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Funding

Funding is MuchFi’s market-balancing mechanism that incentivizes traders to reduce skew by keeping perpetual contract prices aligned with spot prices. When longs outnumber shorts, longs compensate shorts, and vice versa.

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How Funding Works

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Cadence-Invariant System

MuchFi implements a sophisticated funding structure where realized funding is independent of when settlements happen. This ensures fairness regardless of timing.

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The Premium Signal

MuchFi samples the premium—the gap between mark and index prices—every minute: 
premium = (markPrice - indexPrice) / indexPrice
The system maintains a 60-minute rolling average (TWAP) of premium samples gathered every 5-15 seconds to reduce volatility noise.

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Funding Rate Calculation

MuchFi uses a three-step process:

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Step 0 - Premium Calculation

P̄_decimal = Mark / Index - 1
P̄ = 10,000 × P̄_decimal

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Step 1 - Inner Clamp

F_raw = P̄ + clamp(IR_int - P̄, -K, K)

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Step 2 - Outer Cap

F = clamp(F_raw, -C, C)
Where K defaults to 50 basis points and C to 100 basis points. Positive rates = Longs pay shorts Negative rates = Shorts pay longs

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Funding Accrual

The rate converts to per-second accrual: 
r_sec = F / T_interval
Continuous accumulation occurs in the Quote Funding Index (QFI).

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Account Settlement

When positions change or funding settles: 
funding_pnl = -sign(Q) × |Q| × (QFI - last_QFI)
  • Long positions (Q > 0) pay when F > 0
  • Short positions (Q < 0) pay when F < 0

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Dynamic Funding Intervals (RESET)

MuchFi shortens funding intervals during high volatility for faster market response. RESETs trigger when:
  • Premium divergence exceeds thresholds
  • Market conditions shift rapidly
The process:
  1. Closes current intervals early
  2. Re-seeds premium sampling
  3. Starts fresh intervals
  4. Continues QFI accrual without payment interruption

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Funding Parameters

ParameterDescriptionDefaultRange
N_minutesPremium TWAP window60 min5-1440 min
T_nominalNominal funding interval3600 sec1800-86400 sec
T_minMinimum interval post-RESET300 sec60-3600 sec
KInner clamp50 bps10-200 bps
COuter cap100 bps50-500 bps
Current settings: 1-hour funding intervals and 30-minute RESET intervals.

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Worked Examples

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Example 1: Normal Market

Conditions: 1000index,1000 index, 1006 mark, 60 bps premium 
F_raw = 60 + clamp(0 - 60, -50, 50) = 10 bps
F = clamp(10, -100, 100) = 10 bps
Result: Longs pay shorts 0.1% hourly

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Example 2: High Premium

Conditions: 1000index,1000 index, 1020 mark, 200 bps premium 
F_raw = 200 + clamp(0 - 200, -50, 50) = 150 bps
F = clamp(150, -100, 100) = 100 bps (outer cap)
Result: Longs pay shorts 1% hourly (capped)