After a year, Owen is finally back with another high-quality technical post on professional contract underlying design. The three key players in the crypto market (exchanges, project teams, and retail investors) should definitely take a good look at this. Honestly, I’ve been laying low recently and haven’t been messing around with altcoins, especially those sketchy ones. If it weren’t for Owen’s reminder, I wouldn’t have even noticed that Binance changed the formula for calculating funding rates and mark prices for contracts. Arbitrage trading has always been a classic play in the crypto space. As Owen mentioned, from what I recall, it started at least as far back as TRB. After heavy spot market manipulation, using negative funding rates in contracts to drain retail investors’ capital while simultaneously pumping prices and triggering massive short squeezes has become a fixed strategy for many wild, phenomenon-level altcoins over the years. Just recently, MYX innovated its methods and wiped out countless traders through short squeezes. Under the old mechanism, for heavily controlled altcoins, project teams could manipulate spot liquidity to create extreme premiums, then extract significant funding fees from counterparties during short settlement cycles (e.g., under negative rates, shorts continuously pay longs). The new mechanism, however, increases the cost of manipulation: with smoother rates, single-time charges are reduced, and potential income drops by sixfold. This might force them to reassess their strategies and reduce their “blood-sucking” behavior. For retail investors, this can be seen as a protective measure under the exchange’s sustainable development efforts—otherwise, project teams would strip retail investors down to their roots. The new mechanism reduces the risk of being “bled dry” by high funding rates. When bottom-fishing or acting as the counterparty, traders can focus more on price movements rather than worrying about excessive funding deductions. That said, price convergence might slow down, and the “dual pricing” between spot and futures could last longer, making arbitrage more challenging. In summary, this innovation might reduce extreme short squeezes or manipulation in the short term and promote fair trading in the long term.