Funding rates explained
How PerpNow samples premium and settles hourly funding on its testnet.
Updated 2026-11-05
Why perpetuals use funding
A perpetual contract has no expiry settlement that forces its price back to a spot reference. Funding is a periodic transfer between long and short positions intended to make holding a position reflect the premium or discount of the perpetual market. On PerpNow, funding is settled hourly. A positive rate means longs pay shorts; a negative rate reverses the direction. The funding value is a rate for the interval, not a forecast of future returns.
Premium sampling
The engine samples market premium every five seconds. It derives premium from impact prices relative to the oracle, so the calculation looks beyond a single last trade. The sampled values are accumulated and averaged for the funding interval. That average is then combined with the protocol's interest adjustment. This is a PerpNow implementation detail; do not copy funding parameters from another exchange unless they match the running code.
The hourly rate is calculated from the average premium plus a clamped adjustment based on a 0.01% per eight-hour interest baseline, divided by eight. The adjustment is bounded to plus or minus 0.05% at the eight-hour input scale. The resulting hourly rate is capped at 4% in either direction. If the premium is exactly neutral, the baseline term corresponds to 0.00125% per hour before the cap.
How a payment is estimated
A simple estimate is position notional multiplied by the funding rate for the interval. For example, a $10,000 long at a positive 0.00125% hourly rate corresponds to $0.125 paid for that hour, before considering changes in position size or the realized settlement value. A short at that rate receives the corresponding transfer. Actual funding depends on the rate at settlement and the position held at that time.
Funding is distinct from trading fees and unrealized PnL. Fees apply to executed orders according to maker or taker status. PnL changes with market price, while funding is the periodic transfer computed by the engine. Consult live market context rather than treating an observed hourly rate as constant for a day.
Where to inspect it
Market metadata and asset contexts expose funding alongside mark, previous-day price, volume and open interest. Account funding history can show posted funding entries. The API and WebSocket surfaces are documented in Docs; the BTC market shows the current context in the application.
Funding can be positive, negative or capped, and can change from one interval to the next. It is not a yield promise. PerpNow is a public testnet and test balances have no real value. For risk mechanics, read How liquidation works and Cross vs isolated margin.
What the cap means
The cap is a bound on the calculated hourly rate, not a target. A rate near the cap can make the transfer material relative to position size, but it does not describe price risk or guarantee a return for either side. A market's premium may move during the sampling period, and positions can be opened, reduced or closed before a settlement. The realized account ledger therefore depends on the position and rate at the time the engine settles funding.
When comparing markets, use consistent units. Funding values in market context are decimal fractions: multiplying by 100 expresses a percentage for the interval. Multiplying an hourly percentage by 24 and 365 gives a simple annualized display, not a prediction that the same hourly rate will persist. A dashboard that shows an annualized number should label it as a conversion of the current hourly rate, not as a promised APR.
Funding history is useful for reconciling transfers that have already been applied. It is different from a prospective estimate calculated from current market context. The latter can change as the oracle, impact prices and premium samples change. If a client displays a rate, include the interval and timestamp so readers do not mistake an hourly figure for a daily or annual rate.