Funding Rate
A periodic fee exchanged between long and short traders to balance market positions.
What is Funding Rate?
The funding rate is a small, recurring fee (typically calculated every 1–8 hours) paid between traders holding long or short positions in perpetual swaps on Perp DEXs. It ensures market equilibrium by discouraging overcrowding on one side of the trade. If more traders are long (betting on price increases), they pay the funding rate to short traders, and vice versa, based on the difference between the mark price and index price.
For example, on Hyperliquid, a positive funding rate (e.g., 0.01% per hour) means longs pay shorts, incentivizing more shorts to enter and stabilize the market. Funding rates are transparently calculated via smart contracts and rely on oracle price feeds for accuracy. High funding rates can signal market imbalances, prompting traders to adjust strategies to avoid excessive costs.
Related Terms
Circulating Supply
The total number of a digital asset's tokens or coins that are publicly available and actively circulating in the market.
Liquid Staking
A staking mechanism on Ethereum where users receive derivative tokens representing their staked ETH, allowing them to use these tokens in DeFi activities while earning staking rewards.
Utilization Rate (Lending)
The percentage of a lending pool’s deposited assets that are currently borrowed.
Decentralized Data Marketplace
A platform for trading data assets without centralized control.
Solana Smart Contract / Onchain Program
Executable code deployed on the Solana blockchain that processes transaction instructions to read from and modify controlled accounts, equivalent to smart contracts on other blockchains.
Same Activity Same Risk Same Regulation (Hong Kong)
Hong Kong's regulatory principle ensuring uniform oversight for financial activities with equivalent risks, applied to stablecoin issuance under the Stablecoins Ordinance effective August 2025.