Insurance Fund
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The insurance fund is used by BloFin to resist the risk of massive liquidation, mainly composed of the fund provided by BloFin and the liquidation surplus from the liquidation orders.
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USDT perpetual contracts: For USDT perpetual contracts, the insurance fund currency for all the contracts is USDT, but the pools are independent of each other. For example, ETHUSDT perpetual contract has an insurance fund with currency USDT, and so does XRPUSDT perpetual contract. But their insurance funds are independent of each other and cannot be calculated together.
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Every day at 8:00 AM (UTC), the platform will cover all losses, caused by partial liquidation or liquidation in the market from 8:00 AM (UTC) yesterday to 8:00 AM (UTC) today, with the insurance fund, and record it as bankruptcy loss. Every day at 8:00 AM (UTC), the platform will transfer all surpluses, caused by partial liquidation or liquidation in the market from 8:00 AM (UTC) yesterday to 8:00 AM (UTC) today, into the insurance fund, and record it as liquidation balance deposit.
Auto-deleveraging (ADL)
Auto-deleveraging, abbreviated as ADL, refers to a mechanism for liquidation of counterparty positions to control the platform's overall risk when extreme market conditions or force majeure lead to insufficient insurance fund or rapid decline of the insurance fund. At present, the rapid decline means that the insurance fund has dropped by 30% from the peak within 8 hours, and the platform may adjust it according to market conditions in the future. After ADL is triggered, the platform will no longer use the method of placing orders on the market and waiting for a suitable price to liquidate or partially liquidate user's positions, but directly find the counterparty account with the highest ranking and trade with the mark price at the time. After the transaction is completed, the counterparty position will be closed. The profits from the position will be added to the account balance. When the mechanism is adopted, the clawback will no longer be triggered.
ADL's counterparty ranking is determined by the following rules, including account risk or position risk, and the return rate of the contract position:
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Margin profit calculation
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Profitable position: Margin profit = position profit rate / position margin ratio
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Loss-making position: Margin profit = position profit rate * position margin ratio
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Based on margin profit, from the largest to the smallest
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The rate of return on loss-making positions is negative, and profitable positions are ranked in front of the loss-making positions.
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According to the above rules, the higher the return rate and the lower the position margin ratio, the more likely the account to be used as ADL counterparties, facing the risk of automatically deleveraging. Users can see their own ADL risk level in real-time through the signal lights on the page. The signal light has 5 grids. When all 5 grids are on, it means that the counterparty ranking of this position is the highest, and the risk of automatically deleveraging is also the highest; when only 1 grid is on, it means that the counterparty ranking of the position is the lowest and the risk of automatically deleveraging is also the lowest.