The problem novaria solves

Novaria addresses a fundamental inefficiency in perpetual futures markets: the unpredictability and inaccessibility of funding rates.

In perpetual futures trading, funding rates fluctuate constantly based on market sentiment and position imbalance. This creates two main problems:

For traders: Funding rate volatility adds an unpredictable cost (or income) to holding positions, complicating risk management and long-term strategy planning.

For investors: There’s no clean, direct way to access yield opportunities from funding rates without actively managing a perpetual position, which requires exposure to market risk.

Challenges I ran into

Building Novaria presented a few notable challenges — both technically and conceptually.

a) Handling Real-Time Funding Rate Settlements On-Chain

One of the biggest obstacles was designing a system that could handle real-time funding rate accrual and settlement on-chain without creating excessive gas costs or reliance on centralized off-chain calculations.
Solution:
We overcame this by implementing a vault system that tokenizes positions at the time of opening, then decouples funding rate calculations through a modular oracle mechanism. Funding rate yields are claimable via the Yield Token (YT).

b) Designing a Token Model That Preserves Value Integrity

Another significant challenge was ensuring that splitting a position into YT and PT wouldn’t introduce value leakage or incentive misalignment. The tokenization model had to be airtight, preserving the economic relationship between the two while remaining flexible enough to accommodate various perpetual markets.
Solution:
We carefully designed the issuance logic so that the combined value of YT and PT always equals the underlying asset value plus accrued funding.