> For the complete documentation index, see [llms.txt](https://docs.trendle.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.trendle.fi/product/funding-rate.md).

# Funding Rate

### <mark style="color:yellow;">**Purpose:**</mark>&#x20;

balance open interest between longs and shorts and compensate the minority side. Funding is **NOT** about pulling a price toward an oracle. It’s a **crowding tax** paid continuously by the dominant side.

**Two-layer design: index vs market**\
Trendle deliberately separates the system into two independent layers.

1. **Index layer** - the Attention Index (DoA) is computed purely from social and engagement data. It is deterministic, non-tradable, and independent of trader positioning.
2. **Market layer** - traders price a perpetual-style derivative *around* that index based on leverage, risk appetite, and positioning.

There is no tradable `spot attention asset` to arbitrage against. The index acts as a reference signal, not a market-clearing price.

### <mark style="color:yellow;">How the mechanism works ?</mark>

1. **Who pays whom**

* Funding accrues per second. The dominant side *(the side with greater open interest)* pays the opposite side. Accrual is proportional to each position’s opening notional = `collateral × leverage`.
* Current P\&L does not matter for how much you pay / receive.

2. **Per market**

* Funding is calculated separately for each token / index pair. No cross-netting between markets.

3. Rate formula (example shown for long-dominant market)

$$
\text{fundingRatePerSecond}
\= \frac{(\mathrm{Long\ OI}-\mathrm{Short\ OI}) \times \mathrm{baseFundingRate}}
{\mathrm{Long\ OI}}
$$

If shorts dominate, swap “Long” and “Short” in the formula.&#x20;

Your per-second charge / credit = `positionOpeningNotional × fundingRatePerSecond`

4. **Percent-in / percent-out; surplus to LPs**

* Funding is charged as a percentage on each side’s opening notional. “Longs pay 1%” means each long pays 1% (annualized to per-second) of *its opening notional* over the interval; “shorts receive 1%” means each short receives 1% of its opening notional.
* Because the dominant side’s notional sum is larger, total paid > total received; the surplus flows to the pool and is distributed to LPs.

5. **One-sided markets**

* If all open interest is on one side (e.g., only longs or only shorts), no funding is charged.

6. **Funding applies to all open positions, even with no boost (1×)**

* With 1×, funding is calculated on your collateral meaning higher boost increases position size and scales the dollar impact of funding proportionally, while the funding rate itself remains the same.

7. **Liquidations from funding**

* Funding can **r**educe collateral over time. A position may be liquidated due to funding even if its mark-to-market P\&L is positive, if equity falls below the maintenance threshold.