A funding rate is a payment made directly between traders (not to the exchange) on a perpetual futures contract, typically every 8 hours. When the perp trades above spot, longs pay shorts; when it trades below spot, shorts pay longs. The size of the payment scales with how far the perp has drifted from spot, which is precisely what pulls it back toward spot over time: a persistent premium makes staying long progressively more expensive, drawing in arbitrage sellers.
A positive funding rate usually signals bullish positioning (more traders paying to stay long), a negative rate signals bearish positioning, and either extreme can itself become a contrarian signal when it gets unusually stretched.
Funding-rate carry (going long spot and short the equivalent perp size to collect funding while staying roughly market-neutral) is the classic strategy built around this mechanism, and it's exactly the strategy type zengtrade can't run yet without a derivatives venue integration, see perpetual futures.
Educational content, not investment advice. zengtrade is paper-first and non-custodial.