Funding

In order to be able to make liberal use of efficient data structures, the Audaces Perpetuals market doesn’t extract funding directly from a user’s open positions. Instead, funding is paid from the Vault balance, leaving the positions unaffected.

This means that users are required to maintain a high enough balance in the Vault to pay for potential funding in order to avoid having their positions liquidated. A consistently well arbitraged market will require fewer funds locked in Vaults, minimizing the associated potential for impermanent loss. In practice, funding happens in three stages:

  • The first operation samples the market’s funding ratio at short but regular intervals in order to get an accurate estimate of the TWAP of the relative difference between market price and index price.

  • The second operation happens at much longer intervals and calculates the final value of the funding ratio for the past round. At this stage, the imbalance between longs and shorts is recorded and is used to cap the funding that is received by users to the funding that is paid. This is to ensure that the insurance fund never pays out funding.

  • The final operation happens on a per-Vault basis and extracts the relevant user’s funds from the Vault, liquidating their positions if necessary.

Because of the imbalance between longs and shorts in the vAMM, the funding is capped and in some circumstances can be different from the funding in centralized exchanges (CEX). This is why in practice there are two funding rates

Funding > 0

Funding < 0

Longs > Shorts

Similar to CEX

Different from CEX

Longs < Shorts

Different from CEX

Similar to CEX

In cases where the funding is different from a CEX funding, traders who receive the funding will receive less than what they would receive on a CEX.

Funding can be different from centralized exchanges funding

In practice there are two funding rates

Funding is paid every hour

Extracting funding

Crankers are responsible for extracting funding every hour. However, if you try to interact with your positions (e.g increase or close) before crankers have finished their funding extraction cycle, you may encounter the following error

The user account isn't up to date on funding.

In this case, you can either extract your funding yourself by clicking on the Extract button or wait for the crankers to finish their funding extraction cycle.

Funding is not extracted from open positions but from User Accounts. In the case where a User Account had 0 USDC but had to pay funding, its position would have to be liquidated in order to pay funding.