Funding Rate
- Balances market by taxing majority side, paying minority side
- Calculated using velocity model
- Helps maintain market equilibrium over time
In Parcl v3, the funding rate mechanism is designed to balance the market by incentivizing the minority side and discouraging the majority side. The funding rate is calculated based on market skew, with the majority side
paying a fee and the minority side receiving a rebate. This means that traders holding positions on the majority side of the market (whether long or short) will continuously pay funding fees as long as their side remains the majority. Conversely, traders on the minority side will receive funding payments as a rebate for as long as they remain in the minority. This continuous adjustment helps to promote market balance by creating a financial incentive for traders to take positions that reduce overall market skew. ↓ Click below for Related Article