The Funding Rate Vault is a strategy that allows users to earn yield by collecting funding rate premiums on assets with positive funding rates, all while maintaining a delta-neutral position.
How It Works
Step 1: Deposit USDC
Start by depositing USDC into the Funding Rate Vault. This is your initial investment and will be the basis for generating yield.
Step 2: Automatic Asset Swap
Once you deposit USDC, the protocol automatically swaps your deposit for assets with a positive funding rate.
Step 3: Cross Margin Account Deposit
The acquired assets are then deposited into a cross-margin account to be used as collateral to open trades.
Step 4: Delta-Neutral Short Position
To ensure a delta-neutral strategy, the protocol automatically creates a 1x short position on the assets with a positive funding rate. This short position balances out any price exposure, allowing you to collect funding rate premiums without being affected by market fluctuations.
Step 5: Single Transaction Execution
All these operations—depositing USDC, swapping assets, depositing into the cross-margin account, and creating a short position—are executed in a single transaction. This efficiency eliminates the need for manual rebalancing during the funding collection periods, simplifying the process for users.
Step 6: Receive frUSDC Token
Upon deposit, you will receive frUSDC tokens, representing your share of the funding rate yield within the vault. These tokens represent your stake in the vault and will accrue value over time as funding rate premiums are collected.
Step 7: Withdrawal
After 24 hours from the initial deposit, users can withdraw their funds. During withdrawal, your frUSDC tokens will be swapped back into USDC. The amount returned will equal your initial deposit plus any interest earned from the funding rates.
