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How does insurance availability affect sustainable leverage? The availability of robust slashing insurance directly increases the sustainable leverage ceiling for operators. Insurance acts as a hedge, capping the maximum loss from a slashing event. Without insurance, a 3x leveraged position could be wiped out by a single slash. With insurance covering, for example, 80% of the slashing loss, the operator's maximum downside is limited, making the leveraged position significantly less risky. This allows operators to confidently employ higher leverage while maintaining the same risk of ruin. However, this introduces a dependency on the insurer's solvency. If a correlated slashing event occurs that drains the insurance fund and leads to pro-rata payouts, the assumed safety net vanishes, potentially triggering the very cascading liquidations the insurance was meant to prevent.

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