Use funding and margin examples to understand a perpetual contract. Learn how exposure, collateral and liquidation rules interact before comparing trading venues.
A perpetual is a contract, not a spot holding
A perpetual derivative normally has no scheduled expiry. Its value follows a reference asset, while margin and periodic funding help support the market. A long position is not ownership of the underlying bitcoin or ether. No scheduled expiry also does not guarantee that a position can remain open: liquidation, delisting or venue closure can end it.
A DEX label does not specify one custody model. Execution, collateral storage, settlement, price feeds and upgrades may be controlled by different systems or participants. Evaluate the particular deployment and contract rather than assuming all these functions are decentralized in the same way.
Funding is a cost or receipt that can change sign
Hyperliquid's funding documentation, for example, describes hourly payments between long and short positions. The payment uses position size, the oracle price and the applicable funding rate. That is an example of one venue's rules, not a universal schedule for every perpetual market.
In a hypothetical interval, $10,000 of notional exposure at a positive funding rate of 0.01% implies a $1 payment by the long side, under a convention where positive funding is paid by longs. A later negative rate reverses the direction. Applying one observed interval's rate to an entire year assumes it remains unchanged; it is not a dependable income forecast.
Margin is smaller than exposure
Suppose a simplified linear contract gives $10,000 of exposure against $1,000 of collateral. A 5% adverse price move creates roughly $500 of trading loss before funding and fees. It uses half the starting collateral even though the asset moved only 5%. Actual liquidation occurs according to maintenance-margin rules and can happen before all collateral is exhausted.
Hyperliquid's liquidation documentation explains the use of account equity, maintenance margin and mark prices, with order-book liquidation and a backstop mechanism. A displayed liquidation estimate can change with funding and other positions in a cross-margin account. An order-book last-trade price alone is not enough to reconstruct the trigger.
Who absorbs a shortfall?
A useful comparison follows the loss sequence: ordinary closing orders, liquidation, backstop resources and any final loss-allocation mechanism. Hyperliquid documents auto-deleveraging, under which selected positions on the opposite side can be closed when an account or isolated position becomes negative. A profitable position therefore does not guarantee that its owner chooses the exit time.
Other venues may use different models. A published insurance-fund balance is only one piece of evidence; the rules controlling its use, eligible markets and emergency actions also matter. Public transaction records do not by themselves eliminate contract vulnerabilities or dependence on external prices.
How to compare market activity
Volume, open interest, fee revenue and unique traders measure different things. A dated dashboard with a clear inclusion policy is needed before comparing them. Token rewards can also change the incentives behind reported volume.
A reading checklist for any venue
- Which contract, market and chain does the documentation cover?
- Where is collateral held, and who can change the code or pause withdrawals?
- Which prices trigger margin calls or liquidation?
- How often is funding charged, and which price defines notional exposure?
- What happens after a shortfall, oracle interruption or market delisting?
These questions explain how the product works. They are not a recommendation to trade leveraged derivatives or maintain accounts at a particular number of venues.
Revision history and scope
Updated 19 October 2026. Removed unsupported market rankings, historical volume claims and incentive recommendations. Perpetual contracts, custody and loss-allocation rules must be checked venue by venue.
Earlier corrections
The earlier article described Vertex as a growing current Arbitrum venue and carried forward historical token incentives. That description is withdrawn. Vertex's official 8 July 2025 announcement described its move to the Ink Foundation and a staged shutdown of its existing deployments. The indexed announcement was available during this review, but its original blog URL did not load directly; it should not be used as a current trading or migration guide.
The article also no longer repeats unsourced October 2025 market-wide volume, liquidation totals or rankings as present-day facts.
24 October 2026: Added a reader-focused introduction and consolidated explanations of earlier corrections here. Kept the market-comparison guidance in the lesson. This is a presentation edit; the earlier factual review date is unchanged.