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Documentation Index

Fetch the complete documentation index at: https://docs.decibel.trade/llms.txt

Use this file to discover all available pages before exploring further.

Funding rates keep perpetual prices close to the underlying spot price. When perp trades above spot, longs pay shorts. When perp trades below spot, shorts pay longs. Unlike other exchanges that settle every few hours, Decibel uses continuous funding.

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Continuous vs Periodic Funding

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The Problem with Periodic Funding

Most exchanges settle funding every 8 hours (Binance, dYdX) or every 1-4 hours (HyperLiquid). This creates manipulation windows:
  • Traders front-run the funding timestamp
  • Large players push the price just before settlement
  • You pay based on a snapshot, not your actual position over time
Think of it like a taxi that only charges you every 4 miles. You might drive 3.9 miles, pay nothing, then drive 0.1 miles and get charged for 4.

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How Decibel Is Different

Decibel accrues funding every oracle update, roughly once per second. There’s no settlement timestamp to game. Funding accrues like a taxi meter running continuously.
ExchangeFunding Interval
Binance8 hours
dYdX8 hours
HyperLiquid1-4 hours
Decibel~1 second

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How Funding Is Calculated

Funding rate has two components: 
Funding Rate = Premium Index + Interest Rate (clamped)

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Premium Index

The premium index measures how far the perp price deviates from the spot (oracle) price. It’s calculated using impact bid/ask prices, which represent the price to trade a specific notional amount. When perp > spot: Premium is positive, longs pay shorts When perp < spot: Premium is negative, shorts pay longs

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Interest Rate

The interest rate is a small constant (0.01% per 8 hours) that longs pay shorts when the premium is near zero. This component is clamped within a dead zone (±0.05%) so it doesn’t dominate when premium is small.

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When Funding Is Realized

Funding accrues continuously but only settles when you reduce or close a position. Increasing a position does not realize funding. While your position is open:
  • Accrued funding appears in your unrealized PnL
  • It affects your account equity (and liquidation threshold)
  • You don’t pay or receive actual USDC
When you reduce or close your position:
  • Funding is realized proportionally to the size reduction (e.g., closing half your position realizes half the accrued funding)
  • A full close realizes all accrued funding
  • Your USDC balance reflects the net amount
This design saves gas since there’s no periodic mass settlement transaction.

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Trader Implications

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For Long-Term Holders

If you hold a position through extended periods of high positive funding:
  • Your unrealized PnL decreases over time
  • You move closer to liquidation even if price doesn’t change
  • Consider the funding cost as part of your position sizing

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For Short-Term Traders

Continuous funding means you can’t game the settlement window:
  • Fair funding proportional to time held
  • No advantage to entering just after a payment
  • No penalty for exiting just before a payment

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Monitoring Funding

Track funding through:
  • The trading interface shows current rate and accrued amount
  • API endpoints provide historical rates
  • WebSocket streams push real-time updates

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Technical Details

The system tracks funding through a Cumulative Funding Index (CFI). Each position stores the CFI at entry. Your accrued funding is: 
Accrued Funding = Position Size × (Current CFI - Entry CFI)
The global CFI updates every oracle update: 
CFI_new = CFI_prev + (Funding_Rate × Oracle_Price × Time_Elapsed)
This allows efficient calculation without iterating through every position.

Margin

How funding affects your equity

Liquidations

Why monitoring funding matters for liquidation risk