🧐 Can the funding rate also be used to speculate? Pendle Boros Measured Guide: Unlock New Ways to Engage in Interest Rate Trading! For a long time, the funding rate has only been a supporting role, and it has always been market regulation and passive acceptance. I never expected that one day the funding rate would also be split and turned into an independent asset that could be traded separately - this thing was really made by Pendle. @pendle_fi The latest lab project, Boros @boros_fi, a platform focused on funding rate trading, has just been launched. After spending most of my days researching, I found that it is a real "interest rate DEX". With a good play, this thing has a lot of potential. Below I will try to explain the meaning of Boros in a popular way and how to play it - 1️⃣Boros Core Mechanism: How to Tokenize Funding Rates? Anyone who has played contracts knows that the funding rate is the core mechanism for adjusting the long-short balance in perpetual contracts: Positive rate → Long pays short positions Negative Rates → Shorts pay longs The problem is that it has been floating, like the rain that farmers rely on to eat, sometimes more and less, making the cost of the position full of uncertainty. Boros' approach is to cast this "floating rainwater" into tradable "income assets". The core unit of Boros is called Yield Units (YU). You can think of it as: holding 1 BTC perpetual contract, the funding rate cash flow receivable over a certain period of time. Like what: Holding 1 YU-BTC (1 month) is equivalent to the funding rate income generated by buying 1 BTC perpetual contract in the next 1 month. Long YU = Pay a fixed APR (Implied APR) to obtain the floating funding rate income of the underlying asset. The actual rate is higher than the fixed rate → profitable; Otherwise, it will be a loss. Short YU: Charges a fixed APR that pays the cost of the underlying asset's floating funding rate. If the actual rate is lower than the fixed rate→ profit; Otherwise, it will be a loss. The settlement frequency is synchronized with the exchange, and the value of YU is reset to zero after expiration, and profits and losses are automatically settled. For example, it's more intuitive: Assuming the current $BTC price is $100,000 and the Binance funding rate is 6% annualized, you have long 10 YU-BTC on Boros with a 6% YU-APR. After 8 hours, the funding rate rises to 8%; Your earnings = Notional value × (actual APR - fixed APR) × time = 10 × 100,000 × (8%-6%) / 365 / 3 = 18 USDT You will find that the profit and loss here have nothing to do with the price of the underlying asset itself, but are completely a game of interest rates. 2️⃣Why Boros? Where is its market? You may ask: If you speculate in currency, why should someone speculate on the funding rate? This thing sounds like there is no market! Miss by a mile. The answer is simple: fluctuations in funding rates are far more violent than you might think, and they are the norm. 🔸The BTC/ETH perpetual contract funding rate often fluctuates between -3% → +6% 🔸 In a high-leverage structure, a 3% spread can be magnified to 50%+ returns 🔸 For stablecoin protocols (such as Ethena), high-frequency arbitrageurs, and pegged asset minters, the funding rate is the core source of profit. In the past, the way to deal with funding fee fluctuations was either hard eating or using complex multi-legged hedging (spot + perpetual + delta neutral + OTC settlement) - the threshold was too high for ordinary people to play at all. And Boros is "securitizing" the funding rate for the first time, much like the expected trend you are trading U.S. Treasury yields: You think the funding rate will rise in the future → long YU, locking in the low APR you want to spend now You feel that the market sentiment will turn bearish, and the funding rate will drop → short YU, locking in the high APR you want to charge now 3️⃣Who is suitable for Boros? In fact, it can be understood from the mechanism of Boros that this is not a platform for speculative novices, but it should be very attractive to the following types of people: 1) Spot + Futures Traders: Hedging funding rate costs/benefits For example, if you open a long position in 100 BTC perpetuals on Binance, and see the funding rate rise from 0.1% to 0.3%, you want to lock in interest expenses. → Then you can go long on Boros and YU-BTC and lock in a fixed APR to hedge against this cost fluctuation. On the other hand, if you want to short BTC and want to take advantage of the funding rate, but are afraid that the market will pick up tomorrow and the funding rate will fall, you can short YU-BTC to lock up your gains. The essence of this approach is to turn the floating risk of funding rates into predictable costs. 2) Spread trader / DeFi structured player Boros can also do delta-neutral strategies, such as: You hold Lido's ETH (get 4% APY) while shorting ETH perpetuals on Binance (hedging price risk), then short YU-ETH on Boros, locking in funding rate income. This combination operation can generate a stable high-interest note: pledge interest + funding rate arbitrage, not relying on ETH price, only eating structural spreads. This is a pure positive for an income-generating stablecoin issuer like Ethena, and there are too many things that can be done with Boros. A few other points to note when using Boros - (1) You can open a position with a margin of 1-2%, it is recommended not to add leverage in the early stage, and then enlarge it after you are familiar with the net balance mechanism. (2) Liquidation will be triggered when the margin ratio is lower than the maintenance margin. (3) It is best to close or roll over the position a few days before expiration to avoid the expansion of capital-intensive slippage / stepping on the liquidity pit. (4) Remember to keep an eye on the Implied APR, which is actually YU's price expectation. (5) In addition to direct trading, users can deposit funds into the Boros vault to provide liquidity for the market, earn trading fee shares, PENDLE token rewards, and increase in the value of the vault, with the current LP interest rate up to 460%. However, the risk characteristics of vault positions are similar to long YU, and if the implied APR decreases, it may face higher impermanent losses, so it is only recommended to study DeFi old birds and try it! 4️⃣ Conclusion - In the past, we traded coins to make fluctuating money; Now we trade interest rates to hedge structural risks and make more stable money. Pendle originally split the yield right into PT/YT, opening the prologue to the on-chain interest rate market. Now, Boros has further structured the black box variable of the funding rate into an independent asset that can be priced, traded, and derived. The future imagination behind this lies in - 📍 May support funding rates on more exchanges: OKX, Bybit, Hyperliquid 📍 Cover more cross-chain assets: long-tail coins such as SOL, ARB, OP, etc 📍 Introducing real-world RWA interest rate products to become an interest rate bridge for TradFi-DeFi At that time, stablecoins, yield notes, hedge funds, and even interest rate strategies of traditional institutions may directly call Boros' YU as an anchor, which is quite interesting to think about! Finally, I would like to offer a more practical suggestion for all those who are new to Pendle Boros and want to know about Pendle Boros - If you don't dare to open a position directly, you might as well try shadow hedging first: Open a small perpetual long order on CEX, such as 0.001 BTC, and then go long on YU-BTC on Boros 1:1 (or both open short at the same time) to observe the changes in capital flow on both sides and familiarize yourself with the UI and settlement mechanism. In this way, even if you lose very little, you can quickly get started with the logic of the entire funding rate transaction. You can learn the relevant operations of Boros first: The Pendle community has also opened a new Boros communication channel, you can ask any questions: