> For the complete documentation index, see [llms.txt](https://blockwise-1.gitbook.io/blockwise/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://blockwise-1.gitbook.io/blockwise/bw-perpetual-dex/key-concepts.md).

# Key Concepts

#### Perpetuals <a href="#perpetuals" id="perpetuals"></a>

Assets traded on DEX are onchain Perpetuals, a specific type of bilateral contracts that never expire. At the closing of the position, a cash-settlement payment is exchanged between holders of the two sides of the contracts, long and short. The payment is equal to the difference between the underlying asset price at the opening and at the closing of the trade, according to the leverage agreed between the two sides.

#### Collateral & Cross-Margin Account <a href="#collateral-and-cross-margin-account" id="collateral-and-cross-margin-account"></a>

To start sending and accepting Intents and ensure their solvency within Derivatives contracts, users are required to deposit collateral (​​$USDT) into their cross margin account. Compared to Order Book based DEXs, cross-margin accounts are a risk management tool that provide improved liquidity, financial flexibility and unnecessary liquidation of positions achieved by reduced margin requirements. Through this unique approach, DEX is acting as the first decentralized and trustless clearing house on the BNB chain.

Traditionally in trading, a margin refers to an amount of money borrowed to a broker to purchase a financial instrument. As the trades are executed with leverage in DEX, the unrealized gains of one of the two parties can quickly exceed the amount deposited as collateral in its own account. This situation translates into an ongoing loan by the other party, though its own margin account.

One particularity of DEX is the cross-margin nature of the capital employed as collateral. The position margins of a user are aggregated altogether in order to offset positive and negative unrealized gains, all with the same collateral. It not only enhances the trading experience of users, but also allows for an unmatched capital efficiency of the collateral deposited.

#### Funding Rates <a href="#funding-rates" id="funding-rates"></a>

Funding rates are periodic payments between traders holding perpetual contract positions. Since perpetual futures contracts have no expiration date and can be held indefinitely, a price discrepancy can happen between the perpetual contract prices and the spot price of the underlying cryptocurrency.

When the funding rate is negative, shorts compensate for longs, and when it's positive, longs pay shorts. In a bullish market, the funding rate tends to be positive and increase, while in a bearish market, the opposite occurs.

Since Hedgers might be willing to hedge themselves on third party entities, such as CEXs, that are likely to charge them funding rates, which are to be implemented to the system at a later date.


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