But then how does the collateral pool stay solvent if my account goes insolvent?
Last updated October 15, 2025
Depending on the circumstances, two things can happen (even both at the same time):
- There is an insurance fund which is a rainy day fund that is used (and can only be used) to make up any insolvencies resulting after a liquidation. Remember those liquidation fees? That’s what they’re used for.
- In the extreme circumstance that an account were to end up with such a large insolvency that the insurance fund could not cover it, the backstop flow would then activate auto-deleveraging.** Essentially, as a last resort, the liquidation module will distribute the exposure of the liquidated account proportionally to every trader on the opposing side, partially closing their position.
This last layer of the backstop flow has never been activated, and we hope that is never needed. But it ensures that the collateral pool always has enough funds to cover its obligations to traders. And importantly, accomplishes this in the fairest way possible: as unpleasant as it is to have your position closed when you are profiting, everyone gets hit proportionally in the same way. This way, no one can ‘front run’ anyone else on the way out; and no human intervention can tip the scales in anyone’s favor.
Oh! And by the way, Reya’s the only one DEX that can do this. Reya is bringing performance and confidence to DeFi.
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