What is an insurance fund?
The purpose of the insurance fund is to compensate for the losses caused by the user's position crossing under extreme market conditions, so as to reduce the possibility of users' apportionment.
How is the insurance fund generated?
The profit from processing the position after the liquidation engine takes over the position will be injected into the insurance fund.
In the event of a liquidation, the liquidation engine will take over the user's position and the remaining margin at the takeover price. If the liquidation engine closes the position at a price higher than the takeover price, it will generate profits, which will all be injected into the insurance fund.
How is the insurance fund used?
When a liquidation occurs, the liquidation engine will take over the user's position and the remaining margin at the takeover price. If the position continues to lose money, the liquidation engine will generate a loss after the liquidation is closed. This part of the loss is regarded as the loss of the system, and part of the loss will be paid by the system. Insurance fund compensation, the rest will be shared by users.
In this exchange contract, all perpetual contracts of the same margin currency share the same insurance fund.
User allocation rules
After the system goes through the position, the insurance fund bears a part of the loss, the current share is 20%, and the remaining part (80%) is shared by the user's profitable position, which will reduce the user's profit but will not lead to loss.
Screening rules for profitable positions:
We will count all the profitable positions in this settlement cycle and rank these positions in terms of profitability. We will start looking for the most profitable positions. If the accumulated profit amount accounts for 90% of the total profit amount of the settlement system, we will stop searching and find these positions. will participate in this allocation. The purpose of this is to avoid those positions with a small profit amount from participating in the apportionment, and only allow the large profitable ones to do the apportionment, reducing the long tail of the apportionment.
Apportionment Amount Rules:
The allocation amount of this position = the part of the amount that the user needs to bear to wear the position * the profit amount of this position in this settlement period / the total profit amount of all profitable positions in this settlement period
After the user participates in the apportionment, there will be a flow of apportionment in the flow of funds.