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The insurance fund is an on-chain safety reserve. Its job is to absorb losses when a liquidated position falls below zero equity before it can be closed.

Isolated per market

Instead of one giant pool where an exploit on a micro-cap coin could drain funds from everyone else, Priest.trade keeps a separate insurance reserve for each individual market.
  • What happens in one meme coin market stays in that market.
  • Big, liquid markets build up their own independent safety nets.
  • You can inspect any market’s insurance balance on-chain at any time.

Where the money comes from

A market’s insurance reserve grows in three ways:
  1. 10% of all trade fees: Every time someone opens or closes a trade on that coin, 10% of the platform fee goes directly into that market’s insurance reserve.
  2. Liquidation penalties: When a position is liquidated with equity left over, a portion of the remainder goes into the reserve.
  3. Pre-graduation pool corrections: If someone tries to mess with the Uniswap pool price right before graduation, the engine’s rebalancing swap extracts the difference and sends it to the insurance reserve.

When it gets used

If a market moves so fast that a trader’s position gets liquidated at a price worse than zero equity (bad debt):
  1. The market’s insurance reserve pays the shortfall.
  2. If the insurance reserve is emptied on a graduated market, the Counterflow Vault steps in to cover the rest.
  3. Solvent traders never take haircuts or auto-deleveraging under normal conditions.

Headroom cap

The contract guarantees that insurance money cannot be drained by ordinary payouts:
  • You can only withdraw collateral or claim trading profits from surplus headroom — never from funds tagged for insurance or unpaid creator fees.

See also