Insurance Fund

Unlike many leading perpetual exchanges, initial deposits on VDEX are never at risk. Funds remain fully in self-custody, while the insurance pool supports the Virtual Market Maker (VMM) in absorbing liquidation risk.

Without the VMM and the insurance pool, traders would depend on counterparties to cover losses. In highly volatile or low-liquidity conditions, counterparties may not have sufficient collateral to offset realized losses. This could reduce a profitable trader’s returns, even though their deposits remain protected under the Virtual Rollup architecture.

On VDEX, liquidated positions are automatically taken over by the VMM. While some liquidations may result in losses for the VMM, the insurance pool ensures the mechanism remains sustainable and net-profitable over time.

Insurance Pool Funding The insurance pool is funded through liquidations where collateral recovery falls below 67% of the required maintenance margin.