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Centralised finance (CeFi) has developed financial instruments, tools and strategies over the course of decades.

However, access to these instruments, tools and strategies have mostly been limited to a small group of people.

With the rise of blockchains and decentralised finance (DeFi), this has changed.

In this guide, we’ll take a look at two basic financial instruments you can find in DeFi — perpetual futures and options — and help you understand the differences between the two.

Perpetual Futures: What Are They?

Perpetual futures are derivatives that mimic the value of an underlying real world asset. The value is often determined by the index/spot price of the corresponding real world asset.

Let’s take gold for example.

What if you want exposure to the price of gold, but you don't want to deal with the hassle of the red tape, paperwork and storage considerations involved with actually owning gold?

This is where derivatives come in.

A derivative, i.e. a perpetual future of gold (AU-PERP), comes in a digital form and can be purchased online — no red tape, paperwork or storage.

As you can see, derivatives such as perpetual futures have been created to simplify trading.

For a more in-depth view of perpetual futures, read the Perpetual Futures / Perpetual Swap Contracts guide.