3. Funding settlement and PnL

This piece is written by @Edyta from Phezzan Discord server

Funding payment is a mechanism to keep mark price inline with index price. Both makers and traders will receive or pay funding payments. Funding payments are among users themselves, and the exchange doesn't pay nor receive payments.

When the funding rate is positive, traders in long pay for those in short. The price of the perpetual contract is usually higher than the mark price. Conversely, a negative funding rate means that short positions pay for longs.

Most CEXs settle funding payments every certain interval (e.g. 1 hour, 8 hours), but DEXs can do it otherwise. Phezzan Protocol calculates funding payment per block basis (so it's almost real time), and settle the funding payment for a user whenever that given user's position changes (e.g. open/close position, add/remove liquidity).

Realized PnL: Profit and loss gained by closing positions or removing liquidity.

Unrealized PnL: Current profit and loss for all holding positions on this contract.

Funding payments and PnL in Phezzan Protocol are settled in USDC, and be auto converted into yield bearing assets such as aDAI or stETH. This will allow user to earn interested on their settled positions.