledger that the holder, the issuer and others can all read, and on which a transfer can settle in seconds.
What this map leaves out
The law. Whether a token gives real ownership of anything depends on the jurisdiction, the issuer's structure and the token's terms. The same asset can be tokenised in ways that give holders very different rights.
For specialistsWhere tokenisation succeeds or stalls
- Register of record
- The first question is whether the ledger is the legal register or a mirror of an off-chain one. Where it is only a mirror, the off-chain register prevails in a dispute, and the token is a convenience rather than title.
- Token design
- Open, fungible token standards suit cash-like assets. Securities usually use permissioned standards that check a list of verified holders before any transfer, and let the issuer freeze tokens or force transfers to comply with legal orders.
- Bankruptcy remoteness
- Holders are protected if the asset sits in a vehicle or trust separate from the issuer's own estate. Without that, token holders may rank as unsecured creditors if the issuer fails.
- Settlement
- Delivery against payment in one step needs the cash leg on the same ledger, as a stablecoin, a tokenised bank deposit or central bank money. Without it, the payment still settles through banks on the old timetable.
- Price data
- Net asset values, commodity prices and valuations reach the ledger through data feeds known as oracles. Who operates them, and what happens when a feed fails, is part of the asset's risk.
Stablecoins
A stablecoin is a token designed to hold a fixed value, usually one US dollar. The most common kind is backed by reserves of cash and short-dated government bills, and its issuer stands ready to swap tokens for dollars one for one. That promise, and the traders who use it, is what holds the price at a dollar.
- Peg
- The fixed value the token aims to hold. Here it is one US dollar.
- Mint and redeem
- Approved firms can deposit a dollar with the issuer to create a token, or hand a token back to receive a dollar. When the market price drifts, doing one or the other is profitable, and that trade pushes the price back.
- Reserves
- The assets the issuer holds against the tokens in circulation. In the most conservative designs, that means cash and short-dated government bills.
Watch the peg hold
Illustrative simulation. Prices are generated, not market data.
Hold a button to push the price off a dollar. Let go and watch minting or redemption bring it back. Then lower the reserves below 100% and try again.One second here is one hour of trading.
If you know money markets
A reserve-backed stablecoin behaves much like a share in a government money market fund that pays the holder no interest and trades around the clock. The peg holds for the same reason a currency board holds: anyone eligible can convert at a fixed rate, and the reserves are there to meet it. The issuer usually keeps the interest the reserves earn.
What this model leaves out
Fees, minimum sizes and the time a redemption takes, which vary by issuer; the quality and custody of the reserves themselves; and designs that are not backed by reserves at all, such as algorithmic stablecoins, which have broken down in the past.
For specialistsWhat keeps a peg credible
- The arbitrage band
- Minting and redemption fees, minimum sizes and settlement times create a band around a dollar inside which arbitrage is not worth doing. The model ignores fees, so its band has no width; real tokens drift by a few basis points before traders act.
- Primary and secondary markets
- Only approved firms deal with the issuer. Everyone else trades on the secondary market, so for most holders the peg depends on those firms being willing and able to arbitrage, including at weekends, when banks are closed and the dollar side cannot move.
- Reserves
- Credit quality matters, and so do maturity and concentration. Reserves in longer-dated bonds lose value when rates rise, and deposits concentrated at one bank can be caught if that bank fails. An attestation reports reserves at a point in time; an audit also tests the controls around them.
- Rules
- The EU, under MiCA, and the US, under the GENIUS Act of 2025, now broadly require issuers of dollar-style tokens to hold one-to-one reserves in safe, liquid assets, disclose them, and redeem at par. Neither lets issuers pay interest to holders.
Tokenised gold and commodities
A tokenised commodity is a digital token that represents ownership of a set quantity of a physical commodity held in storage. For gold, one token usually stands for one gram or one ounce of metal in a named vault. The token can be split and transferred in seconds, at any hour, while the metal stays where it is.
- Allocated metal
- Specific bars held for token holders and recorded by serial number, rather than a general claim on a pool of metal.
- Mint and burn
- Tokens are created when metal is deposited and destroyed when it is taken out, so the number of tokens tracks the metal in the vault.
