SAFU Insurance Fund

In rare instances, volatile price movements may be too extreme for liquidators to liquidate unhealthy positions fast enough e.g. a "black swan" flash crash resulting a 30% price drop in 20 seconds.

This has been observed on countless occasions in many protocols which which naturally depend on price data. For example in centralized systems e.g. Bitmex, and in decentralized DeFi protocols e.g. Maker DAO, Perp Protocol.

To account for this, SatoshiSwap has a built-in decentralized SAFU Insurance Fund which steadily grows in size over time, funded by a percentage of each profitable margin trade that occurs within the system (5%). If this fund grows disproportionately big (more than several "black swan" events in a row), a percentage will also be distributed to SatoshiSwap holders as a reward.

To account for the possibility that a "black swan" event occurs very early in the lifetime of the protocol we will artificially limit the TVL of the system from growing too big, so funds from the Fair Launch Auction can cover the cost.