Why Traders Come: The Funding Arbitrage

We've followed a full trade - mint, price, backing, redeem - so we know how Own works. Now we ask the question that makes the whole thing run: why does anyone bother? Who shows up to trade, and what are they actually after?

There are two honest answers. The simple one: plenty of people just want to hold stocks onchain - and Own is an unusually good place to do it. You pay a dollar for a dollar of exposure, there's no funding fee bleeding you the way a perpetual future does, no liquidation risk hanging over you, dividends flow through to your wallet, and you can borrow against the position without selling it. For a holder, an eToken behaves like the asset, minus the brokerage.

But the demand engine - the flow that keeps the lending book full and the yields flowing - is a specific professional trade. Let's unpack it.

Perps and the fee called funding

On crypto exchanges you can bet on a stock's price without holding the stock, using a perpetual future - a "perp." Go long and you profit if the price rises; go short and you profit if it falls.

To keep a perp's price glued to the real stock, exchanges use a recurring payment between the two sides called funding. When lots of people crowd into the long side - which is what happens with hot names - the longs pay the shorts. Think of it as a crowding fee: the popular side pays the unpopular side to stay balanced.

How big is this fee? On hot names it has run around +13% per year. That's real income - paid to whoever is willing to hold the short side.

But there's a catch. If you just short NVDA to collect funding, you lose money the moment NVDA goes up. To collect the fee safely you need to be short the perp and hold an offsetting long somewhere else, so price direction cancels out. Then you don't care where the stock goes - you just sit there collecting the fee.

That offsetting long is exactly what Own provides - cheaply, and with leverage.

The trade: build a cheap long, short the perp, pocket the gap

Here's the move a crypto fund wants to run. Start with $100k. Mint eNVDA on Own. Post it as collateral in Own's lending market, borrow USDC against it, mint more, and repeat - a cycle we'll call the loop. Each pass turns borrowed dollars into more exposure. At Own's 70% loan-to-value per pass, the loop tops out around 3.3x - but let's keep the fund conservative at 3x:

  Fund has $100k
       |
       v
  (1) Mint $100k eNVDA on Own
  (2) Borrow $70k against it, mint more, repeat  ......  THE LOOP
       |
   --> ends with $300k eNVDA (3x), $200k borrowed at ~7%
       |
  (3) Short $300k NVDA perp on an outside venue
       |
   --> collects +13% funding on $300k  =  +$39,000/yr
   --> pays ~7% interest on $200k       =  -$14,000/yr
  --------------------------------------------------
     NET: ~$25,000/yr on $100k  =  ~25% gross
     (before fees - and direction doesn't matter)

Three steps, three numbers. The loop builds a $300k long for $100k of real money. The matching $300k short on the perp venue cancels the price risk. And the gap between the funding collected (~13%) and the borrow interest paid (~7%) is the profit.

The reason this works is that Own's borrow rate sits below the funding rate - deliberately, as we'll see in Chapter 11. The fund pays ~7% to earn ~13% on a leveraged base. (These are illustrative mid-2026 rates; both numbers move with the market.)

Why this position never closes

The most important property of that trade is that it's delta-neutral: the long and the short are equal and opposite, so the fund makes the same money whether the stock rallies or crashes. Direction simply doesn't enter the math.

That changes everything about behavior. A directional bet gets closed when you change your mind about the stock. A delta-neutral funding harvest has no reason to close - as long as funding stays above the borrow rate, the trade keeps printing. So the fund holds it, and keeps borrowing, month after month.

For Own, that's gold. These traders aren't tourists; they're stable, repeat borrowers who keep the lending book full. And a full lending book, as the next chapter shows, is precisely what pays the LPs.

One caveat the fund does carry: the loop is a borrowed position, so unlike a plain holder, a looper has liquidation risk if the collateral's value falls too far against the debt. Chapter 11 covers how those liquidations work - and why they make the system healthier rather than sicker.

Why Own instead of a regular broker

You might ask: why not just buy real NVDA shares at a US broker as the offsetting long? Because the people running this trade usually can't. Crypto-native capital - funds holding USDC, operating onchain - often has no path to a traditional brokerage account, and doesn't want one.

Own hands them the long leg natively: priced in USDC, leverage built in, available 24/7, no account application. The position lives entirely in the same onchain world their capital already lives in. That access - not a better price

is the real product.

What just happened

Plain holders come for the clean deal: 1:1 capital, no funding bleed, no liquidation risk, dividends passed through, borrowing built in.
The demand engine is the funding arbitrage: on crypto perps, crowded longs pay shorts a recurring funding fee (~13%/yr on hot names).
Funds harvest it safely by holding an offsetting long - which Own supplies cheaply: mint, borrow at 70% LTV, repeat (the loop, up to ~3.3x).
Short the matching perp, collect ~13%, pay ~7% to borrow, pocket the gap: roughly 25% gross on the example numbers, direction-neutral.
Because the trade is delta-neutral it never wants to close - these are stable, repeat borrowers who keep the lending book full, which is what pays LPs (next chapter).

9. Why Traders Come: The Funding Arbitrage