As the SNX debt pool is the counterparty to every position, we require a mechanism to incentivize the market skew to remain balanced (equal long/short open interest). Funding in our case was designed to incentivize a balance of open interest on each side of the market. Positions on the crowded side of the market will be charged funding, while positions on the noncrowded side will receive funding. Funding rates can have unfavorable effects on a traders position. For instance, funding rates may surge when the market is consistently moving in the same direction, making it costly for traders to hold long positions.