In perpetual trading, funding rates play a crucial role in keeping the perpetual price close to the spot. They are an important balancing feature for perpetual trading because these positions have no expiration, unlike TradFi Futures.
Funding rates (FR) can be positive or negative depending on the market Open Interest (OI), where OI is simply the sum of the notional size of all the positions:
If the Long OI > Short OI, the funding rate is positive.
Long OI < Short OI, the funding rate is negative.
In the first case, more positions are directionally long, meaning long traders pay the short traders the funding rate. In the second case, the opposite occurs: long traders are paid.
Funding rates are settled after a set period, typically 8 hours. On Hyperliquid, it is 1 hour.
Traders pay these funding rates while their positions are open, and these rates can fluctuate significantly with market sentiment.
However, funding rates can serve as a distinct yield-generating mechanism while the positions they are generated from are used to hedge other positions. This is how protocols like Ethena generate yield for its stablecoin.
It is exactly around this that @pendle_fi built its yield-trading platform, @boros_fi. Hedging against FRs' swings is what Boros offers with its plan to expand into other yield sources in the near term.
In this piece, we will discuss what Boros is, how it can be utilised, its growth to date, and showcase the views of the team behind it and its power users.
What is Boros, and how does it work?
Boros is a yield-trading platform developed by Pendle that allows users to long or short a particular instrument's yield. In perpetuals, FRs are a source of yield, and on Boros, you can trade them with margin. Users trade Yield Units (YU), which represent the yield on 1 unit of collateral in the underlying asset.
Since the platform currently supports only funding rates, 1 YU represents a funding rate of 1 unit of collateral (e.g., ETH) on platforms like Hyperliquid and Binance.
How can Boros be used as a yield-trading platform?
A trader can choose either to long or short the funding rates of a particular asset.
Let’s understand what happens in each of these scenarios.
When the trader longs funding rates, they are effectively paying the Implied Annual Percentage Return (APR) in exchange for the Underlying APR. The implied APR is derived from the Boros orderbook and reflects the funding set by market participants on the platform. On the other hand, the underlying APR is the asset's actual funding rate on an exchange.
Since you are long in this scenario, you are essentially bidding on the Funding Rates to go up, the ones coming from the exchange, the underlying APR. So as it increases in value, you profit. But this is one part of the equation: when you open a long, you are also saying that the underlying APR will be higher than the Implied APR, so you pay the Implied APR in exchange for the underlying APR. Additionally, the APR your position pays is fixed from the time you open the position, termed “Fixed APR,” but the underlying APR keeps changing, hence your position PnL.
Similarly, in the short position, traders pay the underlying APR because they expect it to decline in the future, in exchange for the Implied APR (paid by longs).
The liquidation and PnL calculations are performed using the Mark APR, which is the TWAP of the implied APR from recent trades. Because both sides of the traders receive and pay an APR, the position value tends to approach zero as the pool matures.
As we move towards the “hypergamblification” of everything, we asked the Pendle team how this fits within this narrative:
“Boros is in a way a sort of casino in itself since funding rates can go to extreme levels (for ex. NVDIA funding rates reached 71% APR) and you can long or short these at a fraction of a cost through Yield Units (YUs). It can also be along the lines of a prediction market since you are betting on the future interest rates. As for the familiarity of prediction markets in the Boros UI, it was in discussion with the team back then, but we'll announce/share if something along those lines once it launches in the app”.
Moreover, Boros has also Vaults, a mechanism for earning passive yield from these markets. These vaults act as an Uniswap V2 LP position of “long YU” and “collateral”.
Boros TVL currently sits at ~$8 million and has grown steadily since its launch in August 2025, with the protocol's cumulative fees totalling ~$420k.
Considering the fact that “Boros is a 0 to 1 product, so there definitely is a learning curve (same as PendleV2 back then)”.
As Boros is a fairly different product than others, the Pendle team shared how the main “painpoint is education, opportunity, and liquidity, which we are focusing on. We're targeting a new segment in DeFi that's never been done before, even in TradFi (trading rates through an orderbook system), so it's going to be a lot of experiments and learning. We'll continue to iterate along the way, growing our education resources, finding the partners for liquidity mgmt on the books, and skimming the funding rates market on opportunities to get PMF”.
After introducing Boros, we distil its complexity into practical examples of strategies users can leverage.
We conducted interviews with Boros power users to understand how they use the platform. The main value proposition Boros provides is hedging the funding rates on its platform.
As Pope (@web3tokenomics) mentioned, the way to use Boros is “trade funding rates independently, the ROI on a funding trade is a lot higher when you get the direction right, and your entry is at a good implied rate. The challenge is sizing as liquidity is not there yet”.
This is also important for protocols like Ethena, which hold spot positions and short the same assets to achieve delta-neutral exposure and earn yield on the funding rates from the shorts.
