Funding

Fundings are periodic payments between longs and shorts that anchor the perpetual contract price to the oracle. When the market trades above the oracle, longs pay shorts; when below, shorts pay longs. This mechanism discourages persistent deviations from the spot price without requiring contract expiry.

1. Premium

Each funding cycle begins with measuring how far the on-chain book has drifted from the oracle. The contract computes two impact prices by walking the book, takes their midpoint, and compares it to the oracle:

Impact bid — the volume-weighted average price (VWAP) obtained by selling $impactSize$ worth of base asset into the bid side.
Impact ask — the VWAP obtained by buying $impactSize$ worth from the ask side.

The premium is then:

$midImpactPrice = \frac{impactBid + impactAsk}{2}$

$premium = \frac{midImpactPrice - oracle}{oracle}$

If a side of the book has less than $impactSize$ of depth, the walk returns the VWAP of whatever depth is available. If a side has no depth at all, the sample is skipped for that cycle rather than a one-sided mid being computed. In steady state both sides are always populated by the vault.

2. Sampling

A cron job runs frequently (e.g. every minute). Each invocation samples the premium for every active pair and accumulates it into the pair’s state:

$premiumSum + = premium$

$premiumSamples + = 1$

Sampling at a cadence close to the block rate gives each observation roughly equal weight. A resting order that momentarily drags the mid can only influence the average in proportion to how long it sits on the book relative to the full funding period.

3. Collection

When $fundingPeriod$ has elapsed since the last collection, the same cron invocation finalises the funding rate:

Average premium:

$avgPremium = premiumSum / premiumSamples$
Clamp to the configured bounds:

$rate = clamp (avgPremium, [- maxAbsFundingRate, + maxAbsFundingRate])$
Funding delta — scale by the actual elapsed interval and oracle price:

$fundingDelta = rate \times interval \times oraclePrice$
Accumulate into the pair-level running total:

$fundingPerUnit + = fundingDelta$
Reset accumulators: $premiumSum \leftarrow 0$ , $premiumSamples \leftarrow 0$ , $lastFundingTime \leftarrow now$ .

4. Position-level settlement

Accrued funding is settled on a position whenever it is touched — during a fill, liquidation, or ADL event:

$accruedFunding = size \times (fundingPerUnit - entryFundingPerUnit)$

After settlement the entry point is reset:

$entryFundingPerUnit \leftarrow fundingPerUnit$

Sign convention: positive accrued funding is a cost to the holder (longs pay when the rate is positive, shorts pay when it is negative). The negated accrued funding is added to the user’s realised PnL. See Order matching §7a and Vault §4 for how this integrates with fill execution and vault accounting.

5. Parameters

Field	Type	Description
`funding_period`	`Duration`	Minimum time between funding collections.
`impact_size`	`UsdValue`	Notional depth walked on each side of the book to compute impact prices. A larger value dilutes the influence of any single resting order on the premium in proportion to the fraction of the walk it occupies.
`max_abs_funding_rate`	`FundingRate`	Symmetric clamp applied to the average premium before scaling to a delta. Prevents runaway rates during prolonged skew.
`funding_rate_multiplier`	`Dimensionless`	Scalar applied to the vault-driven premium so governance can tune funding independently of the vault’s quoting (see §6). Bounds: $\geq 0$ . $1$ is identity; $0$ disables funding for the pair.

6. Discussions

Vault being the sole maker

As of today, the protocol-owned vault is the dominant maker in Dango’s markets. The vault’s inventory-skew-aware quoting policy causes the book mid to drift from the oracle whenever the vault holds inventory:

$vaultBid = oracle \cdot (1 - halfSpread \cdot (1 + skew \cdot spreadSkewFactor))$

$vaultAsk = oracle \cdot (1 + halfSpread \cdot (1 - skew \cdot spreadSkewFactor))$

Suppose the vault is literally the only maker in the entire market, we can substitute the vault’s bid and ask into the $midImpactPrice$ formula:

$midImpactPrice = oracle \cdot (1 - halfSpread \cdot skew \cdot spreadSkewFactor)$

and therefore

$premium = - halfSpread \cdot skew \cdot spreadSkewFactor \cdot fundingRateMultiplier$

Positive skew (vault long, because sell flow has dominated) produces a negative premium, so longs receive funding from shorts — which credits the vault-as-long for absorbed inventory. Symmetric when short. The sign is economically correct by construction.

The closed-form also tethers funding to the vault’s quoting parameters: tightening spreads to compete for flow would otherwise shrink funding by the same factor. $fundingRateMultiplier$ is a per-pair governance knob that decouples these two — admins can dial funding up or down (e.g. in response to persistent one-sided skew) without touching $halfSpread$ or $spreadSkewFactor$ and therefore without changing the vault’s quoted prices. $fundingRateMultiplier = 1$ is the identity and matches the pre-multiplier formulation; $0$ disables funding entirely.

Comparison with other exchanges

The “book mid minus oracle” premium is the dominant on-chain perpetual-funding pattern — see Drift (bid/ask TWAP mid vs oracle TWAP), Vertex (mark vs spot index), Paradex (Fair Basis from mark), and MCDEX v2 (AMM mid vs index). Dango’s formulation differs in reading impact prices (depth-walked VWAPs) rather than top-of-book, which bakes depth distribution into the primitive and forces any book-level manipulation to commit notional proportional to $impactSize$ .

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