Capital Buffers

Capital Buffers and the Insurance Fund

Establishing Institutional-Grade Protection

Delta Money has established a dedicated Insurance Fund to act as a robust capital buffer, ensuring systemic integrity and solvency under adverse market conditions. This fund is designed to protect users and the protocol from strategic losses, exceptional volatility, and funding inefficiencies. It is structured to support institutional confidence in DUSD by serving as a financial backstop across all operational strategies.

Sources of Capitalization

The Insurance Fund is continuously reinforced through three primary sources:

• Retained earnings from strategic positions

• Protocol-level fees from reserve asset yield

• Direct capital contributions

The initial seed capital is sourced from early fundraising rounds and treasury reserves, enabling a strong protective baseline from the outset. This multi-channel funding model ensures the reserve remains dynamic and scalable in line with Delta Money’s risk exposure.

Coverage of Strategic and Market-Driven Risks

The Insurance Fund is calibrated to absorb drawdowns stemming from Delta Money’s active market positions. This includes:

• Covering negative funding payments on short derivative hedges

• Absorbing losses from market corrections in net long digital asset holdings, such as BTC, ETH, BNB, and SOL

By internalizing these risks rather than passing them on to users, Delta Money reinforces its long-term commitment to capital protection and peg stability for DUSD.

Retained Gains from Digital Asset Exposure

Delta Money may strategically maintain net long positions in volatile digital assets, targeting risk-adjusted growth. Any realized or unrealized gains from these positions are not distributed to token holders, but instead fully allocated to the Insurance Fund.

Example: If a long ETH position initiated at $2,500 appreciates to $3,200, the $700 gain per token is directed to the reserve.

This policy ensures that capital appreciation directly contributes to building safety reserves for the protocol.

Yield Allocation from Reserve Strategies

A fixed 25% protocol fee is collected on yield generated from reserve assets such as yield-bearing stablecoins and liquid-staked tokens. Rather than serving as profit, this revenue stream is directly funneled into the Insurance Fund.

As the platform scales and yield-generating strategies expand, the fund grows proportionally — creating a dynamic capital buffer that adapts alongside the protocol’s economic footprint.

Risk-Responsive Buffer Sizing

Delta Money targets a delta exposure posture within a ±10% range under normal market conditions, with a strict cap of ±20% to ensure risk containment. The Insurance Fund is sized to maintain a minimum coverage buffer of 120% relative to the protocol’s net unhedged exposure.

This ensures sufficient capacity to absorb unexpected volatility without compromising DUSD’s peg or operational stability.