🦢Insurance & ADL
In the event of a Black Swan scenario, there are measures in place to ensure the exchange remains solvent while minimizing negative consequences for users.
Insurance Fund
An insurance fund is maintained from user fees, individually for each perpetual, to cover transactions in the event that the perpetual’s main fund is depleted under extreme conditions. Under certain conditions, the protocol may elect to compensate ADL winning traders for the difference in the value of their position from the deleveraged payout.
Force Close
In the event that there is no resting liquidity in the order book and the price remains stagnant or sideways for an extended period, traders can request that the protocol force close their position at the mark price and exit the perpetual contract.
Auto-Deleveraging (ADL)
This usually happens when there's not enough new liquidity entering, or price gaps up/down drastically. ADL ensures the protocol stays solvent, as was widely experienced during the October 10th, 2025, crash. Rapid changes in price can push liquidatable positions into bankruptcy before they can be liquidated by the system.
In this situation, it's important for the system to remove the positions (deleverage) quickly to ensure that other users with profitable positions can be paid. Failure to do so in a timely manner, along with continued price fluctuations, could result in the insolvency of the perpetual.
The perp is not paused and can continue operating.
Unwind
Unlike ADL, the perp is paused due to an extreme trading scenario (price manipulation, black swan events, thinly traded markets, etc.). The perpetual contract may be delisted under some conditions.
In an unwind, the perpetual may not have sufficient funds to pay existing positions at the value implied by the mark price. Regardless, it will compensate positions with positive value on a pro-rata basis out of the remaining funds. The price used to determine position value is the mark price at the time of pausing.
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