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Q: How does staking in an insurance fund work?

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Injective Protocol
  • Updated

Unlike most exchanges, the insurance fund on Injective is market-specific. That is, there is no common pool of Insurance capital collected, but rather a new fund exists for each derivative market launched on Injective. This way, the risk for underwriting insurance is isolated to each individual market.

When a user underwrites insurance for a derivative market, he stakes the collateral currency for that market and in turn receives insurance pool tokens specific to the market. These pool tokens represent pro-rata (proportional) ownership of the insurance fund. Thus, as an insurance fund grows from liquidation proceeds, the insurance fund stakers gain profit from the increase in value of their stake of the insurance fund.

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