How Does Polymarket Funding Actually Work? The 5-Second Sample, 8-Hour Formula, and 4% Cap
Most funding explanations stop at “longs pay shorts.” The actual mechanism has four design layers, each with consequences for your PnL: a 5-second sampling cadence, an hourly charge window, an 8-hour rate formula with a fixed interest leg, and a ±4% hourly cap. Knowing what each layer does tells you when funding is predictable, when it spikes, and why the number you see pre-settlement isn’t the number you pay.
How is funding calculated on Polymarket Perps?
Layer by layer. Sampling: every 5 seconds, the protocol walks the order book for 1,000 quote-asset notional on each side and records the premium — how far the perp sits from fair value. Averaging: samples accumulate over a 1-hour charge window. Formula: the averaged premium feeds an 8-hour annualization-style formula with a fixed interest leg and a clamp, divided by 8 to produce the hourly rate. Cap: the rate is clamped at ±4% per hour. Settlement: once per window, longs pay shorts when the rate is positive, shorts pay longs when negative — and the protocol takes no cut. The cost math for your position is in the funding cost guide.
What the 5-second sampling means for you
Funding is not a snapshot — it’s the integral of a 5-second-series over the hour. A violent 10-minute spike contributes only its share of the window’s average. Practical consequences: you can’t “time” one bad sample into a cheap settlement, and you can watch the running premium (the rolling 5-second sample and its implied rate are public market data) to see pressure building before it hits your bill — see reading the book under pressure.
What the 8-hour formula means
The premium you observe in the market is a short-term deviation; the charge rate normalizes it through an 8-hour window with a fixed interest leg (the baseline cost of capital, present even when the perp sits at fair value) and a clamp to prevent runaway. Translation for traders: momentary extreme premiums translate into hourly charges more modest than raw panic implies — but persistent multi-day pressure still accumulates badly, which is how a correct thesis at 20x loses to funding over a weekend. The interplay with liquidation buffers is in liquidation mechanics.
What the ±4% cap means
The cap bounds the worst hourly settlement: at 4%/hour, a 5x position pays up to 20% of margin in one hour. The cap is why funding-driven liquidations look paradoxical — funding alone rarely kills a position in one window (see the cap and your buffer), but it hollows the buffer that a normal price wiggle then consumes.
Reading funding pressure between settlements
You don’t have to wait for settlement to know the direction: the protocol publishes the rolling premium sample and implied rate continuously, and funding history is retrievable via the public endpoint (see the API guide). Two reads matter: trend (pressure growing or fading) and your side (paying or receiving at the current sign). Positions on the thin side collect funding — carry can be an edge, not just a cost, see carry discipline in the playbook.
FAQ
How often is funding settled on Polymarket Perps? Once per hour. The rate applied at each settlement comes from the averaged 5-second samples over that charge window, run through the 8-hour formula with the ±4% hourly cap.
What is the interest leg in the funding formula? A fixed baseline cost-of-capital component in the 8-hour formula — funding isn’t purely premium-driven; a small steady leg exists even at fair value, and the premium component dominates when the perp deviates.
Can funding exceed 4% per hour? No — the rate is clamped at ±4% per hour. Extreme premiums saturate at the cap; sustained saturation for many hours is where funding becomes a position-killing cost.
Does Polymarket take a cut of funding? No. Funding transfers fully between longs and shorts; the protocol takes no share of it. Platform revenue comes from trading fees — see the fees breakdown.
How can I see funding before I open a position? The rolling 5-second premium and implied rate are public market data, and funding history is available through the API — or run the free funding forecaster, which projects the drag on your margin from the live book.
Why did funding flip sign against me overnight? The premium is the crowd’s positioning: when the crowded side rotates, the sign flips. Positions on the newly-crowded side start paying. Watch the rolling premium rather than assuming yesterday’s sign persists — see odds and price dynamics.
Educational content, not financial advice. Not affiliated with Polymarket. Last updated October 2026.
