Insurance Pool

40% of perps trading fee, perps funding fee and 100% of perps liquidation fee goes to insurance pool. Funds collected by insurance pool will be used to compensate liquidity providers in case net loss happens to LPs during drastic market fluctuations.

Perpetual swap is a 0 sum game between long and short traders. Gain for one side comes from the loss of the opposite direction traders, whenever there is an imbalance between long and short OI(opening interest), there is a possibility of imbalance between PnL(Long) and PnL(Short) during drastic market fluctuations.

In perfect conditions when PnL(Long) + PnL(Short)<= 0, there is a net gain for the protocol(and liquidity providers). However when PnL(Long) + PnL(Short)>0, which means there is a shortfall to pay traders' net profit, this shortfall has to be paid by Insurance pool