Family, a huge nonsensical event has occurred! Recently, the contract circle is in mourning, with the focus pointing directly at the love-hate 'funding rate'. Some friends complain: 'He could have directly robbed it, but instead, he gave an excuse of 'funding rate'!' Especially when the rate drops to -2%, the deduction frequency suddenly changes from once every 8 hours to once every 1 hour. Even when the rate later rises back to 0.0 something, it still maintains the 'hourly' harvesting rhythm, until one day the platform remembers to issue an announcement and it will be restored.
This operation is reminiscent of that classic line: 'The money of the gentry is returned in full, while the money of the common people is split three-seven.' But today, what we want to talk about is not how to curse but a weapon that can truly break this 'platform decides everything' predicament - Decentralized USD. This may be your first step from being a 'victim' to becoming a 'rule maker'.
First, funding rates: Are they 'stabilizers' or 'harvesters'?
First, I have to say a fair word. The design of funding rates was a genius idea from the start. Its core purpose is to keep the prices of perpetual contracts closely pegged to spot prices, preventing significant deviations. Simply put, when the market is too exuberant and contract prices are much higher than spot prices, long positions have to pay short positions (positive rate), encouraging everyone not to go too wild; conversely, when the market is too pessimistic, shorts pay longs (negative rate).
In the early days, this was even a 'money-grabbing' skill. During the 'golden age' of 2021, funding rates were sometimes absurdly high, professional arbitragers would buy in the spot market while shorting in the contract market, earning the rate difference between the two, with astonishing annual returns.
But the question arises: how heavy should this 'weight' that adjusts the market be? At what frequency should the 'pendulum' of deductions swing? The answers are all in the hands of centralized platforms. Thus, we encounter the situation mentioned at the beginning: sudden rule changes, lagging adjustments, and the platform holding the interpretive power. Your trading costs, unknowingly, have become parameters that others can adjust at will.
Second, the path to breaking the deadlock: when stablecoins are no longer 'subject to others'.
So, is there a possibility that the 'foundation' of our trading—the stablecoin itself—could operate under a set of more transparent, fair, and not controlled by a single entity's rules?
This is the paradigm revolution brought by @usddio representing Decentralized USD (USDD). It is fundamentally different from the stablecoins you are familiar with, which are issued by companies:
Transfer of Trust: From 'Trusting Platforms' to 'Trusting Code'
The problem with centralized platforms is the 'black box'. The operational logic of USDD is all written onpublic and transparent blockchain smart contracts. How much reserve assets it has, whether it is over-collateralized (this is the core of USDD 2.0, ensuring that every USDD has adequate asset backing), anyone can verify in real-time. Trust is no longer given to a company's financial statements but to verifiable mathematics and code.Stable Logic: From 'Human Adjustment' to 'Mechanism Arbitrage'
The secret to USDD maintaining a $1 peg lies in itsPrice Stability Module (PSM). When the market price of USDD falls below $1, arbitragers can buy low and profit by exchanging for the underlying stablecoin (like USDT) at a 1:1 ratio through the PSM, which naturally drives the price back up. This process is automatically accomplished by market arbitrage forces.No centralized team can manually intervene or 'temporarily adjust the rules'..Evolution of Assets: From 'Static Cash' to 'Yield-bearing Capital'
More importantly, within the USDD ecosystem, your stablecoins are no longer 'dead money' waiting to be deducted fees. You can convert them into yield-generatingyield-bearing assets. This means that while your funds are waiting for trading opportunities, they are actively creating value instead of passively waiting to be charged various fees.
Third, the future is here: How does DeFi make 'funding rates' lovable?
Look further ahead; decentralized finance (DeFi) is fundamentally reshaping all the rules of the game, including funding rates.
Fairer Pricing: In some leading decentralized exchanges (DEXs), the base value of funding rates can be decided and adjusted through community governance votes. While this may not be perfect, it is clearly an improvement over the one-sidedness of centralized platforms.
A more extreme imagination: Some industry analysts have even proposed a bolder prospect: if a certain innovative decentralized stablecoin is widely adopted, it could even lead to a 'zero funding rate' future. This means that the implicit costs of leveraged trading will be greatly reduced, and the efficiency of the entire market will be reshaped.
Take action: How to regain 'initiative' into your own hands?
So, when faced with unreasonable rate rules, what else can we do besides complaining?
Vote with your feet, experience true decentralized trading: why not transfer some of your funds to a decentralized derivatives trading platform that adopts a community governance model? Experience firsthand how your voting rights influence the platform's parameter settings.
Upgrade your underlying assets, hold true Decentralized USD: when configuring your crypto asset portfolio, consider converting some of your stablecoin assets from purely centralized versions to decentralized stablecoins like USDD, which are over-collateralized and fully transparent. This is not just swapping a token; it is building your assets on a more solid and autonomous trust foundation.
Focus on the ecosystem and seize yield opportunities: Understand and participate in ecosystems like USDD, exploring how to make your stablecoins continuously generate income through staking and other secure methods, transforming passive 'cost consumption' into active 'asset appreciation'.
The wheels of the era are moving forward. In the past, we could only accept the rules set by the platform; now, we have the right to choose 'who sets the rules'. When the funding rates feel unfair, don't forget that the ultimate charm of the crypto world lies in the fact that it always prepares the options of 'leaving' and 'rebuilding' for you.