Instructions of insurance fund
Updated at:53 days 6 hours ago
The insurance fund is a backup fund Gate.io set up to prevent the loss in the transaction. The insurance funding is mainly used to ensure the completion of liquidation. When the position loss is higher than the margin, the balance of insurance funding will be used to cover the gap.
The insurance funding comes from the surplus funds of contract liquidation. In the event of liquidation, if the average trading price is higher than the bankruptcy price, then the left balance ( the proportion with less loss) will be added to the insurance fund.
When the mark price surpassed the bankruptcy price while the liquidation order is not digested by the market, the insurance fund will be used for it.
As mentioned above, during liquidation, the balance of the Insurance Fund will increase/decrease depends on the price difference between the final Liquidation Price and the Bankruptcy Price of that liquidated position.
User A's long position is liquidated with a bankruptcy price of 10,000USDT and an actual transaction price of 10,100USDT. The actual transaction price is 100USDT higher than the bankruptcy price, that the 100USDT will be added to the insurance fund. User A will lose all balance of the insurance fund.
User B's short position is liquidated with a bankruptcy price of 10,000USDT and an actual transaction price of 10,050USDT. The actual transaction price is 50USDT higher than the bankruptcy price, that the insurance fund will be used to digest the liquidation order, and user B does not have to pay the extra 50USDT.
Traders can always refer to the Insurance Fund on our official website (need to distinguish the tokens for settlement):
The following picture is an example of the Insurance Fund balance:
When the Insurance Fund is insufficient, the auto-deleveraging will be triggered to digest the liquidation.
The current balance of the insurance fund is 1000USDT. The volatile market conditions have caused liquidation for a good amount of users, and a balance of 11,000USDT is needed. The insurance fund is insufficient to digest the liquidation, that the auto-deleveraging will be triggered.
Since the risks and the requirement of each trading pair is different, that the summary insurance fund balance is displayed while each insurance fund is allocated separately.