🧐 Can the funding rate also be used for speculation? Pendle Boros Test Guide: Unlock New Interest Rate Trading Gameplay! For a long time, the capital rate is just a supporting role, which has always been controlled by the market and passively accepted. Unexpectedly, one day the funding rate could also be separated and turned into an independent asset that can be traded separately - this thing was really created by Pendle. @The latest laboratory project of pendle_fi - Boros @ boros_fi, a platform dedicated to fund rate trading, has just been launched. After spending most of the day researching, I found that it is a true 'interest rate DEX'. As long as you play well, this thing has great potential. Below, I will try to explain the meaning of Boros and how to play it in a simple way—— one ️⃣ Boros Core Mechanism: How to tokenize funding rates? Those who have played contracts know that funding rates are the core mechanism for regulating long short balance in perpetual contracts: Positive rate → Long pays short Negative rate → Short sellers pay long sellers The problem is that it keeps floating, like the rain that farmers rely on for their livelihood, with varying amounts of time, making the cost of storage space 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 understand it as: holding a 1 BTC perpetual contract, the cash flow of funds receivable at a certain rate during a certain period of time. For example: Holding one YU-BTC (for one month) is equivalent to buying the capital rate income that can be generated by one BTC perpetual contract in the next month. Long YU=Pay a fixed APR (Implied APR) to obtain the floating capital rate return of the underlying asset. Actual rate higher than fixed rate → profit; Otherwise, it will result in losses. Short selling YU: Charging a fixed APR to cover the floating capital cost of the underlying asset. If the actual rate is lower than the fixed rate → profit; Otherwise, it will result in losses. The settlement frequency is synchronized with the exchange, and the YU value will be reset to zero after expiration, with automatic profit and loss settlement. An example is more intuitive: Assuming the current BTC price is 100000 and the Binance funding rate is annualized at 6%, you are 10 YU-BTCs long on Boros with a 6% YU-APR; After 8 hours, the funding rate will increase to 8%; Your earnings=nominal value x (actual APR - fixed APR) x time=10 x 100000 x (8% -6%)/365/3=18 USDT You will find that the profit and loss here are not related to the price of the underlying asset itself, but entirely a game of interest rates. two ️⃣ Why do we need Boros? Where is its market? You may ask: Why do some people want to speculate on capital rates? This sounds like there isn't much market for it! absolutely wrong. The answer is simple: fluctuations in funding rates are far more violent than you think and are the norm. 🔸 BTC/ETH perpetual contract funding rates often fluctuate between -3% and+6% 🔸 In a highly leveraged structure, a 3% spread can amplify to 50%+return 🔸 For stablecoin protocols such as Ethena, high-frequency arbitrageurs, and linked asset minters, funding rates are the core source of profit. In the past, the way to deal with fluctuations in fund fees was either to force it or to use complex multi leg hedging (spot+perpetual+Delta neutral+off exchange settlement) - the threshold was too high for ordinary people to play. And Boros did it for the first time by securitizing funding rates, much like the expected trend of US bond yields when trading: Do you think the future funding rate will increase? Go long YU and lock in the low APR you need to spend now Do you think the market sentiment will turn bearish, and the funding rate will decrease? Short sell YU and lock in the high APR you want to charge now three ️⃣ Who is suitable to participate in Boros? In fact, it can be understood from the mechanism of Boros that this is not a platform for novice speculators, but it should be highly attractive to the following types of people: 1) Spot+Contract Trader: Hedge Fund Rate Cost/Benefit For example, if you open 100 BTC perpetual long positions on Binance and see the funding rate increase from 0.1% to 0.3%, you want to lock in interest expenses. Then you can go long YU-BTC on Boros and lock in a fixed APR to hedge against this cost fluctuation. On the contrary, if you short BTC to increase the capital rate, but are afraid that the market will rebound tomorrow and the capital rate will fall, you can short YU-BTC to lock in the profits. The essence of this approach is to turn the floating risk of capital rates into predictable costs. 2) Spread Trader/DeFi Structured Player Boros can also implement Delta neutral strategies, such as: You hold Lido's ETH (earning 4% annualization), while shorting ETH perpetual on Binance (hedging price risk), and then shorting YU-ETH on Boros to lock in capital rate income. This combination operation can generate a robust high interest bill: staking interest+fund rate arbitrage, not relying on ETH price, only eating structural spreads. For stablecoin issuers like Ethena, this is a pure profit advantage, and there are too many things that can be done with Boros. Additionally, a few points to note when using Boros—— ① A margin of 1-2% is sufficient to open a position. It is recommended not to use leverage in the initial stage and to increase it after becoming familiar with the net balance mechanism. ② When the margin ratio is lower than the maintenance margin, liquidation will be triggered. ③ It is best to close out or extend the position a few days before expiration to avoid the expansion of the liquidity pit due to the concentration of funds. ④ Remember to keep an eye on the Implied APR at all times, as this number is actually YU's price expectation. ⑤ In addition to direct transactions, users can deposit funds into the Boros Treasury to provide liquidity to the market, earn transaction fee shares, PENDLE token rewards, and increase the value of the Treasury. The current LP offers a high interest rate of 460%. But the risk characteristics of vault positions are similar to long YU. If there is an implicit decline in APR, it may face high unpredictable losses. We only recommend DeFi veterans to research and try it! four ️⃣ Conclusion—— Previously, we traded coins to earn money from fluctuations; Now we trade interest rates to hedge structural risks and earn more stable money. Pendle originally split the income rights into PT/YT, opening the prelude to the on chain interest rate market. Now, Boros has further structured the black box variable of funding rates into an independent asset that can be priced, traded, and derived. The future imagination space behind this lies in—— 📍 May support funding rates for more exchanges: OKX, Bybit, Hyperliquid 📍 Covering more cross chain assets: long tail currencies such as SOL, ARB, OP, etc 📍 Introducing real-world RWA interest rate products to become the interest rate bridge between TradFi and DeFi At that time, stablecoins, yield notes, hedge funds, and even traditional institutional interest rate strategies may directly call Boros' YU as an anchor point. Isn't it quite interesting to think about it! Finally, I would like to offer a practical suggestion that applies to anyone who is new to Pendle Boros and wants to learn more about it—— If you are still afraid to directly open a position, you can try shadow hedging first: Open a small perpetual long order on CEX, such as 0.001 BTC, and then go long on YU-BTC at Boros 1:1 (or both simultaneously open short), observe the changes in fund flow on both sides, familiarize yourself with the UI and settlement mechanism. In this way, even if there is a loss, the loss will be minimal, but the logic of the entire fund rate transaction can be quickly grasped. You can first learn the relevant operations of Boros: https://pendle. (gitbook.io)/boros/boros-docs The Pendle community has also opened a new Boros communication channel, where you can ask any questions: https://t.me/PendleFinance_CN