Liquidations & ADL
Takers are liquidated when their margin ratio falls below 5% (equivalent to 20x leverage). Makers are liquidated at 50% (2x leverage).
| Taker | Maker | |
|---|---|---|
| Liquidation threshold | 5% | 50% |
| Max leverage at liquidation | 20x | 2x |
| Liquidation fee | 1% | 1% |
How Liquidation Works
When your margin ratio drops below the threshold, anyone can liquidate your position. The liquidator closes your position, takes a 1% fee, and returns the remaining margin to you.
Liquidations are processed by bots. We run an open-source liquidator that can process 3,000 liquidations per block.
Margin Ratio
Your margin ratio is your current margin divided by your position size. It's the inverse of leverage: 10% margin ratio = 10x leverage, 5% = 20x.
As your position loses value through PnL, funding, or fees, your margin ratio decreases. You can add margin to improve it, but you cannot withdraw margin from an open position.
Auto-Deleveraging (ADL)
If a position loses more than its margin before liquidation, the system has bad debt. When this happens, losses are socialized across all open taker positions, proportional to their size. Makers are not subject to ADL.
Example
You open a long with 100 notional). The price drops 20%, so your position loses 30 margin on $80 notional, giving you a 37.5% margin ratio (2.67x leverage). If the liquidation threshold is 40%, you get liquidated.