# mUSD (Funding Token)

#### Concept of mUSD(Funding Token) 

Funding Token (FT), branded as **mUSD**, is a USD-denominated, yield-bearing asset that earns the funding fees paid by leveraged traders within the Mooncake protocol.

In Mooncake’s leverage structure:

* LT (Leveraged Token) = borrowing to take leveraged long exposure
* FT (Funding Token) = lending to LT users and earning their funding payments

Therefore:

FT functions as a market-driven lender that captures the funding paid by LT holders.

Its yield is non-subsidized, non-inflationary, and non-Ponzi, fully sourced from organic trading activity.

***

#### Mechanism of mUSD

When users mint LT (e.g., 3× SOL, 5× memecoin), they effectively:

* use the underlying token as collateral
* borrow purchasing power from the LT/FT market
* pay funding to maintain their leveraged position

FT holders supply this purchasing power, so:

* LT pays funding
* FT receives funding<br>

Detailed mechanism:

1. Users deposit the underlying token → the protocol splits the value into LT and FT based on the market’s target leverage.
2. When the LT side is net long (as is typically the case):
   * LT requires additional leveraged exposure
   * FT provides the required purchasing power
3. On each rebalancing cycle, the system calculates the funding fee based on leverage imbalance and allocates it to FT holders.
4. The value of FT increases over time as funding accumulates.

Thus:

FT behaves like a USD-like asset whose yield automatically adjusts according to leverage demand.

***

#### Yield Source of mUSD&#x20;

mUSDs' yield comes entirely from:

**Leverage Demand**

Higher leverage demand → higher utilisation ratio → higher funding → higher FT APY.

**A fully sustainable, non-subsidized model**

No emissions.

No project subsidies.

No “new users paying old users.”

FT’s yield is real cash flow driven purely by market supply and demand—similar to perpetual swap funding rates on exchanges.


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