The mechanism, in full

You deposit. The vault buys a coin and shorts the same coin at the same time, so a move in the price cancels itself out. What is left is the funding fee that traders betting long pay to traders holding the short.

There is no prediction anywhere in that sentence. The vault does not think the coin is going up, and it is not positioned as though it were. It holds the coin and it holds an equal short against the coin, and the only thing it is trying to be exposed to is the periodic payment that flows between the two sides of a perpetual futures market.

A deposit gets you a share. The share is a claim on the position and on whatever the position has collected since you arrived.

A perpetual future is a futures contract with no expiry date. Because it never settles, nothing mechanically forces its price back to the price of the actual coin. The funding rate is what does that job instead.

At a fixed interval the exchange compares the perpetual’s price to the spot price. If the perpetual is trading above spot — which is what happens when more people want to be long than short — then everyone holding a long pays everyone holding a short. If the perpetual is trading below spot, the payment runs the other way.

It is not a fee taken by the exchange. It is a transfer between traders, and it exists to make being on the crowded side expensive enough that the two prices converge.

Two things worth internalising

• The rate is not fixed and not guaranteed. It is reset every few hours from live market conditions.
• It goes negative. When the crowd is short, the short side pays. A strategy that collects funding is a strategy that sometimes pays funding.

Delta is how much a position’s value changes when the price of the underlying changes by one unit. Holding one coin is a delta of +1. Being short one coin’s worth of a perpetual is a delta of −1. Held together, the delta is zero.

Zero delta is the whole claim. If the coin doubles, the spot leg gains and the short leg loses the same amount. If it halves, the reverse. The pair sits still while the market does not — which is what the slider on the home page is showing.

1. Deposit. You send the vault its deposit asset. It mints you shares at the current share price.
2. Open. The vault buys the coin and sells the matching size of the perpetual, so the new capital arrives already hedged rather than sitting exposed while someone gets around to it.
3. Accrue. Funding settles at the venue’s interval. When it is positive, the short leg receives; when it is negative, it pays.
4. Withdraw. You burn shares. The vault closes the corresponding slice of both legs and returns the proceeds.

None of those steps involve a person deciding anything. There is no discretion about when to enter, no view being expressed, and no trader whose judgement you are relying on.

A hedge that is exact at the moment it is opened does not stay exact. The two legs are not the same instrument: one is a coin you hold, the other is a contract with margin posted against it. As the price moves, the sizes that were matched at the open stop being matched.

Left alone, that drift turns a neutral position into a small directional one — a position with a view it was never supposed to have. So the vault re-matches the legs periodically.

Rebalancing is not free

• Each adjustment pays trading fees on the leg being adjusted.
• Each adjustment crosses a spread, and in a fast market the spread is wider.
• Rebalancing too often burns the yield on fees; rebalancing too rarely leaves real price exposure open. The interval is a trade-off, not a solved problem.

How often that happens, and what triggers it, is one of the things that is not decided yet.

Income shows up as an increase in the share price, not as a separate token dropped into your wallet. If the vault collects funding, each share is worth more of the deposit asset than it was. If the vault pays funding, each share is worth less.

share price

Total value of the position, divided by the number of shares outstanding.

your balance

Your shares, multiplied by the share price.

realised yield

What you withdraw, minus what you deposited. Only known at the point you leave.

Because there is no emissions token in the design, there is no headline rate that is being paid for by inflating a supply. Whatever the share price does is what the position actually earned.

This section exists because the alternative is to write something plausible in place of something known, and that is the failure mode this entire site is built to avoid. The following are genuinely open:

• Which venue holds the short leg, and therefore whose solvency you depend on
• The contract address, and who can upgrade or pause it
• The rebalancing trigger and cadence, and who or what is allowed to call it
• The fee the vault charges, if any, and whether it is taken on deposits, on income, or on withdrawal
• How quickly a withdrawal can be honoured when both legs have to be unwound to fund it

When one of these is settled it will be written into the site’s configuration, and every page that mentions it will change at once. Until then, the pages say “not decided” rather than filling the gap.