Research
Funding Rate Bounding Research
Completed
Funding amount
$32,500
Start date
March 2023
Execution
2 months
Description
Today, dYdX bounds funding rates to a range between -0.75% and 0.75%. This research will explore the impact these limits have on dYdX markets, including a study of market behaviour when funding rates are trading near or at the limits and a peer analysis of other exchanges. The research will deliver a recommendation for updating the limits, and push forward a governance proposal to the existing on-chain parameters (on StarkEx).
Purpose
Funding rates bounding is a parameter managed by the community through the Starkware contract. During volatile periods in 2022, dYdX markets repeatedly hit the bounds on funding rates. This can negatively impact dYdX markets and pricing as traders and participants begin arbitraging the premium across exchanges with higher funding rates. Limiting funding rates can also drive traders away to other markets.
This research will serve to address the issue by analyzing historical data, assessing peer markets, and proposing a change in the existing bounds through a governance vote.
Payment structure
25% upfront, 50% at paper publish, 25% at proposal
