Funding Rate

The funding rate is a transfer between longs and shorts based on the market's imbalance. It is comparable to the funding rate on traditional perpetual exchanges, and it exists to push the market toward balance: the crowded side pays, the underrepresented side earns. A positive rate means longs pay shorts, a negative rate means shorts pay longs.

Velocity Funding

Zenex uses a velocity funding model. Rather than setting the rate directly from the current imbalance, the protocol adjusts the rate over time based on how one-sided the book is. The saved rate has momentum: while one side dominates, the rate keeps accelerating toward that side, and when the book comes back toward balance it winds down again.

The imbalance that drives this is measured in tokens: it is the difference between the long and short base-token totals, divided by their sum. A perfectly balanced book has a skew of zero, and a market where one side holds all the open tokens has a skew of one.

For example, a market with 3,000 XLM of long exposure and 1,000 XLM of short exposure has 4,000 tokens open in total and an imbalance of 2,000 between the two sides, so its skew is 2,000 divided by 4,000, or 50%.

• When the skew is large (or the rate is fresh or has just flipped sign), the rate accelerates toward the dominant side. The wider the skew, the faster it accelerates.
• When the skew is small but the book is not perfectly balanced, the rate decays. The charge never drops below the market's minimum funding charge though: the crowded side keeps paying at least that minimum until the market empties or the dominant side flips.
• Between those bands, and when the book is exactly balanced, the rate holds steady where it is.

The rate returns fully to zero in only two ways: the market empties out (which resets it), or the dominant side flips and the momentum ramps the rate through zero toward the other side.

The acceleration and decay speeds, the skew thresholds that separate the bands, and the minimum funding charge are all per-market parameters. The saved rate is hard-capped in both directions. The exact rate mechanics are in the technical reference.

Because the rate carries momentum, a persistently one-sided market builds a strong funding rate that makes the crowded side increasingly expensive to hold and the other side increasingly attractive. This is what nudges traders back toward balance and reduces the vault's directional risk.

Funding Accrues to a Claimable Balance

Funding runs through an internal funding pool rather than flowing directly onto your position's PnL.

When a position settles at a fill, the funding it owes is banked into the pool, and the funding it has earned is added to that user's claimable balance. To collect it you submit a separate claim, which pays out your claimable balance from the pool rather than topping up your collateral automatically. If the pool cannot cover the full amount at that moment, it pays what it can and the remainder stays claimable for later.

The pool can be briefly short because funding only enters it when a paying position settles at a fill. What you have earned may be owed by payers who have not touched their positions since, so that money is still sitting in their positions rather than in the pool. If you claim during such a window you receive what the pool currently holds, and the rest of your balance becomes collectable as the paying side settles. Nothing is lost by claiming early or waiting, the unclaimed remainder stays yours either way.