> ## Documentation Index
> Fetch the complete documentation index at: https://docs.strike.markets/llms.txt
> Use this file to discover all available pages before exploring further.

# Funding Rates

Strike implements a **skew-based funding rate mechanism** designed to maintain market balance and incentivizes traders to take the minority side.

## How Funding Rates Work

The funding rate is calculated based on market skew:

```
skew = (long_oi - short_oi) / total_oi
premium = multiplier * skew
8_hour_rate = premium + clamp(base_rate - premium, -0.05, 0.05)
```

Where the multiplier is 0.5 and helps smooth out the rate. The base\_rate is 0.01, it corresponds to \~11.6% APR - the difference in borrowing rates between USD and spot crypto.
The clamp function ensures the rate stays within ±5 basis points. For example, if the skew is 10%, the funding rate will be 5 basis points.

Funding is applied **hourly** to positions that are at least 8 hours old.

```
funding_increment = position_size * hourly_rate
accumulated_funding = previous_funding + funding_increment
```

## Impact on Positions

Funding payments directly affect your position's economics based on the calculated rate:

* **When you receive funding**: The payment is added to your position's PnL
* **When you pay funding**: The payment is deducted from your position's margin

The funding direction depends on the **final calculated rate**, not simply whether you're on the majority or minority side. Due to the base rate of 0.01 (\~11.6% APR), shorts are generally favored - meaning even in perfectly balanced markets (50/50), longs typically pay funding to shorts.

## Asymmetric Distribution

Strike Protocol's funding system creates **asymmetric rates** to ensure balanced settlements:

* **Majority side pays**: The side with more open interest pays the calculated funding rate
* **Minority side receives more**: The side with less open interest receives proportionally more per position
* **Balanced totals**: Total payments always equal total receipts across all positions

### Example Scenarios

<Tabs>
  <Tab title="Skewed Market (60% Long)">
    When the market is **60% long, 40% short**:

    * Long positions pay the funding rate
    * Short positions receive 1.5x the rate per position
    * Total paid by longs equals total received by shorts

    This incentivizes traders to take short positions, helping rebalance the market.
  </Tab>

  <Tab title="Balanced Market (50/50)">
    When the market is **50% long, 50% short**:

    * Longs pay the base rate of \~11.6% APR to shorts
    * Both sides pay/receive approximately equal amounts
  </Tab>
</Tabs>