Funding Rates
Funding keeps perpetual markets economically anchored when there is no expiry date.
Current Onchain Behavior
The current onchain funding implementation uses two inputs:
- The premium between the perpetual price and the index price
- Open-interest skew between longs and shorts
Positive funding means longs pay shorts. Negative funding means shorts pay longs.
Settlement Model
Funding is settled lazily. Instead of updating every position on a fixed schedule, the protocol updates cumulative funding and applies each account's delta on the next relevant interaction.
Important Status Note
The current onchain funding formula uses premium and open-interest skew.
Interest-rate-differential funding is in near-term scope, but it is not part of current onchain behavior yet. The intended direction is to add an FX carry component on top of the existing premium and skew terms so that longer-horizon positions reflect base-versus-quote rate differentials more directly.
Any carry term would be bounded and smoothed before it affects funding, so funding does not jump mechanically on noisy or abrupt rate changes.
Why Traders Care
Funding affects:
- Carry on open positions
- Available margin
- Liquidation risk over time
- Medium-term economics for positions that may eventually incorporate FX carry