Insurance Fund & ADL

In the event of a Black Swan scenario, these measures ensure the exchange remains solvent while minimising the negative consequences to users.

Our platform is designed to be resilient, even in extreme market conditions. Two key mechanisms help protect against systemic risk: the Insurance Fund and Auto-Deleveraging (ADL). Together, they ensure that the platform remains solvent without passing losses onto innocent traders.

Insurance Fund

The insurance fund is USDC-denominated and acts as a buffer in the event a user’s account drops below the bankruptcy threshold and there isn’t enough collateral left to cover their losses.

This can happen if:

• Markets move too fast for the system to liquidate a position in time

• There’s a sudden liquidity crunch and the orderbook can’t absorb the position

In these cases, the insurance fund covers the shortfall to protect counterparties and maintain overall solvency.

Auto-Deleveraging (ADL)

If the insurance fund is ever depleted — which should be extremely rare — the final line of defense is auto-deleveraging.

Here’s how it works:

• Traders are ranked by leverage and unrealized PnL

• Profitable traders at high leverage may have their positions automatically reduced

• These reductions offset the losses of liquidated traders whose positions couldn’t be closed safely

ADL ensures the system remains solvent without socialized loss — meaning we never spread losses across all users. Only the most risk-exposed profitable traders are affected, and only as a last resort.