Why Traders Come: The Funding Arbitrage

We've followed a full trade - mint, price, hedge, 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?

The short answer: crypto funds want to harvest a fee that one group of traders pays another, every day, on hot stocks. Own gives them the cheapest way to set up that harvest. Let's unpack it.

Perps and the fee called funding

On crypto exchanges you can bet on a stock's price without ever holding the stock, using a perpetual future - a "perp." A perp is just a contract that tracks the price: 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 are crowding 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? For a name like NVDA it has run around +13% per year. Across stocks it averages roughly +5% 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 the price direction cancels out. Then you don't care where NVDA 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 eTSLA (or eNVDA) on Own. Then borrow against those tokens, mint more, and repeat - a cycle we'll call the loop. Each pass turns collateral into more eTokens, stacking up leveraged long exposure for the same starting capital.

  Trader has $100k
       |
       v
  (1) Mint $100k eNVDA on Own
  (2) Borrow $70k, 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
     (~12-18% after 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 an outside 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 the borrow rate sits below the funding rate. The trader is paying ~7% to earn ~13%, and pocketing the ~6-point spread on a leveraged base - which is why $25k on $100k is roughly 25% gross before fees.

Why this position never closes

The most important word in that diagram is delta-neutral: the long and the short are equal and opposite, so the trader makes the same money whether the stock rallies or crashes. Direction simply doesn't enter the math.

That changes everything about their 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. We'll see in the next two chapters that a full lending book is precisely what pays the LPs.

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 open a traditional brokerage account, and doesn't want one.

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

(Worth noting: Own runs on Base Sepolia, a testnet, today. The numbers here describe the target mechanics with illustrative, June-2026 market rates - actual funding and borrow rates move around.)

What just happened

On crypto exchanges, perps pay a recurring fee called funding; on hot names the crowded long side pays the shorts (~+5-13%/yr).
Crypto funds want to collect that fee, but only safely - which means holding an offsetting long so price direction cancels out.
Own supplies that long cheaply: mint an eToken, borrow against it, mint more - the loop - to build ~3x leveraged exposure from one stake.
They short the matching perp on an outside venue, collect funding, pay ~7% borrow interest, and pocket the gap (~12-18% after fees).
Because the trade is delta-neutral, it has no reason to close - so these are stable, repeat borrowers who keep Own's lending book full.
They use Own because crypto-native capital often can't (or won't) open a US brokerage account: Own gives them the long leg in USDC, with onchain leverage, 24/7, no KYC.

9. Why Traders Come: The Funding Arbitrage