Perpetual futures
Leveraged exposure without holding the token — and who pays for it.
Synthetic positions
A perp position is an agreement, not a holding. No tokens change hands: you post USDT margin and the market tracks your profit or loss against a reference price. This is why perps exist on tokens whose spot market would be far too thin to support the same size.
Funding payments
The perp has its own price, which can drift from spot. Funding corrects this: when the perp trades above the spot average, longs pay shorts; when it trades below, shorts pay longs. The further apart the two prices are, the larger the payment — so there is always a financial incentive to take the unpopular side.
The market price is also nudged toward the spot average on a schedule, so a perp cannot drift indefinitely just because no one is arbitraging it.
Liquidation and bad debt
If your margin falls below 4% of position size, the position is liquidated in chunks with a 10% penalty. Liquidation uses a blend of the perp price and the spot average, which prevents a momentary wick on either market from closing an otherwise healthy position.
When a loss exceeds the margin backing it, the shortfall is covered by the insurance account. If insurance is exhausted the remainder is recorded as bad debt and absorbed gradually from subsequent profitable closes, rather than blocking anyone from exiting.