Overview Tori maintains a Reserve Fund as an additional layer of protection for extraordinary circumstances. The Reserve Fund serves as a buffer against unexpected events and extreme scenarios that fall outside normal operations.
Understanding this distinction is key:
Type Description Reserve Fund Used? Normal Drawdowns Temporary fluctuations in delta-neutral positions that resolve over time No Extraordinary Events Unexpected scenarios like counterparty failures, extreme market dislocations, or operational emergencies Yes
Why Normal Drawdowns Don’t Use the Reserve Fund Our strategies are delta-neutral - they have offsetting positions that converge over time. During periods of market stress:
Positions may temporarily show paper losses
As markets normalize, these positions resolve
This is expected behavior, not a loss requiring reserve deployment
The Reserve Fund is preserved for truly extraordinary circumstances.
Purpose The Reserve Fund serves specific critical functions:
Emergency Buffer Protection against unexpected counterparty failures or extreme events
Operational Continuity Ensures the protocol can continue operating during unforeseen circumstances
Extreme Event Protection Buffer for black swan events outside normal market behavior
Confidence Builder Demonstrates the protocol’s commitment to resilience
How It Works Funding Sources The Reserve Fund is built and maintained through:
Source Description Performance Fees A portion of the 10% performance fee on strUSD yield Protocol Revenue Other protocol revenue streams Initial Allocation Seed capital allocated at launch
Fund Management The Reserve Fund is managed with strict principles:
Principle Implementation Capital Preservation Conservative investment in highly liquid assets Liquidity Always available when needed Transparency Included in Proof of Reserves attestations Independence Segregated from operational funds
When the Reserve Fund Is Used The Reserve Fund may be deployed in extraordinary scenarios such as:
Counterparty Failures If a counterparty experiences unexpected failure, the Reserve Fund provides a buffer while the situation is resolved.
Extreme Market Dislocations In truly exceptional market conditions that exceed historical stress parameters, the Reserve Fund can be deployed.
Operational Emergencies If unexpected operational issues arise that require capital to resolve, the Reserve Fund can be deployed.
The decision to deploy Reserve Fund capital is made by protocol governance following established guidelines and thresholds. Normal strategy fluctuations do not trigger deployment.
Transparency Real-Time Visibility The Reserve Fund will be included in the protocol’s Proof of Reserves attestations from Accountable:
Current fund size
Historical changes
Coverage ratio
Attestation Reports Regular attestation reports provide detailed information about the Reserve Fund’s status and composition.
Understanding the Reserve Fund What It’s For Scenario Reserve Fund Role Counterparty failure Buffer against unexpected defaults Extreme market dislocation Protection in black swan events Operational emergencies Capital for unforeseen issues
What It’s NOT For Scenario Why Not Normal drawdowns Expected to resolve naturally in delta-neutral strategies Temporary paper losses Part of normal strategy operation Market volatility Strategies are designed to be market-neutral
Important Considerations Aspect Details Capacity The fund has a finite size and is disclosed in Proof of Reserves Not insurance It’s a protocol-managed buffer, not third-party insurance Extraordinary use Reserved for unexpected events, not normal operations
The Reserve Fund is one of several protective measures, alongside diversified strategies, risk controls, and professional management.
Reserve Fund vs Backing Assets It’s important to understand the distinction:
Aspect Reserve Fund Backing Assets Purpose Emergency buffer for extraordinary events Supports trUSD value Usage Only for unexpected circumstances Active trading positions Reporting Included in attestations Included in attestations
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