Interdax’s funding mechanism ensures that the price of a perpetual swap contract closely tracks the price of the underlying asset. Unlike most cryptocurrency perpetuals, Interdax's contracts do not have eight-hour funding periods.

Instead, the interest rate (or funding rate) is calculated and compounded continuously for open positions to ensuring a smoother adjustment mechanism for the index price (=mark price) for perpetuals.

The Browser panel displays the 8-hour average of the funding rate for each instrument, as shown below:

The daily interest rate/funding rate is calculated as:

The formula for the daily interest rate is applicable if the bid-ask spread is less than 20% and the interest rate is capped to max interest on each side.

If the interest rate is positive, long positions pay short positions.

In the case where the mark price is significantly higher than the price of the underlying asset, a positive interest rate provides an incentive for traders to take short positions (as they will receive payments). As more traders open short positions, the price of the derivative contract should fall and quickly re-align with the price of the underlying asset.

If the interest rate is negative, short positions pay long positions.

If the mark price is significantly lower than the price of the underlying asset, traders with long positions will be paid interest. As more traders go long on the derivative, the mark price will increase to match the price of the underlying asset.

## Example

Suppose the daily interest rate is 0.01% and a user has a short position of 1,000 contracts of BTC-PERP with a mark price of $10,000. The position will be valued at 0.1 BTC.

The interest accrued to a trader with a short position in one second will be equal to the daily interest rate:

However, a trader with a long position in the same situation would be debited 0.0116 satoshis per second.

Accumulated payments are credited to (or deducted from) the user’s balance continuously. Funding payments will appear on the transaction history page as soon as the accumulated payments reach at least 1 satoshi (0.00000001 BTC).