Funding Fees
Funding fees are a core mechanism in XOX perpetual markets that keeps the contract price tightly anchored to the underlying asset’s spot price. These fees are exchanged directly between long and short position holders on a periodic basis, incentivizing market participants to drive price convergence and maintain equilibrium.
Mechanism of Funding Fees
On XOX, funding fees are settled every hour. The funding rate is calculated and updated in real-time.
When the funding rate is positive at settlement → Longs pay Shorts
When the funding rate is negative at settlement → Shorts pay Longs
Only users who hold a position at the exact moment of the hourly funding timestamp will pay or receive funding.
Funding fee amount is calculated as:
Funding Fee = Position Value × Index Price × Funding Rate
Funding Rate Calculation
XOX computes the funding rate using two components:
Interest Rate (I)
Average Premium Index (P)
Both components are calculated every minute, then converted into an N-hour Time-Weighted Average Price (TWAP), with increasing weight applied to minutes closer to the funding timestamp.
Example (4-hour funding interval, N = 4): Average Premium Index (P) = (P₁×1 + P₂×2 + … + P₂₄₀×240) / (1 + 2 + … + 240)
The final Funding Rate (F) is then derived as:
F = Average Premium Index (P) + clamp(I − P, −0.05%, +0.05%)
This ±0.05% clamp (dampener) ensures the funding rate cannot deviate excessively from the interest rate differential, providing predictability and protection against extreme funding scenarios.
Result: If (I − P) falls within ±0.05%, the funding rate effectively equals the interest rate — a proven and stable design used by leading perpetual platforms.
Interest Rate Component (I)
Interest Rate (I) = (Interest Quote Index − Interest Base Index) / Funding Interval
Interest Quote Index = cost of borrowing the quote currency (e.g., USDT, USDC)
Interest Base Index = cost of borrowing the base currency (e.g., BTC, ETH)
Funding Interval = 24 / N (where N is the number of funding periods per day)
This component reflects the natural cost-of-carry difference between holding the asset versus the stablecoin.
Premium Index (P)
Premium Index (P) = [Max(0, Impact Bid Price − Index Price) − Max(0, Index Price − Impact Ask Price)] / Index Price
Impact Bid Price = average execution price for an Impact Margin Notional amount on the bid side
Impact Ask Price = average execution price for an Impact Margin Notional amount on the ask side
The Impact Margin Notional (IMN) is a fixed notional value (configured per market) that measures order-book depth at a realistic size. This prevents manipulation from thin order-book edges and ensures the premium index reflects genuine market imbalance.
Why Traders & Liquidity Providers Trust XOX Funding Mechanism
Proven & battle-tested logic adopted by top-tier perpetual platforms
Hourly settlement → smooth funding accrual, reduced gamma risk compared to 8-hour models
Tight ±0.05% dampener → highly predictable funding costs
Time-weighted premium index with increasing weight toward settlement → resists last-minute manipulation attempts
Transparent on-chain oracles and calculations → fully verifiable
This combination delivers one of the most robust, fair, and manipulation-resistant funding systems in decentralized perpetual trading, giving traders and liquidity providers on XOX strong confidence in long-term price stability and cost predictability.
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