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Accounting and Settlement

Within Drift Protocol, all token deposits are held in a global collateral vault. This is required for seamless cross-margin and borrow-lend. The only exception to this is the insurance fund vault residing outside.

Ensuring proper accounting across users requires a robust settlement mechanism. The protocol uses intermediate Pool Balances to facilitate transfers and ensure that claimed gains are required to come from settled offsetting losses.

High Level Architecture

Perpetual Market​

An individual perpetual market has two pools:

A. P&L Pool: to accumulate funds from users with losses for settlement to users with profits B. Fee Pool: to accumulate a fraction of exchange fees for the Quote Spot Market's Revenue Pool

The P&L Pool receives the highest priority on claimed funds, in order to give user's the best possible experience. The default fraction of exchange fees for the Fee Pool is total_exchange_fee / 2 and this fraction is determined by: SHARE_OF_FEES_ALLOCATED_TO_CLEARING_HOUSE.

The Fee Pool will only get partially filled up by up to 1% of intermediate P&L settled from a user's losses and aggressively drawn down for the benefit of the P&L Pool otherwise.

Spot Market​

An individual spot market has two pools:

A. Revenue Pool: to accumulate revenue across the protocol, denominated in this token B. Fee Pool: to pay fillers and settle portions to the revenue pool

The Revenue Pool can collect fees from:

  • Borrow interest

  • Liquidations

  • Perpetual Markets

and can pay out to

  • Insurance Fund Stakers

  • Perpetual Markets

(see details of these rules in Revenue Pool)

The Fee Pool collects exchange fees from swaps and uses them to pay out the Keeper Network Keepers & Decentralised Orderbook

Future Work​

Currently, a Perpetuals Market can only pull from the Spot Market Revenue Pool and Insurance Fund for its quote currency.

  • In the future, it may be possible for a distressed associative perp market (BTC-PERP) to be able to pull funds from the associated spot market (BTC) revenue/insurance pool and immediately swap for USDC to top off its fee/P&L pool.