Aegis has developed software designed to perform funding rate arbitrage through delta-neutral trades in spot and perpetual markets, effectively generating profits from funding fees.

Funding fees are periodic payments (usually three times a day) made by traders based on the difference between perpetual contract prices and the spot price. These fees are transferred between buyers (long positions) and sellers (short positions) based on market conditions. They help balance prices, cover leverage costs, and stabilize the market. Aegis collects these fees as rewards and distributes them to USDa holders.

Funding rate is an interest rate calculated as a percentage, based on the difference between contract prices and spot prices. This rate determines whether buyers (long positions) or sellers (short positions) will pay the fee. It can be either positive or negative, indicating the direction of payment in the transaction.

For example, let's assume Funding Rate (FR) is 0.01%, and funding rewards are applied every 8 hours, three times a day:

• Decimal conversion: first, change FR to decimal, so 0.01% becomes 0.0001.
• Daily application: this rate is used 3 times daily, totaling 1,095 (3 × 365 days) times a year.
• APY calculation: % APY = ((1 + 0.0001)¹⁰⁹⁵ - 1) × 100.

USDa yearly APY is ≈ 11.57%.