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.Normal Drawdowns vs Extraordinary Events
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
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 |
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 |
Next Steps
Backing
How trUSD is backed
Peg Mechanism
How the peg is maintained
Security
Security measures
Risks
Understand all the risks