@zhaominjie
Drift Protocol's perpetual contracts on Solana feature a robust liquidation system with cross-margining and tiered markets to mitigate risks.
Liquidation risk is low under normal volatility due to fast Solana execution, Pyth oracles, and incentivized liquidators, but rises in extreme moves if positions aren't closed timely, leading to bad debt.
The Insurance Fund (primarily USDC, funded by trading/liquidation fees and staking) acts as the primary backstop, covering bankruptcies and AMM deficits up to per-market limits.
If depleted, losses socialize across participants—a tail risk, though historical events (e.g., 2022) were resolved, and the fund has grown with protocol revenue.
Overall, risk is well-managed but not zero in black swans.
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