Definition
Funding exists because a perpetual never expires, so nothing else pulls its price back to the asset's. The rate follows the difference between the contract's price and the spot price: positive, and longs pay shorts; negative, and shorts pay longs. The payment is purely peer to peer, and the documentation states that no fees are collected on it.
Two components make the rate. The interest component is fixed at 0.01% every 8 hours, which the documentation gives as 0.00125% every hour, or 11.6% APR paid to short. The premium component moves with the difference between the perpetual and the underlying spot oracle price, read from the average execution prices of the funding impact notional on each side of the book (20,000 USDC for BTC and ETH, 6,000 USDC for every other asset), sampled every 5 seconds and averaged over the hour.
The formula produces an 8-hour rate, and Hyperliquid pays one eighth of it every hour. The rate is capped at 4% an hour, a cap the documentation notes is much less aggressive than its centralized counterparts, and neither the cap nor the interval depends on the asset. The payment converts the position size to a notional at the spot oracle price, not at the mark price.
It is a cost of holding, not a cost of trading: it is charged for every hour a position stays open, whatever that position is doing. That makes it a figure for a trade measured in days and almost nothing for one measured in minutes. An annual figure, such as the hourly rate times 8,760 that this site shows beside each market, measures the present hour rather than the year ahead.
Formula
Funding Rate (F) = Average Premium Index (P) + clamp(interest rate - Premium Index (P), -0.0005, 0.0005), which is an 8-hour rate paid hourly at one eighth of it. The payment itself is position_size * oracle_price * funding_rate, and the premium is premium = impact_price_difference / oracle_price.
Example
An example, in round figures. A long of 1 BTC with the spot oracle price at $100,000 carries $100,000 of notional. At the interest component alone, 0.00125% an hour, the hour costs $1.25, and a full day of it $30. At an hourly rate of 0.01% the same position pays $10 an hour, $240 a day. A real rate changes every hour, so this is arithmetic, not a forecast.