# Funding Rate

Funding rates balance perpetual and spot prices. If contract prices are higher, longs pay shorts; if lower, shorts pay longs. In the PRMM model, payments depend on market makers' positions. Calculated hourly, the rate is:

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The DAO sets the Interest Rate and the Premium Rate is updated every 5 seconds to calculate the average premium rate. This refined translation aims to convey complex information straightforwardly, using the simplest terms and minimizing word count.
