Insurance Fund staking
What a stake earns, what it risks, and the rules that decide the payout on unstaking.
Staking supplies first-loss capital to a market's Insurance Fund, and in exchange a staker receives that market's share of the protocol's fee revenue. Velocity owns no share of any fund, so every dollar standing between a bad debt and socialized loss was put there by a staker.
This is not a deposit and it is not lending. Staked principal is what pays when a position in the market goes bankrupt, and a large enough draw can reduce it. The fund's page comes first: it covers which markets can draw on a given fund and how much they may take.
What a stake earns
Staked capital is priced in shares, a claim on a fraction of the fund's vault. Revenue arriving lifts the share price, and a bankruptcy draw lowers it. There is nothing to claim: rewards are the same shares worth more.
Two streams feed a market's fund: a capped slice of the spot market's revenue pool, which collects perpetual trading fees, liquidation fees and borrow fees, and a fixed fraction of the market's deposit-interest gains. Both accrue entirely to stakers, with no protocol cut of any kind.
The stake lifecycle
Staking is four actions: add, request an unstake, cancel that request, and complete it. Each settles any already-due revenue into the fund first, so every price is struck after the revenue already owed has landed.
Adding a stake
Shares are priced off the fund's vault balance at the moment of the stake. There is no minimum stake: the only threshold is the price of one share, and a request too small to buy one is rejected with IFDepositMintsZeroShares. Adding while an unstake request is pending fails with IFWithdrawRequestInProgress, and adding is refused while the market's Add insurance-fund operation is paused, with InsuranceFundOperationPaused.
Requesting an unstake
The request records the share count and freezes a valuation: what those shares were worth at that instant. That frozen value is the ceiling on the eventual payout, and it is the single most important number on this page. The request is rejected in six cases.
| Condition | Error |
|---|---|
| The amount converts to zero shares | IFWithdrawRequestTooSmall |
| The share count exceeds the staked balance | InsufficientIFShares |
| A request is already pending | IFWithdrawRequestInProgress |
| Withdrawals are paused exchange-wide | ExchangePaused |
| The spot market's withdrawals are paused | MarketWithdrawPaused |
The RequestRemove insurance-fund operation is paused | InsuranceFundOperationPaused |
The cooldown, and why it cuts both ways
An unstake does not complete when it is requested. The cooldown is 13 days by default, set per spot market, so that capital cannot leave in the hours between a market breaking and the bankruptcy being resolved. When it ends the payout is the smaller of the current value of the requested shares and the frozen request value, which means the two directions do not behave the same way.
Gains after a request do not reach the staker. Losses after it do. Revenue that settles during the 13 days lifts the share price, but the payout is capped at the frozen value, so none of that gain arrives. A bankruptcy draw during the same 13 days lowers the share price, and the payout is capped at the current value of the shares, so the draw lands in full. Submitting a request does not take capital out of Insurance Fund risk; only completing the withdrawal does.
Cancelling a request
A cancel values the requested shares at the smaller of their current value and the frozen request value, then restakes that amount at the price prevailing now. If the fund appreciated while the request was pending, that mints fewer shares than the stake started with, and the difference is forfeited to the stakers who stayed. If it did not, the stake comes back intact.
Cancelling after the fund has gained costs shares. The gap between the current value of the requested shares and the frozen request value is exactly what the cancel forfeits, so the two are worth comparing first.
Completing the unstake
After the cooldown, the unstake pays the smaller of the current value of the requested shares and the frozen request value, and burns those shares. It is rejected in seven cases, and the utilization one catches people out most often.
| Condition | Error |
|---|---|
| The cooldown has not elapsed | TryingToRemoveLiquidityTooFast |
| There is no pending request | InvalidIFUnstake |
| The staked share balance is below the requested count | InsufficientIFShares |
| Spot market utilization or its TWAP is above 90% | SpotMarketInsufficientDeposits |
| The payout would empty the fund's vault | InvalidIFDetected |
The Remove insurance-fund operation is paused | InsuranceFundOperationPaused |
| Withdrawals are paused exchange-wide | ExchangePaused |
Both the market's live utilization and its running average must sit at or below 90% for an unstake to complete, so a stretch of high borrow demand can hold a withdrawal past the 13 days. The gate applies only at removal, not when the request is opened.
Revenue settlement limits
Once a market's fund has a staker, revenue settles into it on a timer, by default once every 3,600 seconds, and each settle is capped two ways. The smaller cap wins, and what does not settle waits for the next run.
- One tenth of the revenue pool per settle.
- A 1000% annualized rate on the fund's own balance, pro-rated to the settle period, so a market on the default hourly period moves at most about 0.114% of the fund per settle.
What this means in practice
This is underwriting, not depositing. The yield is real fee revenue and none of it is shared with the protocol, but it is compensation for taking first loss on a market's bad debt. A stake is best sized against the largest single draw the market's tier permits.
An exit takes at least 13 days and can take longer. The cooldown and the 90% utilization gate are both outside the staker's control once a request is open.
Choose the market, not just the yield. A stake into the quote market's fund backs every perpetual carrying a non-zero insurance cap; a stake into another market's fund backs only that market's borrows. The quote fund earns the most and is exposed to the most.