Leveraged trade inherently imposes some risks on both trader and protocol. During highly volatile market conditions, slippage and delayed execution can result in some accounts having a negative balance post-settlement.
Insurance fund is a safety net that maintain the solvency of the protocol when an account has a negative margin ratio. Losses from liquidations of such accounts are compensated by the insurance fund.
- Insurance fund initially is seeded by the team
- The initial size of insurance fund is $USDN 10,000
- Tsunami imposes 1% fee on each trade. Half of that fee goes to insurance fund
- Additionally, during liquidation, a part of liquidation penalty goes to insurance fund