The Funding Rate is composed of two main parts: the Interest Rate and the Premium / Discount. This rate aims to keep the trading price of the perpetual contract in line with the underlying reference price.
Interest Rate Component Every contract consists of two instruments: a Base currency and a Quote currency. For example, with BTC-USD, the Base currency is BTC while the quote currency is USD. The Interest Rate is a function of interest rates between these two currencies:
Interest Rate (I) = (Interest Quote Index - Interest Base Index) / Funding Interval
where Interest Base Index = The Interest Rate for borrowing the Base currency Interest Quote Index = The Interest Rate for borrowing the Quote currency Funding Interval = 3 (since funding occurs every 8 hours)
Premium / Discount Component: The perpetual contract may trade at a significant premium or discount to the Last Price. In those situations, a Premium Index will be used to raise or lower the next Funding Rate to levels consistent with where the contract is trading. Each contract’s Premium Index is available on the specific instrument’s Contract Specifications page and is calculated as follows:
Note: EasyCoins doesn’t charge any funding fees from its users. There is no interest rate on keeping the position open indefinitely in perpetuals. The payments are directly interchanged between the buyer and the seller.