⌨️Funding Rate Perpetuals
🧩 BasisX Funding Rate Perpetuals Specification
1. Overview
BasisX Tokenised Yield Perpetuals (YPs) are on-chain contracts that let traders hedge or speculate directly on yield movements across both crypto-native and real-world yield markets — including perpetual funding rates, staking APYs (e.g. stETH, kHYPE), and tokenised bond yields (e.g. TLT, BND).
They are linear, USDC-settled, and quanto in USD, meaning all P&L is denominated in USD but settled in USDC.
YPs tokenise the carry exposure of yield-producing assets into a perpetual, composable instrument that can be traded independently of the underlying.
All YPs are currently isolated-margin only (cross-margin support to be added later).
YPs are listed on the BasisX HIP-3 deployment. For the context of Funding Rate Perpetuals, they will be called FRPs wherever applicable. Matching, funding, liquidations, and order logic are handled by HyperCore, while the oracle and mark price are bespoke BasisX components. The BasisX relayer transmits oracle and mark price updates approximately every 3 seconds.
2. Mark Price
The mark price — used for margining, liquidations, stop/limit triggers, and unrealized P&L — is the median of three components:
The Yield Index Oracle Price (see Section 3).
The sum of the oracle price and a 150-second exponentially weighted moving average (EWMA) of the difference between the YP’s mid-price and the oracle price.
The median of best bid, best ask, and last trade prices.
At each tick, the BasisX relayer publishes (1) and (2). The Hyperliquid protocol computes (3) and takes the median of all three to form the final mark.
This mechanism ensures:
Mark stability
Resistance to manipulation
Smooth convergence between oracle and market-based valuation
3. Oracle Price — The Yield Index
The oracle provides the pricing reference for both yield tracking and mark price calculation.
For FRPs, it represents the Funding Rate Perpetual Index, a direct exponential mapping of the current annualised yield (r_apy) into an index level.
3.1 Definition
The Funding Rate Perpetual Index represents the instantaneous exponential transformation of the current annualised yield rate:
Pt=er_apy
Where:
Pt: Yield Index at time t
r_apy : Annualised yield rate (APY) at time t
This formulation maps every APY into a positive, smooth price space, ensuring continuity across rate regimes.
Key Properties:
Always strictly positive (
P_t > 0)Symmetrical handling of positive and negative yields
Exponential sensitivity to rate changes (higher convexity)
No need for cumulative or time-weighted compounding
Fully compatible with HIP-3’s ±1% per-tick limit
3.2 Interpretation
When yields rise, er_apy increases non-linearly, representing higher carry or yield potential.
When yields fall or turn negative, er_apy decays below 1.0, representing yield compression or carry loss.
The rate of change in Pt directly corresponds to the change in exponential yield — producing a smooth, convex price response across different APY regimes.
This approach creates a continuous, compounding-equivalent index that represents the yield curve’s instantaneous state without needing a rolling accumulation window.
3.3 Examples
Stable yield
0%
e^(0)
1.0000
Neutral baseline
Positive yield
+10%
e^(0.10)
1.1052
Yields up → Index above 1
High yield
+50%
e^(0.50)
1.6487
Strong upward drift
Negative yield
−10%
e^(−0.10)
0.9048
Mild downward decay
Deep negative yield
−50%
e^(−0.50)
0.6065
Sharp contraction
Interpretation:
Long YP benefits from rising yields or tightening carry regimes.
Short YP benefits from falling or negative yields.
The non-linear mapping ensures proportional P&L even at extreme rates.
4. Internal Pricing Continuity
The oracle updates continuously based on the latest yield observations (r_apy).
Each update recalculates:
Pt=er_apy
and applies HIP-3’s ±1% guardrail to prevent abrupt market distortions.
If external yield feeds (Pyth, HL funding APIs, or RWA sources) are temporarily unavailable, the oracle holds the last known rate and applies an EMA smoothing until live data resumes:
rt=βt rt−1 + ( 1 − βt ) rlastKnown
where βt=e−Δt/τ τ=8 hours
5. Economic Exposure & Use Cases
5.1 Hedging
Example: A trader holds a $1,000 long BTC-PERP on a CEX, paying +10% annualised funding.
They hedge this exposure by going long FRP-BTC on BasisX.
If funding rises from +10% → +15% APY:
CEX position pays more funding (loss)
FRP price rises (from 1.105 → 1.162) as er_apy increases (gain) → Funding exposure neutralised
If funding turns negative (e.g., −10% APY):
CEX position earns funding
FRP price falls (from 1.105 → 0.905), offsetting the gain
5.2 Speculation
Traders can use YPs to speculate on yield direction or volatility:
Long YP: bet yields or funding will increase (bullish leverage demand, tightening cycles).
Short YP: bet yields will fall or turn negative (bearish or risk-off regime).
The exponential mapping makes YPs more responsive to large shifts in yield sentiment — creating a convex exposure to yield curve changes.
6. Notes
The e(r_apy) formulation ensures:
Positive-only oracle and mark prices
HIP-3 compatibility (±1% per-tick bound)
Continuous, compounding-equivalent price mapping
Linear P&L across small rate changes and convexity across large ones
PnL is computed as:
Pn LYP = K × N × (Pt−Pentry)
where
K = $1
N=notional position size in USD
Hedge accuracy verified to within 0.1% over short horizons, with smooth continuity through rate jumps or regime changes.
📘 BasisX Funding Rate Perpetuals aim to make on-chain funding exposure fully tradable — enabling perpetual funding markets that are composable, hedgeable, and transparent.
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