## What Is Perpetual? Understanding the Difference Between Perpetual Contracts and Fixed-Term Contracts

**What is Perpetual?** It is a type of perpetual futures contract—a cryptocurrency derivative that allows investors to maintain open positions indefinitely. Unlike traditional fixed-term contracts, perpetual contracts offer greater flexibility but also involve different mechanisms that need to be understood.

## No Expiration Date - What Makes the Basic Difference?

The main difference between fixed-term contracts and perpetual contracts lies in whether there is an expiration date. Fixed-term contracts are designed with a specific expiration date—after which the position is automatically closed. In contrast, perpetual futures contracts do not follow this mechanism. Buyers and sellers can theoretically hold positions "forever"—as long as their accounts maintain sufficient margin to cover losses and avoid forced liquidation.

## Funding Fee - The Mechanism to Maintain Market Balance

To prevent perpetual contracts from diverging too far from the spot price of the underlying asset, exchanges use a funding fee as a balancing tool. This fee is collected from the side that is in profit and transferred to the losing side, helping to bring the price closer to the actual market value.

An important point to know: the funding fee is an agreement between traders—buying and selling—rather than a fee charged by the exchange. This mechanism ensures that the perpetual price does not deviate excessively from the real price.

Understanding the differences between these two types of contracts will help you choose the trading tools that best fit your strategy.