Insurance Fund

Built on the ultra high performance Sei blockchain, Vortex protocol is able to correctly liquidate positions most of the time. To ensure system’s solvency when market prices are volatile, Vortex protocol will backstop losses incurred in liquidation processes through its insurance fund.

The insurance fund is the first backstop to maintain the solvency of the system when an account has a negative balance. The account will be liquidated, and the insurance fund will take on the loss. It will grow by accruing 100% of trading and liquidation fees from the exchange.

Deleveraging

In the event that the insurance fund is depleted, positions with the most profit and leverage may be used to offset negative-balance accounts, in order to maintain the stability of the system.

• Deleveraging will only be used if the insurance fund is depleted.

• Deleveraging is performed by automatically reducing the positions of some traders—prioritizing accounts with a combination of high profit and high leverage—and using their profits to offset underwater accounts.

• Deleveraging is chosen over a socialized loss mechanism to reduce the uncertainty faced by traders trading at lower risk levels.

The most highly leveraged offsetting accounts will be deleveraged onto first.