What Is a Funding Rate on a Perp DEX?

Funding is the price of being on the crowded side of a perp. For a farmer it is one of two things: a cost you pay for holding positions while you build volume, or the yield in a hedge that is long on one venue and short on another. Either way, it is charged on the full position, so it matters more than it looks.

Quick answer

A funding rate is a periodic payment between longs and shorts on a perpetual future. It keeps the perp price close to the spot price. When the rate is positive, longs pay shorts. When it is negative, shorts pay longs. Venues pay it on different clocks: every hour, every few hours or continuously. The exchange does not keep it: Hyperliquid, Lighter and Aster all describe funding as a payment between traders.

Why do perps need funding?

A normal future expires, so its price must meet spot at the end. A perpetual never expires, and funding takes the place of the expiry. If the perp trades above spot, longs pay. Holding a long gets more expensive and a short more attractive, which pulls the price back down. The reverse happens below spot.

Who pays whom?

You pay or receive only while a position is open when funding is applied. Extended says it plainly: if you close before the funding fee is charged, “it is not applied.” On a venue that accrues funding continuously, you pay for exactly the time you held.

How is the rate set?

On standard crypto markets the venues we track use the same basic shape:

Funding rate = premium + clamp(interest rate - premium)

• Premium: how far the perp price sits from the index (spot) price, usually measured on the order book.
• Interest rate: a small fixed baseline, commonly 0.01% per 8 hours.
• Clamp: a limit on how far the result can sit from the baseline. When the premium is small, the rate snaps to the baseline.
• Cap: a maximum rate per period, so one wild hour cannot drain a position.

That is why a quiet market shows about the same small positive rate on every venue: the baseline of 0.01% per 8 hours, which is about 11% a year. A rate far above that means one side is crowded.

Why do the clocks matter?

Venues quote and pay funding on different periods. Hyperliquid, Lighter and Extended pay every hour, Paradex accrues continuously, and Aster sets the interval per market and can change it. A rate quoted per 8 hours is eight times the same rate quoted per hour. Compare two venues only after you bring both to the same period. Our funding scanner does that and shows every rate as a yearly figure.

How do you turn a rate into a yearly number?

Multiply the hourly rate by 8,760, or the 8-hour rate by 1,095. The baseline of 0.01% per 8 hours is 0.00125% per hour, which times 8,760 is about 10.95% a year.

A yearly figure assumes the rate holds for a year. It never does. Read it as a way to compare venues, not as a return.

What does funding cost on a position?

Funding payment = position size x price x funding rate

It is charged on the full position, not on your margin. Say you hold a $10,000 BTC long at 5x, so your margin is $2,000, and the rate sits at the baseline of 0.00125% per hour:

• Per hour: $0.125
• Per day: about $3.00
• Per 30 days: about $90, which is 4.5% of your $2,000 margin

If the rate turns negative, the same amount flows to you. If it spikes, so does the bill.

What does funding mean for a farmer?

• Holding for volume costs funding. A position you keep open to build volume or points pays funding the whole time it is on the crowded side. Add it to your cost per point next to the trading fees.
• A hedge earns the spread, minus fees. Long where funding is negative or low, short where it is high, and the gap is yours while it lasts. Four fills (open and close on both legs) come out of it, so a short hold keeps much less of the spread than a long one.
• Rates flip. A spread that pays today can reverse within hours. Check it again before you add to a position.

What funding does not tell you

• It is not the exchange’s fee. Trading fees are separate and charged on every fill.
• It does not predict price. A high positive rate says longs are crowded right now, nothing more.
• It can reach your margin. If your balance cannot cover funding, some venues take it from position margin, which moves your liquidation price.

Frequently asked

Is a positive funding rate good or bad? It depends on your side. Positive is a cost for longs and income for shorts.

Why is the rate the same on every venue sometimes? When the premium is small, the clamp pulls the rate to the 0.01% per 8 hours baseline on each venue.

Do I pay funding if I close before the payment? On an hourly venue, not if the position is closed when the payment is applied. On a continuous venue you pay for the time you held.

Where can I see live rates? On our funding scanner, with the net after fees for your size and hold.