Why Are Exolane Funding Rates Capped?
Exolane caps funding rates at ±15% APR per market. This means that no matter how skewed the market becomes, the maximum annual cost of holding a position due to funding is 15% — roughly 1.25% per month or 0.04% per day. On many other perpetual exchanges, funding rates can spike to 100%+ APR during volatile periods.
The cap exists for three reasons: to keep position costs predictable for traders, to prevent "funding squeeze" attacks where whales intentionally skew markets to extract funding from other traders, and to make long-term positions economically viable.
How Funding Works on Exolane
- Direction based on skew: When there are more longs than shorts, longs pay shorts. When there are more shorts than longs, shorts pay longs.
- Rate is proportional to imbalance: The more skewed the market, the higher the rate — up to the ±15% APR cap.
- 100% flows between traders: The protocol takes 0% of funding. Every penny paid by one side goes to the other side.
- Continuous accrual: Funding accrues continuously and is settled at each oracle update.
Why the Cap Matters
Predictable Costs
Without a cap, a 30-day position could cost anywhere from 0.1% to 30%+ in funding alone. With the cap, you know the maximum cost upfront: 1.25% per month in the worst case.
Protection Against Funding Squeezes
On uncapped exchanges, a whale can open a large directional position to intentionally skew the market, then profit from the extreme funding rate paid by traders on the other side. The cap limits the profitability of this attack.
Viable Long-Term Positions
Many perpetual traders hold positions for days or weeks. Uncapped funding makes this a gamble on costs, not just on price direction. Capped funding makes longer-duration strategies more predictable.
Cost Comparison Example
$10,000 long position held for 30 days during a bullish period (longs pay shorts):
| Exchange Type | Funding Rate | 30-Day Cost |
|---|---|---|
| Uncapped (moderate skew) | ~50% APR | ~$411 |
| Uncapped (extreme skew) | ~200% APR | ~$1,644 |
| Exolane (maximum cap) | 15% APR | ~$123 |
Other Fee Facts
- Taker fee: 0.02% of notional value on open and close
- Maker fee: 0.00%
- Liquidation penalty: 0.00%
- Interest fee: 0%
- Protocol share of funding: 0% — 100% flows between traders
- Gas per transaction: ~$0.01–$0.05 on Arbitrum
These parameters are verifiable on-chain in the market contracts. See the documentation for contract addresses.
What You Should Verify Yourself
- Check the funding rate parameters in the market contracts on Arbiscan (see contract addresses).
- Monitor current funding rates in the trading interface before opening positions.
- Review the funding rate documentation for the exact formula.
- Note that ±15% APR is the current cap — it is a coordinator-adjustable parameter bounded by protocol limits.