What are perpetual futures (perps) in crypto?

If you’ve spent any time around DeFi or trading apps, you’ve probably seen the term perps.

Short for perpetual futures, they’re one of the most widely used tools in crypto trading today — especially among more active users. But they’re also one of the easiest to misunderstand.

Let’s break it down in plain terms.

The short answer

Perpetual futures (perps) are contracts that let you speculate on the price of a crypto asset without owning it.

You can go:

• long (bet the price will go up)
• short (bet the price will go down)

And unlike traditional futures, they don’t expire — you can keep a position open as long as you want (as long as you maintain the required margin).

How perps actually work

At a basic level, trading perps feels similar to spot trading — you pick an asset and choose a direction.

But under the hood, it’s a different system.

Instead of buying the asset itself, you’re opening a contract position that tracks its price. These positions are powered by smart contracts (in DeFi) or exchange engines (in centralized platforms).

A few key mechanics to understand

Leverage

Perps allow you to trade with leverage, meaning you can open a larger position than your actual balance.

Example:
With $100 and 10× leverage, you’re trading a $1,000 position.

This amplifies both:

• potential gains
• potential losses

Funding rate

Because perps don’t expire, they use a mechanism called the funding rate to keep prices close to the real market price.

• If most traders are long, longs pay shorts
• If most traders are short, shorts pay longs

This payment happens periodically and helps balance the market.

Liquidation

If the market moves against your position and your margin isn’t enough to cover losses, your position gets liquidated.

This means:

• your position is automatically closed
• you lose the funds allocated to that trade

Perps vs traditional futures

Why perps are so popular

There are a few reasons why perps became a core part of crypto trading.

Flexibility in market direction

You’re not limited to “buy low, sell high.” Perps let you take positions in both directions — which matters in volatile markets.

Capital efficiency

With leverage, traders can open larger positions without committing the full amount upfront. Used carefully, this can make strategies more flexible.

No expiry pressure

Unlike traditional futures, there’s no deadline forcing you to close a position. You decide when to exit — not the contract.

Fast-paced trading environment

Perps are designed for active markets. Execution is quick, and positions can be adjusted in real time.

Where perps are used today

Perpetual futures are widely used across both centralized and decentralized platforms.

In DeFi, they’re typically offered through specialized trading protocols that handle:

• order execution
• liquidity
• funding mechanisms

More recently, access to these tools has started to move closer to the wallet layer. Instead of switching between multiple apps, users can now explore perps directly through wallet-integrated environments.

For example, inside NOW Wallet’s Explore section, users can access major perpetual trading platforms including Hyperliquid, Aster, Lighter, GMX, and ddX without leaving the app — making the overall flow more streamlined.

Why users access perps through wallets

More users are moving toward wallet-based access to perps, especially in DeFi environments.

The reason is simple:

• you keep control of your funds
• you don’t need to deposit to a centralized platform
• you can switch between tools (swaps, staking, trading) in one place

This setup doesn’t remove risk — but it does give you more control over how you interact with the market.

Tip: Not sure what a DeFi wallet actually is? We break it down in a separate guide — worth a quick read before diving deeper.

When perps make sense — and when they don’t

Perps are useful, but not for every situation.

They tend to make sense when:

• you want to actively trade short-term price movements
• you need flexibility in direction (long/short)
• you understand how leverage affects your position

They’re less suitable when:

• you’re just looking to hold assets long-term
• you don’t want to actively monitor positions
• you’re not comfortable with fast-changing risk exposure

For many users, perps are something to grow into — not necessarily the first step.

Risks to keep in mind

Perps are powerful, but they’re not beginner-friendly by default.

A few things to watch for:

1. Leverage cuts both ways
   Small price moves can have a big impact on your position

2. Liquidations happen fast
   Especially in volatile markets

3. Funding fees add up
   Holding a position over time can cost more than expected

4. Complexity
   It’s easy to open a position — harder to manage it well

None of this makes perps “bad” — but they do require a bit more awareness than basic swaps.

Margin modes: isolated vs cross

When it comes to perps, it’s not just leverage that matters.
Your margin mode also changes how much you can lose — and how your positions behave.

There are two main types:

Isolated margin

You put a fixed amount into a position.
If the trade goes wrong, you lose only that amount — and the position is closed.

This is typically used when you want clear, limited risk on a single trade — for example, when testing an idea or using higher leverage.

Cross margin

Your position is backed by your entire wallet balance.
If the market moves against you, the system can use more of your funds to keep the position open.

This is often used when managing multiple positions at once, where profits from one trade can help offset losses in another, or when trying to avoid early liquidation during short-term volatility.

What this means in practice

With isolated margin, your risk is limited to what you put in.

With cross margin, losses can go beyond that and affect your full balance — in some cases, wiping out most or all of it if the position isn’t managed.

The good news: if you’ve read this far, you’re no longer going in blind.
Understanding how perps work is what makes the difference when it comes to managing risk.

Final thoughts

Perpetual futures are one of the most flexible tools in crypto trading.

They let you trade both directions, use leverage, and react quickly to market changes — all without owning the underlying asset.

At the same time, they introduce a different layer of complexity.
If you’re just getting started, it’s worth taking time to understand how positions behave before going in size.

Like most things in crypto, perps are less about access — and more about how you use them.

FAQ

What are perpetual futures in simple terms?

Perps are contracts that let you trade the price of a crypto asset without owning it, with no expiration date.

Are perps the same as futures?

Not exactly. Both are derivatives, but perps don’t have an expiry date and use funding rates instead.

What is leverage in perps?

Leverage lets you open a larger position than your actual balance. It increases both potential gains and losses.

Can I lose money trading perps?

Yes. If the market moves against your position, you can be liquidated and lose your margin.

Do I need a wallet to trade perps?

If you’re using DeFi platforms — yes. Your wallet is how you connect, sign transactions, and manage positions.

Are perps suitable for beginners?

They can be used by beginners, but they require more understanding than basic crypto transactions. It’s better to start small and learn how they behave.