On the exchange, Ethena's positions at any given point may be earning or paying funding based on FRs, which is volatile. Opening a short position on Boros can give access to a fixed APR while they pay the volatile one.
Consider the two following scenarios:
When FRs are negative, Ethena positions pay funding on exchanges, but on Boros, since the “Underlying APR” is negative, it accrues as a yield in addition to Fixed APR.
When FRs are positive. Ethena positions earn funding on exchanges, but on Boros, since the “Underlying APR” is positive, they pay the same rate, resulting in a Fixed APR.
This makes Ethena’s yield more predictable. This strategy is similarly applicable to retail traders who hedge against the funding rates they pay on their perp positions.
This design offers many unique ways to utilise it, but before any major protocols can use Boros for this purpose, they need scale and liquidity.
Another way to leverage Boros is to account for inefficiencies. DeFi Voyager (@DeFiVoyager_X) shared how he actually started using Boros “because early-stage products like this usually have inefficiencies you can earn from before they get popular and the yield gets crowded out. I spent a long time farming funding fees through delta-neutral setups before Ethena and the wave of perp DEX farmers, so I have a good understanding of where the money on Boros comes from. I’m mainly trading longer-term funding trends”.
Others, like Waj (@Wajahat), instead, prefer Directional Trading. While he would like to also use “delta neutral strategies”, there are still some limitations with regard to onchain DEX support, in particular because “doing delta neutral would require opening 2 positions on boros & 2 positions on different exchanges”.
However, funding rates are a different asset category to trade, and as such, they require a different approach to determining when to open a trade.
Something users should be aware of, as Pope mentions, is to “look into historical data to understand how long an asset can trade below or above the neutral funding rate, and alongside that patch the current sentiment, asset price, and chart outlook.”
Another useful sentiment tool used by DeFi Voyager is “the fear & greed index and underlying APR 30dma indicator - both are available in the Boros terminal. Beyond that, you need a clear understanding of what’s happening in the market overall and with the specific instrument you’re trading. I only trade ETH, and right now the combo of ETH FUD and terrible market sentiment makes one thing obvious: this is not a long environment.”
For Waj, instead, he prefers to “open positions on extremes of funding”, looking at what the market “is really hot and funding is high” as its trigger to “short as a return to the mean trade.”
What is clear is that for users who understand how Boros work, this is an additional “battlefield to explore, as more assets get listed”.
Especially considering the fact that it’s a slightly new product, “that's where you find opportunities, cause nobody is looking there. Mastering a new platform takes time and a lot of pain, so most users open, look around and leave, until they hear about it again and jump in for another browsing experience”.
DeFi Voyager couldn’t make it any clearer: “In DeFi, you can’t keep making money with the same strategy forever - you always have to look for new opportunities. Right now, Boros is my main project for earnings, with Polymarket as a secondary one”.
For this reason, most of these power users identify in Boros “an additional market, decoupled from traditional trading venues. It’s a whole new instrument by itself where you can trade spot, perps, options or funding”.
Even in a tough market, Boros could be a possible alternative to other yield-trading mechanisms. When asked how this market could impact Boros, the Pendle team mentioned how it “caters to both market uptrends or downtrends since funding rates play a key role in perpetuals trading. As long as perps trading continues, then Boros funding rates trading thrives as well”.
This is proven by the recent growth of Boros, which is “growing steadily despite the market conditions [...] recently achieving $268M ATH Open Interest and launching new markets to trade NVDIA, Gold, and Silver”.
Food For Thought
Boros is a new and fundamentally misunderstood (and in our opinion undervalued and underused) product.
This article provides a brief overview of its mechanisms and direct primary sources from both the Pendle team and Power User interviews, offering practical insights into how they leverage Boros as an additional market.
It’s important to note that the product is fairly new. As the Pendle team highlights, “there are more markets to come in the future as well as UX improvements such as cross-collateral deposits, etc.”
Our power users also expressed a desire to have more onchain trading venues supported, so that the number of strategies available on Boros can scale accordingly, including, for example, the delta-neutral strategies mentioned above.
For now, size and liquidity remain a strong bottleneck: “new users should avoid apeing above a certain size, given you can move markets with a few thousand, earn some funding fees, but when you try to close the position a few days later, or a few hours later, you basically pay back the profit and then some.”
Nonetheless, thin liquidity also means users can gain deeper insight into how the order book behaves and act on that.
We leave you with this quote from DeFi Voyager, which could not put it better:
“Boros feels more like a turn-based strategy game: you build a position over days, average in, then watch how things play out and adjust to extract max value. Definitely not a product for fast dopamine enjoyers”.
written by @noveleader and @francescoweb3
Special thanks to @Wajahat, @web3tokenomics, and @DeFiVoyager_X for their inputs.
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