What Is the Alternative to ADL Used by Some Exchanges?
The primary alternative to the ADL system is a 'socialized loss' system. In this model, if the insurance fund is depleted, the remaining losses are distributed proportionally among all profitable traders.
This spreads the loss thinly across a wider base, rather than targeting a few highly profitable and leveraged traders. However, it can still be unpopular.
Glossar
Socialized Loss Mechanism
Mechanism ⎊ A structured approach to distributing the impact of a default across a broader set of participants involves the forced reduction of profitable positions.
Socialized Loss
Mechanism ⎊ Socialized loss, within cryptocurrency derivatives and options trading, describes the distribution of losses across a broader participant base than those directly holding a losing position, often amplified by leveraged exposure and cascading liquidations.
Alternative to ADL
Framework ⎊ Within cryptocurrency derivatives and options trading, a robust framework serves as an alternative to traditional Automated Dealer Listings (ADL), particularly crucial for enhancing transparency and operational efficiency in decentralized environments.