Mechanics

Funding Rate Mechanism

Funding rates are a function of the difference in price between the futures price and spot price. In perpetual futures, funding mechanisms are useful for ensuring that users cannot hold a single position indefinitely with no risk. When the price of futures is higher than the spot price, the funding rate is positive and all the holders of longs will pay the funding rate on their position to their counterparty, and all shorts will get paid by their counterparty. The same applies, but in reverse, for shorts. Funding is exchanged on a regular basis, as outlined on the trading interface.

Funding rates are dynamic and adjust based on new positions that open up or close out, calculated in close-to-realtime.

On the Dexodus platform, both longs and shorts pay and get paid from the AMM which serves as every trades counterparty. Funding rates are calculated by taking a measure of total open interest delta between longs and shorts and measured against the total AMM value.

Mark Price

Mark price in a CEX experience is the price that prevents unfair liquidations from occurring, and oftentimes take price feed data from a combination of Index price and adjusted based on Funding rates. In Dexodus, it is very much the same, and serves the same purpose of protecting users from anomalous price spikes. Dexodus uses multiple price feeds to ensure that the price of every market is as accurate as possible, and has the fewest aberrant price spikes possible.

This is not infallible, as random events always happen. It is recommended users exercise caution and never trade more than they are able to afford.

Leverage

Leverage is a function of borrowed money against a specific amount of collateral. If a user has $100 to trade with, and they use 10x leverage, they are able to trade with a total position size of $1000. This is not free however, as the maximum amount that price can move against the entry price is 10%, before the full amount of collateral is liquidated and the user loses the entire position.

Open Interest is the total position size that is opened, and on Dexodus, the Open Interest is capped to ~90% of the AMM value. As a result of this, leverage does not impact the protocol as much as it impacts the health of a user’s account. In the event that a user wants to open a position that exceeds the total available open interest on the AMM, users will be encouraged to add liquidity in order to open a new position, or lower their position size (either through lowered collateral or lowered leverage, or both) in order to open a trade on Dexodus. Dexodus offers up to 100x leverage for trades on the most liquid pairs only.