Rebates

For position holders, both repeg and k adjustment events implicitly issue rebates from the collective fee pool back to users. Symmetric funding imbalances in favor the users also draws from the fee pool.

As IF (Insurance Fund) balances increase, this pool can be increased without fee collection. This will be determined by the admin and later by an IF pool.

Event

Rebate Amount

Fee Pool Allocation

Symmetric Funding

baseAssetAmount * fundingRate

up to 50%

Repeg

baseAssetAmount * Ξ” pegMultiplier

up to 50%

K increase

increasing k => lowers slippage newSlippage = oldSlippage * k_new/k_old

newExitPrice = MarkPrice - newSlippage unrealizedPnl(entryPrice, exitPrice) - unrealizedPnl(entryPrice, newExitPrice)

up to 100%

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In the event of a market failure, when arbitrage trading demand is not enough to push prices to the oracle, the admin (later DAO) may lower k temporarily. The good news is Drift protocol allocates this temporary liquidity withholding to be used at later time, rebating position holders.

Event

Temporary Withholding Amount

Fees Pool Limit

K decrease

decreasing k => increases slippage newSlippage = oldSlippage * k_new/k_old

newExitPrice = MarkPrice - newSlippage

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unrealizedPnl(entryPrice, exitPrice) - unrealizedPnl(entryPrice, newExitPrice)

N/A

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