📥5.6.4 Reserve & Insurance Fund

EOSI Finance maintains a Reserve Fund smart contract funded by trader challenge fees, staking deposits and a share of protocol revenues. This buffer covers rare events where trader losses exceed allocated limits.

The fund utilises parametric insurance—payouts are triggered automatically when predefined conditions are met. In traditional DeFi insurance, parametric contracts pay out if policy parameters (such as rainfall or wind speed) are met, eliminating the need for claims adjusters.

EOSI Finance adapts this model for trading: if multiple traders breach risk parameters within a short period, the Reserve Fund automatically compensates LPs.

Optional Insurance NFTs grant LPs priority claims on the Reserve, and external underwriters may stake capital to underwrite pool risk in exchange for yield. This creates a secondary “risk market” where third parties can earn premiums for providing coverage.