🌡️Insurance Fund

Ensuring Deterministic Payouts

For the AMM to be viable for LPs, the liquidity returned to the pool when a trader's position is liquidated at any time in the future must be at least as large as the original liquidity fronted by LPs.

Insurance balances are set aside in the form of passively held X and Y tokens, effectively an impermanent gain mechanism that kicks in as price drops on a long position, increasing the contribution to additional liquidity from the insurance amounts passively held internally in the pool.

Marginal is setup such that the insurance balances guarantee that LPs never experience a liquidity shortfall (ignoring potential funding payments from the pool).