Introduction

Drift Safety Module ("DSM") is a fully on-chain system for automatically covering bad debt and managing protocol risk. DSM introduces a more capital-efficient and automated way to protect the protocol without requiring governance intervention.

DSM allows users to stake DRIFT into its insurance fund.

DSM enhances the resilience of the Drift Protocol by introducing an automated staking system. If a deficit occurs in a given asset, DSM enables the corresponding staked assets to be act as a backstop for any bankruptcies, removing the need for governance decisions or manual intervention.

This creates a more efficient, responsive, and predictable safety mechanism for the protocol and its users.

DSM can be interacted with using the app.drift.trade interface.

Safety Incentives

The potential incentives for the safety module can include what is outlined in a successfully passed governance proposal by the DAO (here (opens in a new tab)).

Overtime, further utility functions can be added to DRIFT across validator and other network functions through DAO proposals.

Slashing Risk and Deficit Protection

In return for earning safety incentives, stakers accept the possibility of slashing if a deficit arises on the specific pool and asset they have staked. Staking risk is isolated to the specific asset and network where the DRIFT is staked. For example, staking DRIFT helps cover bad debt in DRIFT pairs only.

In the case of a bankruptcy in DRIFT markets, staked DRIFT would potentially be liquidated. Similar to other Insurance Fund pools on Drift, the risk of bankruptcies is compensated by the revenue pool.