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The funding rate is the periodic payment exchanged between long and short holders of a perpetual contract, which keeps its price close to the spot market. When the perpetual trades above spot, longs usually pay shorts; when it trades below, shorts usually pay longs. Funding is charged at set times, and the rate changes with market conditions.
A perpetual trades slightly above spot and the funding rate is 0.01% for the period. A long position worth $10,000 pays $1 at that funding time, and a short position of the same size receives $1. Prices in this example are illustrative.
