How does the Gate.io insurance fund work?

Gate.io's Insurance Fund protects futures traders by covering losses when liquidations fall short, ensuring fair payouts and platform stability during extreme market moves.

Jul 25, 2025 at 12:14 pm

What Is the Gate.io Insurance Fund?

The Gate.io insurance fund is a dedicated reserve pool designed to protect users from potential losses during extreme market conditions, particularly in futures trading. When traders open leveraged positions and liquidation occurs due to adverse price movements, the system automatically closes those positions. If the liquidation doesn’t fully cover the losses — known as a "bankruptcy event" — the insurance fund steps in to absorb the remaining deficit. This ensures that profitable traders on the opposite side of the trade still receive their full earnings, maintaining fairness and trust in the platform.

How Is the Insurance Fund Funded?

The fund is primarily replenished through several mechanisms:

• A portion of trading fees collected from futures contracts is allocated to the fund.
• Profits from auto-deleveraging (ADL) events, when applicable, are also directed into the fund.
• Any surplus from liquidated positions — where the collateral recovered exceeds the loss — is added to the fund.
• Gate.io may also inject additional capital during periods of high volatility or fund depletion.
  

  These contributions are transparent and updated in real time on Gate.io’s public dashboard, allowing users to verify the fund’s balance and growth history.

  When Does the Insurance Fund Activate?

  
  The fund activates automatically when:
• A trader’s position is liquidated, but the remaining collateral is insufficient to cover the full loss.
• The system cannot fully offset the loss via the ADL mechanism (which matches losing positions with profitable ones).
• The market experiences a sharp, rapid move — known as a “flash crash” or “flash spike” — causing multiple liquidations in quick succession.
  

  In such cases, the system uses the insurance fund to ensure that the counterparty (the profitable trader) receives their full payout, preventing any negative impact on user trust or platform stability.

  Step-by-Step: How the Insurance Fund Protects You

• When a futures position is liquidated, the system first attempts to cover the loss using the trader’s margin balance.
• If the margin is insufficient, it triggers the ADL system to reduce the positions of profitable traders in descending order of leverage.
• If ADL cannot fully offset the loss — due to insufficient counterparty positions or extreme market gaps — the insurance fund covers the remaining deficit.
• The system logs the event and updates the fund balance in real time.
• Users can view these logs and fund status on Gate.io’s futures insurance fund page.
  

  This process is fully automated and happens within milliseconds, ensuring no manual intervention or delay.

  Can the Insurance Fund Run Out?

  
  Yes, although rare, the fund can be depleted if multiple large bankruptcies occur in a short period — for example, during a black swan event like a sudden regulatory announcement or macroeconomic shock. In such cases:
• Gate.io may temporarily pause new high-leverage futures trading to limit risk.
• The platform might initiate emergency funding from its own reserves to restore the fund.
• Trading fees may be temporarily increased to accelerate replenishment.
• Users are notified in real time via platform alerts and on-chain notifications.
  

  Gate.io has historically restored the fund quickly after past depletion events, ensuring continuity of service and trader protection.

  How to Monitor the Insurance Fund in Real Time

  
  Gate.io provides a public dashboard accessible to all users:
• Navigate to the “Futures” section on the Gate.io website.
• Click on “Insurance Fund” in the left-hand menu.
• View the current balance in USDT for each futures contract (e.g., BTC/USDT, ETH/USDT).
• Check historical data, including daily inflows, outflows, and usage events.
• Subscribe to email or Telegram alerts for significant fund changes.
  

  This transparency allows traders to make informed decisions about their leverage and risk exposure based on the fund’s health.

  ---

  Frequently Asked Questions

  Does the insurance fund cover spot trading losses?
  
  No. The insurance fund only applies to futures and leveraged trading. Spot trading losses — such as those from price drops — are not covered, as these are considered normal market risk.

  Can I withdraw from the insurance fund?
  
  No. The fund is non-withdrawable and exists solely to protect users during liquidation events. It is not a user-controlled wallet or staking pool.

  What happens if my position is liquidated and the fund is empty?
  
  If the fund is depleted, the system will attempt to use ADL first. If ADL also fails, your counterparty may not receive their full profit — but you, as the losing trader, are still only liable for your margin balance. You will not owe additional funds beyond your initial collateral.

  Is the insurance fund unique to Gate.io?
  
  No. Most major exchanges like Binance, Bybit, and OKX have similar mechanisms. However, Gate.io stands out for its public transparency and frequent updates on fund status, allowing users to track its health in real time.