It isn’t at all clear that the insurance fund is “larger than it ever needs to be”. Several exchanges (most recently OKEX) have had to socialize losses substantially larger than the total size of the BitMex insurance fund. Bitmex has ‘automatic’ liquidation, but this would still result in extreme losses in a low-liquidity, high-leverage situation. The insurance fund should be held on the books as a loss-reserve, or as carry, but not reduced or eliminated. The money in the insurance fund was legitimately lost on liquidation. The ADL mechanism disadvantages traders with winning positions too. While I agree that the mechanics of the fund could/should be reworked, making it smaller is categorically not the answer.