- Redemption
- Swapping tokens for physical metal. It usually needs a minimum, such as a whole bar, and a delivery fee.
Inside the vault
Illustrative model. One token is one gram; bars are one kilogram; the price is $100 a gram for illustration.
Move the slider to set a holding.
Set a holding from a single gram. Send part of it to someone else and notice that no bar moves. Hold a full kilogram and you can take a bar out of the vault; deposit one and new tokens are created.
If you know bullion
It resembles an allocated account with a bullion bank, or a unit in a physically backed exchange-traded product: the holder owns metal, not a promise to pay. The differences are settlement and size. Ownership changes on a shared ledger in seconds, at any hour, and a holding can be far smaller than a bar.
What this model leaves out
Storage and redemption fees; the legal structure that gives holders title to the metal, which differs by issuer and jurisdiction; and how the custodian and auditor are chosen and checked. Those are where tokenised commodities differ most, and where diligence matters.
For specialistsWhat to check behind a gold token
- Allocated or unallocated
- Allocated metal is identified bar by bar and remains the holder's, or the trust's, property. Unallocated metal is a claim on the custodian's general stock and ranks as a debt if the custodian fails. The token's documents should say which, and in whose name the bars are held.
- Bars and bar lists
- Wholesale gold trades in Good Delivery bars of roughly 400 troy ounces, not kilobars, and a token may be backed by either. A published bar list, reconciled against token supply at regular intervals, is the practical test of backing.
- Title and law
- Title to the metal passes under the law of the vault's jurisdiction and the token's terms, not by the ledger alone. The question to answer is what a holder owns if the issuer disappears, and how they would claim the metal.
- Pricing
- Tokens reference a benchmark price but trade in their own markets. Spreads widen when redemption is slow or costly, which is the commodity version of a stablecoin's arbitrage band.
Multi-signature custody
Digital assets are controlled by private keys: whoever holds the key can move the asset. Multi-signature custody spreads that control across several keys and sets how many must sign before anything moves. For a family, it replaces a single point of failure with a rule: no one person can act alone, and no single lost key locks everyone out.
- Private key
- A secret that authorises transfers. It works like a signature that cannot be forged, and cannot be reset if it is lost.
- Keyholders
- The people or institutions each holding one key. In a family arrangement they might include the principal, relatives, a trustee and a regulated custodian.
- Threshold
- How many keys must sign to approve a transfer, written as, for example, three of five. It is the single most important choice in the arrangement.
Approve a transfer
Illustrative model of how approval thresholds work. It does not depict any particular wallet or provider.
Have keyholders sign until the transfer is approved. Then mark a key as lost, and move the threshold from one of five to five of five. Low thresholds are easy to use and easy to steal from; high ones are safe until someone loses a key.
If you know corporate governance
It is the rule on a company's bank mandate that any two of five directors must sign, enforced by code rather than by the bank. The difference is that no bank officer stands behind it: if too many keys are lost, nobody can override the rule and restore access.
What this model leaves out
How keys are generated, stored and backed up; newer techniques that split a single key between parties instead of using several keys; and the documents that say who may sign, and when. For a family, those documents matter as much as the technology.
Osomon advises on how these arrangements are governed. It does not hold keys or provide custody.
For specialistsDesigning a family arrangement
- Multi-signature or threshold signatures
- On-chain multi-signature wallets make the signing policy visible on the ledger and easy to audit, but depend on each chain's support. Threshold-signature schemes, often called MPC, split one key into shares held by different parties: the policy sits off-chain, works across chains, and appears as a single signature on the ledger.
- Recovery paths
- An arrangement can add a time-delayed recovery key, so that if the threshold can no longer be met, a designated party can recover the assets after a waiting period that gives the family time to object.
- Operational controls
- Keys on separate hardware, in different places, with no two held by the same person or on the same network; documented key ceremonies; and regular tests that each keyholder can still sign.
- Legal fit
- The signing policy should mirror the trust deed or family charter: who may sign, who must be consulted, and what happens on death, incapacity or divorce. Where the two disagree, the law and the documents decide, not the wallet.