SmarDex Ecosystem
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USDN Protocol
USDN Protocol
  • Introduction
    • Quick Overview
  • THE USDN Protocol
    • Protocol USDN Overview
      • Simplified Examples
    • Protocol Balance
      • Imbalance Protections
      • Equilibrium: The Role of the Funding Rate
    • Vault Side
      • Vault Overview
      • Rebase Mechanism
      • Yields
        • Funding Rates
        • Yield-bearing asset
    • Long Side
      • Long Perpetual
      • Long Overview
      • Dip Accumulator
      • wstETH Collateralization
      • Liquidations and Minimum Position
    • Inside the Protocol
      • Protocol vs Market Fluctuations
      • 1. Providing a Price
      • 2. Calculating Long PnLs
      • 3. Applying the Funding Rate
      • 4. Liquidating Positions
    • Integration
      • WUSDN
    • Fees
      • Protocol Fees
      • Liquidation Fee
    • Protocol parameters
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  • PERIPHERY
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  • Whitepaper
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  1. THE USDN Protocol
  2. Inside the Protocol

3. Applying the Funding Rate

Previous2. Calculating Long PnLsNext4. Liquidating Positions

Last updated 2 months ago

After calculating the profits and losses (PnL), the protocol applies the . The side with the higher exposure is the one that pays the funding rate. For instance, if the balance of the exceeds the trading expo of the , the vault pays. Conversely, if the trading expo of the long side is higher, the longs are responsible for paying the funding rate.

However, calculating the funding rate is more complex than simply comparing the imbalance between the two sides. It incorporates several elements, including the level of imbalance, a five-day exponential moving average to smooth out fluctuations, and an adjustment factor that adapts to maintain the protocol's balance. For more details on this calculation and its mechanics, please refer to the .

Impact on SDEX

With each funding rate payment, 8% of the funding rate is allocated to a "buy back and burn" mechanism for SDEX tokens. This process permanently reduces the supply of SDEX, thereby increasing its value. It rewards SDEX holders and supports the value growth of the SmarDex token.

whitepaper
funding rate
vault side
long side