Crypto exchanges have
so–called perpetual futures.
They have no expiration date, so their price may deviate from the real price of the asset.
To prevent this from happening, a funding mechanism is used. It motivates the market to balance itself.
There are always two sides on the exchange: Long Traders who bet on price increases. Short Traders who bet on price decreases.
Every few hours (usually every 8 hours), a funding payment is made between them.
Who pays the funding It all depends on
market sentiment.
If the majority of the market is long The futures price starts to be higher than the spot price. Then: Longs pay shorts. This encourages people to open shorts and balance the market. If the majority of the market is short. The futures price becomes lower than the spot price. Then: Shorts pay longs.
This encourages people to open longs. Where does the money come from? Funding is not an exchange commission. It is the traders' own money. It's just that some participants pay other participants for holding their positions.