Paradex CEO details Funding V2 improvements for stable trading

Privacy-focused decentralized exchange Paradex has deployed version 2 of its funding rate mechanism, aiming to address erratic funding costs that have long plagued traders of smaller perpetual contracts. The upgrade went live on June 16 and was detailed by CEO Anand Gomes.

Instead of relying solely on its own order book, Paradex now calculates an Impact Premium — a weighted median of price premiums from six trading venues. The exchange assigns itself a weight of 3.5, while Binance, Bybit, OKX, Hyperliquid, and Lighter each receive a weight of 1.2. The system recalculates every second and applies an Exponentially Weighted Moving Average (EWMA) with a 30-minute half-life for regular markets, smoothing out high-frequency noise. The baseline interest rate is set at 0.01% per eight hours.

This marks a departure from traditional fixed-interval funding rate resets, which can produce abrupt jumps. By blending data from multiple venues and favoring a median over an average, Funding V2 reduces the influence of any single illiquid data point. Early data from the first 48 hours indicates lower funding rate volatility and tighter clustering around market medians, according to the company.

Paradex launched its mainnet in early 2024 as a no-fee, privacy-first DEX. It has since processed nearly $1 trillion in cumulative derivatives volume. The inclusion of Hyperliquid and Lighter alongside the three largest centralized exchanges acknowledges that no single venue holds enough liquidity across all pairs to generate reliable funding signals independently.

The system does introduce dependency on external data sources. If Binance, Bybit, or another venue suffers an outage, flash crash, or data disruption, those anomalies could feed into Paradex’s calculations despite median-based smoothing. The weighting scheme mitigates some risk, as no single external exchange dominates the computation.