Revenue pool

A portion of the fees collected within the protocol (denominated in a particular token: USDC, SOL, etc) go into that spot market's revenue pool.

The revenue pool increases from various portions of the protocol:

• borrow fees

• spot market exchange fees

• perpetual market exchange fees

• liquidations

The revenue pool ultimately funds:

• insurance vault

• perpetual market amm (conditionally)

Insurance Fund

Every hour (on the hour), a portion of the revenue pool can be settled to the insurance fund using the permissionless settle_revenue_to_insurance_fund instruction.

If the insurance fund has users staked, each individual hourly settlement is capped to what would amount to 1000% APR.

• Thus an astronomically large inflow into the revenue pool (relative to user insurance staked amounts) would result in revenue that slowly reaches the insurance over a longer period of time rather than immediately.

  • This encourages more insurance fund stakers (who require a medium horizon of insurance offering) to join during the high annualised cap inflow.

Insurance Fund Stakers must adhere to the cooldown period for withdrawals (see Insurance Fund Staking).

Spot Markets

Spot Markets allow for swaps between tokens and interest payments between depositors and borrowers. These token swaps and flow of interest are parameterized to allow fee collection for the revenue pool and thus ultimately insurance.

Within the program, it's parameterized by the following fields (important ones shown in bold in the original):

Field	Description
total_if_factor	percentage of the borrow interest reserved for revenue pool
user_if_factor	this proportion of total_if_factor is reserved for staked users (the other piece is reserved for the protocol itself)
liquidation_if_factor	the proportion of liability transfer in liquidate_borrow that is sent to the revenue pool

Thus the following must be true: user_if_factor <= total_if_factor. For example, if the total_if_factor is 100%, depositors would receive no interest from borrows.

The following instructions interact with the insurance fund:

• resolve_borrow_bankruptcy

Perpetual Markets

Perpetual Markets are bootstrapped by the Drift AMM which, depending on market-making performance conditions, can add and remove funds from the revenue pool.

Within the program, it's parameterized by the following fields:

Field	Description
max_revenue_withdraw_per_period	the amm's max revenue pool draw per period (note this doesn't include bankruptcy resolution)
revenue_withdraw_since_last_settle	revenue pool draws on behalf of user pnl since the last settle (note this doesn't include bankruptcy resolution)
last_revenue_withdraw_ts	the last timestamp of a revenue withdraw (tracked in order to reset the period)

A perpetual market's amm may draw up to max_revenue_withdraw_per_period from the revenue pool every period.

Additionally, for direct draws from the insurance fund, it is parameterized by the following fields:

Field	Description
quote_settled_insurance	settled funds from the insurance fund since inception
quote_max_insurance	max funds it can settle from insurance fund since inception
unrealized_max_imbalance	max amount of pnl the net users can be owed within a market before: 1) draws from insurance are allowed 2) initial asset weights for this pnl gets discounted

Unlike spot markets, perp markets are capped by the max draw from insurance via quote_max_insurance.

quote_settled_insurance tracks the insurance fund draw amount since inception. Once this threshold is reached or the insurance fund is depleted, the market will then resort to the AMM Fee Pool. For any remaining losses not covered, the market will perform socialized losses in bankruptcy events.

The following instructions interact with the insurance fund:

• resolve_perp_pnl_deficit

• resolve_perp_bankruptcy

Notes:

• resolve_perp_pnl_deficit can only be resolved by insurance fund deposits (within the market's constraints), not by social loss with other users.

Additional notes

• Perpetual markets may draw and settle insurance subject to their quote_max_insurance limits and the cumulative quote_settled_insurance.

• If insurance funds are insufficient or a market has reached its quote_settled_insurance cap, the AMM Fee Pool is used first, then any remaining losses may be socialized in bankruptcy.